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Friday, September 2, 2011

Justice's New War Against Lenders

The Obama administration repeats mistakes of the past by intimidating banks into lending to minority borrowers at below-market rates in the name of combating discrimination.


Talk about not learning from past mistakes: A government department is again intimidating banks into lending to minority borrowers at below-market rates, all in the name of combating "discrimination." Welcome to the next housing mess.

The 1990s may have brought us supercharged politicized lending, but Eric Holder's Department of Justice is taking the game to an entirely new level, and then some. The weapon is a "fair lending" unit created in early 2010, led by special counsel Eric Halperin and overseen by Civil Rights Division head Thomas Perez.

A sampling of Mr. Perez's thinking, from April 2010 congressional testimony: "The foreclosure crisis has touched virtually every community in this country, but it disproportionately touches communities of color, in particular African-Americans and Latinos." And: "[C]ross burnings are the most overt form of discrimination and bigotry. Lending discrimination is some of the most subtle. It's what I call discrimination with a smile."

Even for the Obama administration's antidiscrimination cops, this is a shocker: A political appointee who's supposed to neutrally enforce the law loosely equates bankers with Klu Klux Klan thugs. But let's move from what may be Mr. Perez's personal bias, and focus on the broader brush strokes of the Justice Department—which seem designed to paint bankers into a corner.

Lenders who discriminate on the basis of race and those who make decisions on the basis of credit scores are two entirely different animals. The former our society doesn't permit, for moral reasons; the latter we encourage because it's fundamental to capitalism. A lender will go bust if he can't distinguish between a risky loan and a good loan. Poor people aren't well-served by getting loans they can't afford.

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