On Wednesday, the Justice Department announced that Bank of America (BOA) had agreed to pay a fine of $335 million to settle charges that its ill-fated 2008 acquisition, Countrywide Financial, discriminated against non-white borrowers. Although BOA officials deny it, Countrywide is alleged to have steered blacks and Hispanics more often than whites into costly, risky, sub-prime mortgages. Attorney General Eric Holder boasted that this fine–a record for alleged lending discrimination–shows that he is determined to “vigorously pursue those who would take advantage of certain Americans because of their race, national origin, gender or disability.”
Very few details are available about Countrywide’s alleged crimes, but I smell a rat. Does anyone–and I mean anyone–other than the fanatics at the Justice Department (and probably 90 percent of blacks in America) really believe that executives at Countrywide told lending officers to deliberately push non-whites into riskier mortgages–and that the lending officers cheerfully did so? For decades, every “civil rights” bureaucracy in the country has been on the sniff for “redlining.” I can believe stupidity and malfeasance of just about any kind from bankers, but that is the one thing even the stupidest banker knows not to do.
Discrimination requires acts of discrimination, and if Countrywide had been doing $335 million worth of nastiness to blacks and Hispanics–the Justice Department claims there were more than 200,000 victims–somebody must have done it. We can be sure that Mr. Holder would love nothing more than to stage a perp parade of real, live, racist white men, but not a single former Countrywide executive has been charged with anything. It is the shareholders of Bank of America who will dish out that $335 million, so we have yet another example of a mystery that would baffle even Hercule Poirot: racism without racists.
Well into its article about the settlement, the New York Times noted–though only in passing–that lending policies are discriminatory if they have a “disparate impact” on protected minorities. This means lending standards can appear to be race-neutral, but if they are more likely to inconvenience non-whites than whites, they are illegal. The Times then goes on to explain that blacks and Hispanics were treated worse than whites even when they had “similar credit ratings.”
“Racism”-hunters have been accusing banks of this ever since the 1970s. One of the most famous allegations of banking discrimination was a 1992 paper by the Boston Fed that claimed to have looked at every possible measure of creditworthiness only to find that blacks were more likely than whites to be denied loans even if they were just as financially solid. In fact the “study” was such a mess that even the Comptroller of the Currency had doubts about it, and one of the fed’s own scholars largely dismissed it.
Of course, there was always a simple test for whether blacks (or Hispanics) were being held to higher credit standards than whites: Do they default less frequently? If non-whites have to be rolling in dough and collateral to get loans, they should almost never stiff lenders. But what is the reality? A 1999 study confirmed that blacks were more likely than whites to stiff banks, so, if anything, they were being held to lower credit standards. Today, Mr. Holder wants us to believe that Countrywide was deliberately stiffing blacks and Hispanics.
There is another reason to think that this settlement is just another government shakedown. Banking is competitive. If Countrywide was really skinning its customers, why didn’t they walk over to the bank across the street? Competition is what keeps virtually all bankers (and car dealers and soap salesmen) in line. But, no. We are supposed to believe that Countrywide wasn’t the least bit worried about scaring off customers, and that every one of those 200,000 alleged victims was such a bonehead it never occurred to him to try another bank.
The Justice department says that its pet minorities were more than twice as likely as whites to be steered into over-priced loans, even when they were equally creditworthy. We know from the Boston Fed study just how bad bureaucrats are at judging creditworthiness, so we can be 99 percent sure that this is baloney. But even if we decide to swallow the baloney, what about the whites (of equal creditworthiness) who got stuck with over-priced loans? Weren’t they just as hard done by as the non-whites? Shouldn’t they get some of the swag? Of course not. They’re white. Maybe they were skinned to the bone, too, but it wasn’t because of their race, so they get nothing.
A strong case can be made for the view that the entire mortgage crisis was brought on by government pressure on banks to make sure blacks and Hispanics got housing loans, even if they couldn’t pay them back. Back in 2002, George Bush was whooping about how he was going make sure that in the next eight years another 5.5 million non-whites got mortgages. The only way to do that, of course, was to force banks to make dicey loans. Once lending standards went south, white deadbeats got loans too, and we know what happened next. Now your government is back to its old tricks: making sure that whitey picks up the pieces.