Bank Lawyer's Blog

Disparate Impact: Full Speed Ahead

2015-11-11T22:04:00-06:00

The successor to the infamous Thomas Perez at the US Justice Department's Civil Rights Division, Vanita Gupta, has served fair warning that (as we predicted) the folks who run Justice intend to use the recent SCOTUS decision that validated "disparate impact" in the fair housing arena to pursue the statistically-proven racist scum in the quest to ensure that every one who wants one can get a home loan. She thinks that disparate impact discrimination is part and parcel with much broader abuses, like cops killing racial minorities and otherwise profiling minorities for disparate law enforcement abuse. America is racist, and Gupta's gonna root out racism wherever she can find the statistics to make her case.

“High-profile incidents across the country have thrust us into a national dialogue over the use of excessive force, racial profiling and stereotyping, officer and public safety and a festering lack of trust between police departments and the communities they service, particularly low-income communities of color,” said Gupta.

“But underneath so much of the unrest that we’ve seen in Ferguson, Missouri; Baltimore; New York; and cities across America," she said, "lies a foundation of systemic inequalities and discriminatory biases, built up over decades, not days."

She specifically pointed to lack of credit in affected communities as a root cause of this year’s troubles.

“To break down barriers to opportunity we must protect the rights of people to borrow money without bias or discrimination,” said Gupta. “Discrimination is a multiplying force. It can have a devastating domino effect on a person’s future economic prospects. And that is why equal access to credit is a fundamental part of our work. Credit provides the means for families to own a home, to buy cars so they can get to work, and to increase their earnings so they can invest in their own future.”

“Credit enables people to uplift their lives and build a brighter future,” said Gupta.

That's right: systemic racism in American society is rooted in a lack of credit availability for racial minorities, according to Gupta. If the federal government can ensure that every citizen can get credit, this country can overcome more serious problems which are the result of the "multiplying force" of that credit discrimination. How do they plan to do that? Suing banks on the basis of statistical analyses founded on flawed assumptions and squeezing cash out of them is only the tip of the enforcement iceberg. Gupta has much more "robust" remedies in mind.

“Whether mandating that a bank open a branch in a neighborhood neglected for years or requiring an auto lender to limit the discretion of its dealers, we recognize the value of resolutions that extend beyond the distribution of dollars,” said Gupta.

Of course, at the same time, Justice will use Operation Choke Point to drive payday lenders, auto title lenders, and other "high risk/high reward" lenders out of the market. That will leave all those great "small loan" programs that the FDIC tried to "encourage" banks to make a few years ago and that never gained traction because banks couldn't charge enough (most programs had a maximum APR of 36%) to justify the cost of administration and the serious problem of nonpayment. You can bet your life that they'll be resurrected, along with more creative solutions in the great game of credit redistribution.

And, of course, two guys named Guido and Louis (The Lip) will always be available on local the street corner to take care of the needs of the needy in an extra-judicial manner.

Are we having fun yet?

Deja Vu, All Over Again

2015-09-23T21:51:00-05:00

Here we go again.

The city of Oakland, California is the latest municipality to sue one of the nation’s largest banks, accusing Wells Fargo (WFC) of allegedly steering minority borrowers into higher-cost loans, which caused rampant foreclosures and neighborhood blight.

According to a Reuters report, Oakland filed suit against Wells Fargo in a Northern California federal court, stating that Wells Fargo violated the Fair Housing Act by “targeting minorities” with high-cost loans, despite their ability to qualify for lower cost loans.

[...]

The lawsuit said many of the loans ended in foreclosure because Wells refused to refinance them on the same terms it granted to white borrowers.

The lawsuit said Wells steered minorities into various types of "predatory loans," including those with high interest rates, balloon payments and large prepayment penalties.

As is the case with all of these lawsuits, the bank said that it would "vigorously defend itself." I hope that vigorous defense includes a cage match involving Ronda Rousey, but that's likely too much to hope for.

Although a number of these suits have continued to drag on, the linked article notes the more customary outcome when the bank does not settle.

Wells Fargo secured a victory in court, when a U.S. District Judge dismissed a lawsuit brought against the lender by Cook County, Illinois, which also accused the bank of predatory lending

Yes, dismissal by the court is often the result. However, as we noted a couple of years ago, cities keep bringing these meritless suits because they think that they can squeeze a settlement out of big banks on the banks would rather settle quickly and reduce the reputational damage than pay trial lawyers, which no one in their right mind wants to do for any length of time. Also, as our prior post observed, the US Justice Department under the current administration has on occasion jumped into the fray on the side of the cities and helped to pummel the banks. That may stop in 2017, but there's still a lot of blood to be spilled before then.

