Open Letter to U.S. Assistant Attorney General Thomas Perez

by Don Boudreaux on September 6, 2011

in Current Affairs, Housing, Hubris and humility, Man of System, Myths and Fallacies, Other People's Money

Mr. Thomas E. Perez
Assistant Attorney General for the Civil Rights Division
U.S. Department of Justice
Washington, DC

Dear Mr. Perez:

In today’s Wall Street Journal you justify the DOJ’s crackdown on banks that, in your and your colleagues’ opinion, allegedly resist extending mortgages at appropriate market rates to minority home buyers (“Government Is Right to Fight Discrimination in Lending“).  And you protest that “The suggestion that the department, as part of its settlements, is forcing banks to lower their underwriting standards and make loans to unqualified borrowers is simply wrong.”

Please forgive my skepticism.

Your premise is that profit-hungry banks – out of bigotry or incompetence or both – are leaving money on the table by discouraging credit-worthy homebuyers from borrowing.  If this dubious premise is valid, then a far better course of action for you and your colleagues is to quit your jobs as ‘public servants,’ start your own banks, and then lend to all of those many homebuyers whose profitable business is rejected by other banks.

By putting your own money where your mouths are, you’ll not only give credible evidence that your premise is valid, you’ll also – if you’re correct – (1) solve through voluntary market actions the problem that you now attack with government force, and (2) make a mint.

It’s a classic win-win.

Sincerely,
Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA 22030

P.S. Yet another benefit of your putting your money where your mouths are is that, with government resources no longer spent solving a problem that the private sector cures, Uncle Sam’s fiscal woes will be a tad bit eased.

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{ 27 comments }

kyle8 September 6, 2011 at 8:24 am

Brilliant because of it’s simplicity.

Invisible Backhand September 6, 2011 at 10:49 am

Simple because it’s ahistorical.

Andrew_M_Garland September 6, 2011 at 7:36 pm

To Invisible Backhand,

I don’t know the history you are referring to. Fill me in.

kyle8 September 6, 2011 at 7:42 pm

As usual he uses a cryptic post to appear so much wiser than us yokels. He is just a brainwashed stooge.

Daniel Kuehn September 6, 2011 at 8:26 am

So you said the other day about 5% of your letters to the editor get published. Do you ever actually send these open letters? Has anyone ever responded (either to your sent version or because they saw it on the blog?)

Don Boudreaux September 6, 2011 at 12:00 pm

I do send these open letters (when I can find the addressee’s e-mail address). No one has ever responded.

Jurbo September 7, 2011 at 4:20 am

“Do you ever actually send these open letters?”

Maybe I’m just a bundle of prejudices, but I can’t help feeling that sentence is an accusation couched as a question.

Daniel Kuehn September 8, 2011 at 11:43 am

Jurbo –
Paranoid interpretations of what I say on here are par for the course, but your suspicion here is so strange I can’t even imagine what you think I could be accusing Don of. I’m asking him if he sends the letter or just posts them to the blog. What kind of maliciousness could I possibly be sneaking in with this question?

Methinks1776 September 6, 2011 at 9:00 am

The only thing the Gestapo knows how to do is put its boot where your throat is. Everything else is foreign to it.

vikingvista September 6, 2011 at 1:18 pm

Amen.

SweetLiberty September 6, 2011 at 9:03 am

What Ms. Kissel and other critics refuse to acknowledge is that the failure of some lending institutions to offer credit to qualified borrowers—who were disqualified for loans not because of their creditworthiness but solely based on race—in minority neighborhoods on the same basis as qualified borrowers in nonminority neighborhoods, was one of the factors that contributed to the subprime lending boom and subsequent crisis. – Thomas Perez

Sorry Don, the race card has been played. Any attempt at a rebuttal means you are a racist. And it is a fact (simply because Perez asserts it is – evidence not required) that “some” lending institutions failed to lend to creditworthy borrowers based on race. Your “put your money where your mouth is” argument clearly isn’t a solution because…, well, because… you’re a racist!

David Driver September 6, 2011 at 9:08 am

Unless I’m mistaken;

1) Tthe Justice Dept already conclude that the claim of discrimination in lending practices (as implied in the incomplete Fed report of 1991) by banks was false.

2) This the same nonsense that started the housing debacle in the first place.

“Differences in approval and denial rates among groups and neighborhoods revealed by the new data can be expected to raise questions abou the adequacy and fairness of the home lending process. (BUT) The data have IMPORTANT LIMITATIONS, however, and care must be taken in drawing conclusions from observed lending patterns. Foremost among these limitations is a LACK OF INFORMATION about FACTORS that are important in determining teh CREDITWORTHINESS of applicants and the adequacy of the collateral offered as security for their loans.”

That MISSING DATA, consisted of FINANCIAL STATUS (i.e., credit SCORE), CREDIT HISTORY, JOB HISTORY and DOWN PAYMENT.

