Tuesday, January 06, 2004

Affirmative action banking 

Remember the affirmative action bake sale that a few campus conservatives put on? In that case, whites were charged a dollar while others were charged anywhere from 95 to 20 cents based on their race and sex. Well, it turns out they were imitating real life, as the same thing was happening at a bank, according to a Washington Post op-ed:

... the instructions required loan officers to limit the fees they charged black and Hispanic home buyers while allowing higher fees to be charged to white borrowers. Here is what Flagstar's "Revenue Per Loan Procedure" policy required of loan officers:

• Minority home buyers could be charged no more than 3 percent in loan origination fees or "points," but white applicants could be charged up to 4 percent.

• Loan officers whose "revenue per loan average" from mortgages made to minority applicants exceeds their "non-minority [white] average" will be subject to disciplinary actions, including probation and termination.

• "Non-minority will be defined as any borrower who is determined on the loan application to be white, not of Hispanic origin."
As is often the case, this policy started originally so that the bank wouldn't appear to be discriminatory:

The irony behind the Flagstar loan pricing policy? Though not confirmed by Flagstar, DeBrota said the dual-standard loan fee policy originally was put into place as a way to avoid any appearance of discrimination against black and Hispanic borrowers.
We can't look like we're racist against blacks and Hispanics, so what we'll do is discriminate against white folks. Don't you just love that?

The way to achieve fair lending for minorities, in other words, was to enforce a policy of higher-fee lending to non-minorities.

That's not exactly what Congress had in mind back in 1968. Fair means equal. Period.
When the 1964 Civil Rights Act was being discussed in Congress, Humbert Humphrey guaranteed that it would not lead to reverse discrimination against whites, and famously said that if he were wrong, he would eat the paper on which the law was written. But calls for equality disappeared from civil rights groups soon after, replaced by calls for preferences.

Lastly, I'll note that discriminating in favor of minorities often isn't very beneficial to them, as it is in this case:

DeBrota believes that while racial preferences in mortgage lending may appear to favor one group over another, the reality is that "it is a lose-lose situation." Those charged lower fees can also be harmed, she argues, "because it creates a disincentive to lend to them." When loan officers stand to earn less from one category of borrowers than another, they will naturally tend to emphasize making loans to clients who will bring them the highest fees and income -- white borrowers, in this case.
(Via David Bernstein)
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