Unfortunately, the more settlements that occur, the more municipalities pile on. Five years ago I alleged that the lesson to be learned was to never settle. I still believe that is the best approach to stopping this municipal extortion. On the other hand, it's not my bank being sued and it''s not my money being spent.

A Long, Hot Summer Of Foolish Things

2015-09-13T22:06:00-05:00

Among the many critical events that occurred this summer while I was pounding down Shiner Bocks by the busload and watching stupefied as the greatest self-aggrandizer since P.T. Barnum managed to vault to the top of the opinion polls by leveraging a condor's wingspan of hair and a face that looks like someone set it on fire with liquefied steroids and tried to beat it out with a rake into the most SPECTACULAR, FINEST, CLASSIEST, ENERGETIC, and HUUUUUGEST presidential campaign EVERRRRRR, the always amusing Supreme Court of the United States of America was proving everyone but left wing-nuts as wrong as Liz Warren about an Indian chief's skeleton in her family's closet when it determined, after a couple of previous misfires, that "disparate impact," indeed, applied to already shell-shocked residential housing lenders. While the opinion did sow some landmines in the statistical road to government-determined racial diversity in housing, the use of the doctrine itself as a basis to bring baseless actions against home lenders and to squeeze some juice out them for the benefit of those who will tend to vote reliably for the party that puts the chicken in all of their pots, was validated.

An excellent analysis of the decision, and potential legal issues to be considered by interested parties, can be found in this client alert by Joe Lynyak and his colleagues at Dorsey & Whitney. For the moment, I'm more interested in more fundamental concerns regarding the entire notion of "disparate impact." Another person who shares similar concerns is economist Thomas Sowell. He was interviewed in the Wall Street Journal on a wide range of topics, but the following is what Sowell, a man once so poor he pawned a suit of clothes for enough money to buy a knisch and a can of orange soda, had to say about disparate impact:

Or take “disparate impact,” the idea that different outcomes among different groups—say, that there are more male CEOs than female—is ipso facto evidence of discrimination. The Obama administration has used disparate impact to charge racism in housing, employment and other matters. In the absence of discrimination, the theory goes, people naturally would be dispersed more or less at random. Nonsense, Mr. Sowell says. “In various books I’ve given lists of all the great disparities all over the world, and I recently saw a column by Walter Williams in which he added that men are bitten by sharks several times as often as women.”

Differences in outcome is a matter that Mr. Sowell takes up in his new book, “Wealth, Poverty and Politics: An International Perspective,” out Sept. 8. Its theme, he says, is that “in a sense, there was never any rational reason to believe that there would be this evenness that they presuppose.” Some continents have more navigable rivers and deep water harbors than others. Some cultures value education highly, and some don’t. Underwhelming as the conclusion might sound to those with the urge to reorder society, many disparities arise simply because people are different, and because they make different choices.

Another problem is that the “disparate impact” assumption misidentifies where group differences originate. He sets up an example: “If you have people in various groups in the country, and their kids are all raised differently, they all behave differently in school, they do differently in school. And now they’re grown up and they go to an employer, and you’re surprised to find that they’re not distributed randomly by income.” It’s “just madness,” he says, to assume “that because you collected the statistics there, that’s where the unfairness originated.”

[...]

Why do we never seem to learn these economic lessons? “I think there’s a market for foolish things,” Mr. Sowell says—and vested interests, too. Once an organization such as the Equal Employment Opportunity Commission is created to find discrimination, no one should be startled when it finds discrimination. “There’s never going to be a time when the EEOC will file a report saying, ‘All right folks, there’s really not enough discrimination around to be spending all this money,’ ” he says. “You’re going to have ever-more-elaborate definitions of discrimination. So now, if you don’t want to hire an ax murderer who has somehow gotten paroled, then that’s discrimination.”

"A market for foolish things." Yes, we are.

The Underbelly Of The Mt. Holly Settlement

2015-05-28T22:04:00-05:00

The settlement of the Mt. Holly disparate impact case before it could be decided by the US Supreme Court were suspicious. At the time, it was thought by many that the US Justice Department had helped to engineer that settlement so that its (and HUD's and the CFPB's) use of that questionable doctrine in fair lending claims could continue for a while longer. The last thing the Feds wanted was for the SCOTUS to decide the matter, because they were worried (correctly) that it would strike down its use. At the same time, the banking industry wanted the SCOTUS to render a decision, because it thought that the court was more likely than not to strike down the doctrine's use in the fair lending context. The last thing that banks wanted was for the parties to the case to settle before the SCOTUS could render its decision (which is exactly what happened).

