Wall Street’s civil rights disgrace: Inside a quiet, evil lobbying effort
Since the financial crisis of 2008, a defining question has been how to rein in Wall Street’s most reckless practices. In the face of the Dodd-Frank Act, a nascent Consumer Financial Protection Bureau and some impressive legal settlements against banks involved in securities fraud and abusive loan servicing, Wall Street has not been shy about taking countermeasures.
After lobbying furiously against financial reform, the financial industry has worked to defang the new regulatory regimes where it can. For the most part, this response has aimed at rolling back reforms put in place following the 2008 financial crisis. But the backlash against regulation has not been limited to attacking new financial reforms.
Over the last several years, Wall Street has joined a coalition of groups in a litigation campaign to dismantle a crucial regulatory bulwark: federal civil rights protections against discriminatory lending. Pressing this litigation effort is a good investment for Wall Street. It provides a low-profile path to advance its deregulatory agenda. Under the guise of a technical debate over legal doctrine, this litigation campaign aims to radically roll back an indispensable legal constraint on reckless financial practices. In the process, it would tear down a vital pillar of civil rights law, making it much harder to mount legal challenges to discrimination throughout the housing and lending markets.
A Pillar of Civil Rights Law
Discrimination was one of the engines of the financial crisis. Unscrupulous lenders designed their entire business models to serve Wall Street’s bottomless appetite for loans to be packaged into securities. The most effective way to feed that appetite was to exploit long-standing patterns of discrimination and residential segregation, which had the effect of funneling African-American and Latino borrowers into hyper-risky loans that put borrowers on a path to foreclosure.
As a result, some of the most important legal actions against the banks have involved discrimination claims under the Fair Housing Act (FHA). Many of those claims have relied on a long-standing pillar of civil rights law: The principle that the FHA prohibits housing practices that have a discriminatory effect – or, in the language of legal doctrine, a “disparate impact” – on the basis of race, sex, religion, disability or other protected characteristics. Disparate impact claims provide a way for judges to enforce anti-discrimination laws without forcing them to get inside the heads of decision-makers to determine whether discrimination was intentional.
http://www.salon.com/2014/09/12/wall_streets_civil_rights_disgrace_inside_a_quiet_evil_lobbying_effort/
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