To help prevent another financial crisis, CEI helped file an amicus brief in a pending Supreme Court case, Magner v. Gallagher. The case tests whether race-conscious “disparate-impact” causes of action can be judicially read into laws, like the Fair Housing Act, that ban racial discrimination, effectively turning the colorblind intentions of such laws upside down. “Disparate impact” is when a neutral policy happens to impact more minorities than whites, like a standardized test that whites pass at a higher rate than some minority group, even though test scores are calculated the same way for members of all races. The Supreme Court sometimes declines to interpret anti-discrimination statutes as banning neutral practices that have a “disparate impact,” but in other cases, it interprets then as banning “disparate impact,” deferring to the statutory interpretation of civil-rights agencies, like the EEOC, that like “disparate impact” rules because they expand agencies’ power to regulate businesses and interfere with their race-neutral criteria for things like hiring, lending, or leasing apartments.
Banks and mortgage companies have been under pressure from lawmakers and regulators to give loans to minorities with bad credit, in order to avoid liability for “racially disparate impact,” and to provide “affordable housing” and promote racial “diversity.” (Recently, the Obama administration has ratcheted up such pressure, demanding that targeted banks make preferential loans to minorities with bad credit, notes Investor’s Business Daily, extracting such racial preferences in recent settlements with banks.) Such pressure played a key role in triggering the mortgage crisis, judging from a story in The New York Times. For example, “a high-ranking Democrat telephoned executives and screamed at them to purchase more loans from low-income borrowers, according to a Congressional source.” The executives of government-backed mortgage giants Fannie Mae and Freddie Mac “eventually yielded to those pressures, effectively wagering that if things got too bad, the government would bail them out.” Taxpayers have now spent $170 billion bailing them out (and unlike the private banks, which repaid their bailouts, Fannie and Freddie never have, and never will, repay their bailouts, which continue to expand monthly).
In the amicus brief in Magner, Pacific Legal Foundation attorneys note that the legislative history and plain language of the Fair Housing Act does not support a disparate-impact cause of action, contrary to the Obama Administration’s claims. (CEI and the Cato Institute joined the Pacific Legal Foundation’s amicus brief, along with the Center for Equal Opportunity.)
The brief also contains two arguments that I’ve previously made, such as the fact that deferring to the Obama administration’s recent interpretation of the Fair Housing Act as including a “disparate impact” cause of action would violate a principle of statutory interpretation known as the canon of constitutional doubts, and the fact that it conflicts with the federalism canon of statutory construction set forth in the Supreme Court’s decision in United States v. Bass.
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