Recently, a rock has been overturned that has exposed a bunch of creepy-crawlers that work not for the federal government, but for the big banks that wanted the SCOTUS to rule in the Mt. Holly case. According to a former senior executive of Chase, that bank tried to get him to use his board position with a non-profit housing organization to "scuttle" the funding of the settlement. Moreover, the former executive, Wayne Trotman, at the time the mid-Atlantic market president of Chase, alleges that when he refused to breach his fiduciary duty as a member of the board of directors, the bank retaliated by firing him.

The fact that Mr. Trotman is an African-American adds not only to the radioactivity of the alleged wrongful conduct, but also substantial irony to those actions, if Mr. Trotman's allegations are true. While Chase counters that Trotman's claims are "baseless," Trotman's lawyers claim that they have "substantial evidence" to support them.

Obviously, the first thing that Trotman has to prove is that Chase pressured him to use his board position to scuttle the settlement. According to the linked article, which cites Trotman's Complaint, he claims that he was instructed to do so by Chase's Associate General Counsel, via email, even after he refused on the grounds that it would breach his fiduciary duty. The Complaint later states that another Chase attorney told him that he should not honor the request (which was also the position of his supervisor). Apparently, the ball started rolling in Jamie Dimon's office after he (and the heads of other large banks) received an email from Tim Pawlenty of the Financial Services Roundtable uirging the bankers to find ways to derail the settlement long enough for the SCOTUS to render a decision. There does not appear from the kinked article to be any order from Dimon that Trotman do anything, but, then, that's what subordinates are for: read the CEO's mind and "get 'er done" while retaining deniability for those residing at the top of Mt. Olympus.

The harder nut to crack for Mr. Trotman may likely be proving the causal connection between his decision to be an honorable man and not to breach his fiduciary duties, and his subsequent termination by Chase. It's impossible to determine that connection solely from the linked article, although I assume that the "substantial evidence" referenced by Trotman's lawyers indicates that they think that they can carry the water on that claim. The man worked for Chase for 19 years, received a "meets expectations" review shortly after the incident (although Chase substantially cut his bonus from the previous year, in which he received the same rating), then six months later received a mid-year performance rating of "poor" and was fired 14 days later without being provided an opportunity to improve. On its face, it looks like there might be fire with this smoke.

On the other hand, we haven't seen Chase's formal responsive pleading. In one press report, a Chase spokesperson told a reporter that Trotman 's position was eliminated in a "reorganization of markets." That spokesperson also claimed that Chase would "fight this in court." I guess that beats fighting it in the streets.

Obviously, it's too early to tell what the outcome of this lawsuit might be. The smart money in these situations is on a cash settlement with nondisparagement and confidentiality provisions in the settlement agreement, so that the "reputational risk" is mitigated and the whole sordid affair is swept under a rug.

Still. When it comes to picking a champion inducer of the gag reflex, it's often tough to choose between Big Banking and Big Government.

Disparate Impact: Liz Goes Loony

2015-01-28T21:49:00-06:00

In full-spittle mode, Lizzie Warren let the hysterics and flop-sweat fly last week in an Op-Ed piece for the Wapo, in which she warned that if the SCOTUS strikes down "disparate impact" in the context of fair lending laws, the space-time continuum will be ripped to shreds.

The Supreme Court appears poised to continue its systematic assault on our core civil rights laws. After gutting the Voting Rights Act just two years ago, the court set its sights on our country’s fair housing laws when it heard oral arguments today in Texas Department of Housing and Community Affairs v. The Inclusive Communities Project. As with the voting rights decision, a decision limiting the scope of the housing laws would ignore the will of Congress and undermine basic principles of racial equality. But there is even more at stake in the fair housing case, because the wrong decision would reduce economic opportunities for working families and raise the risk of another financial crisis.

After correctly pointing out the inconvenient truth that proving actual discrimination is a bitch, she uses that "high bar" as a reason to lower the bar.

Intentional discrimination cases are notoriously hard to prove because they require evidence of a person’s state of mind. As a result, most housing segregation cases are brought on the second basis: disparate impact. Those cases are no easy lift either. To find a disparate-impact violation, a court must conclude that a challenged practice has a disproportionately negative effect on otherwise similar racial groups and that there is no nondiscriminatory explanation for the practice. Despite that high bar, disparate-impact claims have been the main tool for attacking some of the most persistent practices contributing to housing segregation.

