Aggressive Pursuit of Fair Lending Cases Drive by the Government Alarms Bankers

Aggressive Pursuit of Fair Lending Cases Drive by the Government Alarms Bankers

8/19/2011

 

The Justice Department’s aggressive drive to investigate fair lending claims is prompting an adverse reaction from bankers who have been claiming that the government is abusing its authority and contradicting the findings made by other federal regulators

In reaction to the financial crisis, the Obama administration has taken aim at banks, alleging redlining and other violations, to a degree not seen since the Clinton administration.

However, critics charged that the government’s effort has gone too far, claiming that the Justice Department misused legal interpretations so that they would be able to bring complaints to court. They also claimed that the government is too fixated on community banks instead of firms on Wall Street.

According to Camden Fine, the president and chief executive officer of the Independent Community Bankers of America, “‘Witch hunt’ is too mild a term to use for what the Department of Justice is doing to basically community banks. I would call it extortion. It’s an abuse of governmental power over smaller banks that are basically too small to fight back.”

But some observers claim that the banking industry is overreacting. They said that the prominence of fair-lending issues during a Democratic administration is not at all surprising, given the financial crisis which hit the country recently.

John Taylor, the National Community Reinvestment Coalition’s president and chief executive, say that some of the claims made by banks are overblown.  He also disputed the idea that the Justice Department is extracting settlements that force banks to underwrite high risk loans.

WRITTEN BY:

blakeh@wellsdrew.com