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When the City of St. Paul withdrew its appeal before the US Supreme Court on the issue of "disparate impact" under fair lending laws, a banking lawyer wrote me to propose that the St. Paul received pressure from the US Department of Justice and other agencies of the federal government. According to The Wall Street Journal (paid subscription required), my correspondent was correct. The applier of pressure was none other than the US Justice Department's "leading champion of disparate impact."
Readers may recall that the City of St. Paul, Minnesota in February withdrew a case that the Supreme Court had already agreed to hear—and the city thought it would win—under pressure from the Department of Justice ("Squeezed in St. Paul," Feb. 13). Our source at the time wouldn't name names at Justice, but now Reuters reports that the man working the phones was none other than Assistant Attorney General Thomas Perez, the head of the Civil Rights Division. A Justice spokeswoman confirmed that Mr. Perez spoke to St. Paul and the plaintiff in the case.
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If the Justices had found disparate impact illegal under the Fair Housing Act, one of the government's biggest hammers against banks and others would disappear. So Mr. Perez decided to press the city to take the decision out of the hands of the nation's highest Court so he could continue pursuing a policy that the Justices probably would have found illegal. Another triumph of politics over the law.
However, it appears that the very fact that the SCOTUS was willing to decide "disparate impact" is prompting victims defendants of Justice Department lawsuits alleging the same to take off the gloves and let The Supremes take another bite out this apple. According to today's American Banker (paid subscription required), GFI Mortgage Bankers has decided it would rather fight than cave.
"GFI regrets DOJ's unwillingness to settle this matter on reasonable terms," Andrew Sandler, the chairman of BuckleySandler LLP, which represents the defendants, said in an interview. "It will vigorously defend these legally vulnerable, statistically based disparate impact claims."
Venable's Ron Glancz, for one, thinks the defense will have legs.
"I think the Justice Department is on weak ground on some of the disparate impact cases they're bringing," said Glancz, who was previously an assistant director in the Justice Department's civil division. "It's totally based on economic research, which in some cases I've seen is flawed. So that's the area where you're going to get some litigation and a court decision — maybe several court decisions — and hopefully clarify the law there, because I think it really needs clarification."
To no ones shock, who should be the front-and-center mouthpiece for the DOJ on this lawsuit but one Thomas Perez.
"Charging people more for home loans simply because of their race or national origin — as we have alleged in our complaint against GFI — is illegal," Thomas E. Perez, the assistant attorney general for the civil rights division, said in the release. "The Justice Department will act aggressively to ensure that all people have equal access to credit and a level playing field. For that reason, vigorous enforcement of fair lending laws remains a top priority."
"Simply because of their race or national origin"? That's not what the DOJ is actually alleging, is it? It's because of the disparate impact on minority groups, regardless of the intent of the lender, that's the crux of the DOJ's case, isn't it? That framing of the issue by Mr. Perez sounds woefully disingenuous. Then again, he lives inside The Beltway, where "truth" is whatever you can spin without cracking yourself up.
Let's hope this defendant stays the course and The Supremes finally get to "clarify" this principle.