"No easy lift" my petite, firm tukus. If "disparate impact" is a "high bar," then her idea of a prototypical NBA center must be Verne Troyer. As Princess Fauxcohontas understands well, outfits like her evil spawn the CFPB, HUD and the DOJ have used regression analysis to find discrimination in places even the starship Enterprise has not yet gone. Because it's so expensive to wage battles on a field where figures don't lie, but liars figure, the accursed accused have generally permitted themselves to be bullied into settlements not because they think the claims against them are warranted, but on a pure cost-benefit basis. It's cheaper to settle than to wage war with the fiscally unaccountable.

She also touts the fact that 17 states have joined the Obama administration in supporting disparate impact. That leaves almost twice as many states with their middle fingers raised at Lizzie. If she's arguing that there's majority support for the doctrine as a matter of popular opinion (which, I suppose in her intellectually dishonest universe, trumps sound legal reasoning), then she screwed the pooch in that paragraph.

Undercutting our fair housing laws also would increase the risk of another financial crisis. In the wake of the 2008 economic collapse, the Justice Department found that several big banks and other mortgage lenders had violated the Fair Housing Act’s disparate-impact standard by steering borrowers of color into more expensive mortgages than white borrowers with similar financial profiles. While lenders profited in the short term, these families were unable to keep up with their payments when housing prices fell, contributing to the chain reaction throughout the financial system. As the crisis demonstrated, we need stronger fair housing laws, not weaker ones that allow lenders to return to the risky — but lucrative — practices that set the stage for the last crash.

That's been her (and the CFPB's) consistent meme over the past seven years: the 2008 financial meltdown was caused by a catastrophic failure of consumer protection. Hubris, greed at all levels of society (including the vaunted consumer level), and federal government policies that encouraged putting gardeners from Guadalahara in California McMansions had absolutely nothing to do with it.

Rather than waste further time with that tiresome tool, read an interview with Ballard Spahr's Mike Skojec. Mike's insights are much less fevered and much more cogent. Then again, he's not making a run for higher office on a platform based upon the truth of the adage that you can fool most of the people some of the time and some of the people all of the time.

All The Mail That's Fit To Print

2015-01-15T21:45:00-06:00

It's been awhile since I dipped into the BLB mailbag. It's about time to see what kind of flack I receive.

First up is an email I received from a gentleman who referred to himself as the Director of Public Relations for Citi. Without hurling a single epithet, he informed me that the dispute with a lawyer/house renovator whose home was broken into by contractors for CitiMortage was "resolved" on December 10, 2014. He did not indicate what that "resolution" might have entailed, but we assume, based upon the nature of the dispute ("Show Me The Money!"), it involved coin of the realm passing from Citi and/or its contractor to the homeowner/attorney. While Toni Braxton may yearn for her heart to be unbroken, we aren't aware of any way in which you can unbreak into a house.

Another recent blog post on a scholarly article written by University of Alabama Law Professor Julie Anderson Hill on the legal cunundrum for banks trying to bank state legal - federal illegal marijuana-related businesses in Colorado, I received an email from Professor Hill. She corrected me on the nature of the "Mary Jane" credit union formed in Colorado, Fourth Corner Credit Union. I thought that it was the first special purpose "Cannabis Cooperative" authorized under Colorado law. Instead, Fourth Corner is a state chartered credit union. Because of quirk's in Colorado law, it may open its doors prior to receiving deposit insurance from the NCUA (a processes that could take years), although its still needs approval by the Federal Reserve System of a master account. The organizers think that this approval process by the Fed is a sure thing, but neither Professor Hill or I are as confident. On the other hand, it's not that there is any precedent on which to base an opinion, so we're just going to have to wait and see. The organizers had, according to press reports, hoped to be up and running by January 1, 2015, but that hasn't occurred. Stay tuned.

Finally, a financial institution trade official asked if I thought that Maxine Waters had personally drafted the press release that contained the following words, allegedly spoken by her:

“The disparate impact standard is absolutely essential to providing for fair housing throughout our nation. I sincerely hope that the Supreme Court will make the right decision in this case by affirming that the Fair Housing Act unequivocally prohibits actions that have the effect of disproportionately denying housing to marginalized communities,” Waters said Friday.

“Failure to do so would be contrary to congressional intent; it would overturn decades of major progress in fair housing; and would be particularly devastating for minority individuals and communities,” she added.

