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Banks, Disparate Impact, and the Financial Meltdown



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The New York Times reports that the U.S. Justice Department “is beginning a major campaign against banks and mortgage brokers suspected of discriminating against minority applicants in lending.”

It will be announced today by Tom Perez, head of the department’s civil-rights division, at Jesse Jackson’s annual “Wall Street Project” conference. The initiative apparently will use the “disparate impact” approach, meaning that the banking practices will not be alleged to discriminate in their terms, intent, or application, but just to lead to racially disproportionate results. And, as the Times notes, “Some critics have contended that government rules pushing banks to lend to minority and low-income borrowers contributed to the financial meltdown. The campaign could rekindle that debate.” The Justice Department, it is reported, will be targeting subprime mortgages, but is also looking at “loan modifications for people seeking to avoid foreclosures” to see if there has been a “disparate impact on minorities.”



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