We earlier reported on the DOJ making work for its Civil Division with questionable disparate-impact lawsuits against banks over lending standards. Today's Investor's Business Daily (via Sailer) finds the problem even worse than that: as part of mau-mauing the banks into settlements so they don't face the bad publicity (and copycat litigation) from being called racist, the government insists on non-disclosure agreements so the banks can't publicly complain about the unreasonable tactics. Some of the settlements actually require banks to provide special rates for minorities:
In what could be a repeat of the easy-lending cycle that led to the housing crisis, the Justice Department has asked several banks to relax their mortgage underwriting standards and approve loans for minorities with poor credit as part of a new crackdown on alleged discrimination, according to court documents reviewed by IBD. ...
In several cases, the government has ordered bank defendants to post in all their branches and marketing materials a notice informing minority customers that they cannot be turned down for credit because they receive public aid, such as unemployment benefits, welfare payments or food stamps.
Among other remedies: favorable interest rates and down-payment assistance for minority borrowers with weak credit. ...
[I]ndustry analysts fear Attorney General Eric Holder is rekindling an anti-bank witch hunt launched by Attorney General Janet Reno in the 1990s, when Holder served as her deputy.
Some blame that in part for the subprime boom, because banks were ordered to throw open their lending windows to credit-poor minorities. That crackdown spurred the American Bankers Association to distribute to its thousands of members "fair-lend ing tool kits" advising the adoption of more permissive underwriting criteria to help inoculate them from prosecution.
In the new prosecutions, Justice acknowledges in every case it did not prove charges of intentional discrimination, while banks have denied any wrongdoing. ...
As part of settlement deals, prosecutors have required banks to sign "nondisclosure agreements" barring them from talking about the methods used to allege discrimination. Bank lawyers contend the prosecutors are trying to hide the shaky legal grounds on which the cases are built. "It's horrible what they're doing at the civil rights division," said Reginald Brown, a partner at Wilmer Hale in Washington, who has represented banks in connection to recent race-bias investigations. "They don't have any proof, just theories."
He added, "They want you to sign something saying you agree, under the condition of any settlement with them, that you won't disclose what their theories were. That's because their theories are loopy and wouldn't stand the light of day."
One such theory -- "disparate impact" -- holds that merely a difference in loan application outcomes is enough to prove racial discrimination -- even if no intent exists on the part of loan officers to contrast based on the color of applicants, and even legitimate business factors -- such as credit scores and down payments -- help explain disparities in loan outcomes between white and black applicants.