Waters said unchecked discriminatory housing practices, such as subprime lending to minority communities, in the time leading up to the mortgage crisis continue to prevent working class families from joining the middle class.

“The disparate impact standard under the Fair Housing Act has been effectively used for decades to weed out practices that create barriers to housing for people on the basis of factors like race, color, religion and gender,” she said.

Given her previous problems in the socialization/nationalize arena, we are both doubtful that Rep. Waters wasn't acting as a mere sock puppet for the guiding hand of a professional PR hack. Then again, we could be wrong. Either way, we're rooting for the visiting team in the disparate impact game being played before the SCOTUS.

Surprisingly, there were no anonymous emails threatening my life or worse, regulatory retaliation. Perhaps with the spring thaw, the wombats and trolls will again be out in force.

Fighting Back: Maybe, Maybe Not

2015-01-11T21:42:00-06:00

Compliance consultant Lucy Griffin recently discussed the fact that a number of banks have been pushed around by the CFPB on questionable legal grounds, and she suggests that, perhaps, instead of rolling over, banks should "push back."

Lucy rightly notes that the CFPB has made transformed its "supervisory" role into an "enforcement" role. According to Lucy, the CFPB has become the FTC "on steroids." I suppose that explains the "Roid Rage" of its creator, Lizzie Borden Warren, a woman whose public persona resembles that of a wolverine on a bad acid trip, albeit a wolverine with a pair of bifocals perched half-way down her schnoz and with the air perpetual outrage and aggrievement emanating from regions best left unexplored.

Lucy complains that even where in areas like fair lending, where the Adjustment Bureau's use of questionable statistical analyses to draw even more questionable conclusions merits a vigorous defense, most banks don't fight back. She explains why.

Fighting back is indeed a risk. It is expensive, results in bad press.

That's true. These factors are compounded by the fact that the Bureau doesn't have much accountability for the money it spends on "its mission," and is an ideologically-driven step-child of progressivism, which values strong central government action to level the playing field and root out evil where it sees it, as only it can see it from its lofty home above the clouds. When it comes to punishing the forces of the Dark Lord, no expense is too much. Plus, with no shareholders, and no effective Congressional oversight over its budget (or its sole Director), it can spend what it pleases and push around whoever it wants to push around. As we've noted previously, this is an agency that depends more than any other agency on the wisdom and virtue of its Director, since his favorite song is "Unchained Melody" and it lacks effective structural checks and balances.

On the other hand, Lucy asks, "banks get bad press even when they do the right thing. But when banks give in, they are guaranteed to lose."

Why not push back? The worst thing that could happen is that the bank could lose. That’s going to happen anyway.

But you also just might win.

Don't hold your breath, Lacy. It's a business decision, and most businesses, including banks, aren't going to wage war in the federal courts with an enemy with practically unlimited staying power and financial resources unless the CFPB leaves them no choice but to slug it out. Sure, the bank might win, but what it has to lose is the same thing any prevailing party gains from a pyrrhic victory: a "win" that leaves them so weakened that they might as well have lost.

Disparate Impact's Bump In The Road

2014-11-05T22:00:00-06:00

In today's American Banker (paid subsciption required), Rachel Witkowski riases some good points about the potential impact of the recent decision of federal district court judge Richard Leon's recent decision that HUD's use of disparate impact violates the Fair Housing Act. For one thing, it throws a monkey wrench in HUD's use of the questionable theory, even though other ideologically-driven regulators like the CFPB and the US Justice Department may not be deterred from continuing to use it as cudgel with which to beat lenders senseless.

It is unlikely to stop other regulators, including the Consumer Financial Protection Bureau, from their own use of the theory in other circumstances, but sources said it will slow down what HUD can do under disparate impact until the Supreme Court issues a ruling on a similar case before it.

As another observer notes, it also boosts the morale of lenders, trade groups, and others that have been fighting the theory over the past few years. While HUD will likely appeal the decision, the fact that the same issue is before the SCOTUS and that arguments on that case are likely to be heard early next year means that HUD's pursuit of the appeal, and use of the theory in other instances, may be deterred.

Judge Leon's opinion was, to say the least, unvarnished.

As is typical for Leon — who often issues strongly worded opinions — the judge blasted the use of disparate impact, saying the Fair Housing Act "only" prohibits disparate "treatment," or intentional discrimination. Responding to an argument by the government that his court was precluded from weighing in on the use of disparate impact, Leon replied, "Please!"

"The expansion of FHA to include disparate-impact liability would not only have wide-ranging disruptive effect on the pricing and provision of homeowner's insurance, but would also require insurers to collect and analyze certain types of race-based data on their clients and prospective clients," Leon said in the final opinion.

He added that the case was "another example of an administrative agency trying desperately to write into law that which Congress never intended to sanction."

That has been the story of the life of the banking industry since January 2009.

Witkowski also points out that Judge Leon's decision, and the case pending before the Supreme Court, involve the Fair Housing Act. The CFPB has been using disparate impact to push claims under the Equal Credit Opportunity Act. Therefore, a decision against disparate impact under the Fair Housing Act doesn't necessarily apply to actions by the CFPB under ECOA. However, what such a ruling would likely do is encourage victims of CFPB's overreach to fight back, with the legitimate hope that they will ultimately prevail. Personally, I would love to see the CFPB continue to paint a bulls-eye on the forehead given the change in contol of Congress effected yesterday. The more examples of stained theories used to push ideological social engineering goals, the more reason for concerted action by Congress to put actual oversight on The Adjustment Bureau, and the more likelihood that wing-clipping will occur, even if it has to wait for a change in the White House in January 2017.

Culture wars aren't won overnight. Banks are in it for the long haul.

CFPB Delenda Est!

Consolidation Does Not Inevitably Lead To De Novos

2014-09-10T22:08:00-05:00

ICBA chief Cam Fine recently turned optimistic (paid subscription required) about an eventual uptick in de novo charters. However, he doesn't think that wave will break for a few years.

"It may not be as robust as the late '90s, when we had 150 to 200 [new banks] a year, but maybe 50 or 60 a year, particularly by 2020," Fine said. "First in, say 2017, it will be 10 to 15."

The new activity will sprout once the industry players feel the operating environment has leveled off, he said. "The money will come back once we digest [new regulation] and the turmoil gets in the rear view," Fine said, adding that startup capital "will maybe go where there is no local bank."

Based primarily upon what has occurred in the past, Cam's predictions make sense. On the other hand, the past is not always prelude to the future. As we've discussed previously, some of the regulatory agencies, especially the FDIC, have, by their actions and "sub rosa" admissions (if not their public statements), expressed a view that there are simply too many financial institutions in this country to ensure that all prosper, and that reducing the total number of financial institutions is a long-term goal. If that's the view, then unless it changes, I don't see another round of de novo charter approvals, certainly not 50 to 60 a year, being likely.

Of course, I could be wrong. It's happened.

One of the recent trends that those of us in the bank mergers and acquisitions arena have noticed over the past couple of years is the number of deals that have been hung up, and in some cases killed, by fair lending concerns initially raised by fair lending advocates, then taken up by regulators such as the Federal Reserve. Speaking recently with an investment bankers heavily involved in with community bank merger and acquisition transactions, I was struck by how frustrated he and others have become with the Fed's fly-in-the-ointment role in slowing down what many observers think is an inevitable consolidation of the banking industry. A number of affected participants have voiced the view that that the Fed has gazed over the horizon and been concerned by what it sees: fewer banks to regulate, especially among the ranks of smaller Fed member community banks. These observers assert that the Fed is deliberately slowing down, and sometimes killing, deals on the pretext of fair lending concerns, but actually because it's concerned that consolidation might adversely affect the agency itself. With fewer total banks to regulate, the proponents of reducing the number of federal bank regulators to a single agency might gain support.

I suppose that's a plausible view. Certainly, it has had the effect of artificially sustaining a higher number of banks than would be the case if nature took its course. I think it may be simply more likely that the fair lending roadblocks that have been thrown in the way of recent transactions have more to do with the ideological bent of those at the top of the regulatory food chain than they do to with worry about the need to preserve enough of the regulated to justify the existence of the regulator.

Regardless, I think consolidation is a trend that will continue, as does Cam Fine.

"We have 6,300 community banks as of right now," Fine said. "My personal prediction is that… we will be at 4,800 to 5,300 banks" by the end of 2019.

That sounds about right to me. Fair lending or no fair lending, the trend is toward consolidation and I think that is where the industry is headed, whether or not the Fed makes the process more painful. Where I'm more pessimistic than is Cam is in predicting that such consolidation will, as it has in the past, spur a wave of new bank charters. Given the fact that so many of the community banks that failed in the latest downturn were de novo banks, I simply don't see the FDIC agreeing to grant 50 to 60 new bank charters on an annual basis.