If that data is skewed by race, then it is not the lending practices that are racially biased – it is some other factor that preceds the loan application process than biases the applicants towards attaining a qualifying profile.

Must history repeats itself once again before we finally begin to learn from the mistakes of the past? Even the very recent past?

David Driver September 6, 2011 at 9:13 am

my typing it terrible. I apologize for not proofing it first.

The quote if from the Federal Reserve Bulletin titled, “Home Mortgagae Disclosure Act: Expanded Data on Residential Lending”, Oct. 23, 1991.

tdp September 6, 2011 at 2:40 pm

don’t forget that they also want to punish banks for doing exactly what they are punishing other banks for not doing. At the government’s urging, subprime mortgages were issued that caused a collapse, and the government then turns around and slams the banks issuing them as “predatory” and causing the crisis by taking advantage of minority home buyers and people with bad credit. So the lesson is: if Obama and Friends make you do something, you will be punished if you comply and punished if you don’t comply. Clearly corporations and investors aren’t hiring or engaging in economic activity because they’re greedy selfish bastards. Clearly that’s why our economy’s tanking and why the federal government must redistribute wealth to the middle class and poor and manage the economy by spending more.

tdp September 6, 2011 at 2:41 pm

for those too slow to catch on to sarcasm (IB, muirgeo, Gil, et al) the last part was sarcastic

Seth September 6, 2011 at 10:09 am

As a sharp Forbes reporter once pointed out, if banks held group A to a higher standard than group B when making lending decisions, it should show up as a lower default rate in group A.

Chucklehead September 6, 2011 at 12:15 pm

The fact that you ignored group C proves you are a racist too.

Hasdrubal September 6, 2011 at 10:10 am

Of course banks are leaving money on the table. They’ve just been through a major financial crisis, a tremendous number have failed due to having far too many bad loans on their books, they’ve been made the bogeyman by every politician around and hit with a tremendous amount of legislation and regulations, and the housing market is in the toilet. The government is still making noises about forcing them to renegotiate loans with people who can’ pay and are underwater.

They’re turning down just about everyone, not just minorities who are marginal borrowers even in good times, but middle class borrowers with solid credit ratings as well.

Chris O'Leary September 6, 2011 at 10:11 am

Did this letter get hung up in the mail or something? It seems so 10 years ago.

Krishnan September 6, 2011 at 10:34 am

“But, but, but … Mr. Perez and the DOJ mean so well … they want to do good – and help people from the big, bad wolves … and all you do is complain against those that want to do well … what we want is compassionate capitalism – capitalism with a heart – that does good and not send money to evil corporations – so what if we abuse our power against some banks for some time – we are after all, trying to do good that these greedy capitalists refuse to” (Author unknown – but fits anyone in the DOJ and the current administration)

Brad K. September 6, 2011 at 1:27 pm

The premise you make, that a better response would be to act as an individual, overlooks an important aspect of governance.

That is, those in charge get to affect more people. If you have the right answer, you can improve the lot of many, many more people as a policy maker.

That is a big “if”. Because Jimmy Carter and Bill Clinton both appeared to have imposed this same “solution”, and the problems have sprung into enormous debt inflation, and toxic debt growth, without beginning to help those targeted, it seems to me that lowering the standards doesn’t work. Like other affirmative action plans, it dramatically impairs those targeted.

Decrying minority discrimination is intended to sway voters. Democrats just seem so very indifferent to the harm they cause all involved. *sigh*

If you want better home ownership among minorities — enable minorities to become more affluent, to have better jobs.

Of course, if you want anyone to have better jobs, then you have to provide more prosperity to those that create those jobs — employers — and not the shills and muggers that prey on them (labor unions, liberals, and other socialists).

Arthur Felter September 6, 2011 at 1:56 pm

You’re so nice. Whenever people have said something along the lines used by Mr. Perez, I respond by saying:

You’re a damn fool for one of two reasons: one, you’re right that banks aren’t providing the need, thus making you an absolute fool for not capitalizing on an easy million-dollar idea; or you’re a fool for believing something that isn’t so.

Either way, you’re a fool.

Floccina September 6, 2011 at 3:58 pm

Some people seem to think that giving bank loans us like giving a gift. Maybe some blacks and Hispanics are much better off because they could not get loans in 2004-2007. Access to loans is not always a winner for the borrower.

Dan J September 6, 2011 at 10:47 pm

Indeed, some people do think they have a rite to a loan. Going in for a loan is akin to interviewing for a job. Your history and choice in presenting yourself is important. Rather, progressives want the loan process to be akin to employment in their view……. Affirmative action and preferential treatment for political identities. Affirmative action IS discrimination.

brotio September 6, 2011 at 8:34 pm

I’m sure Prof Boudreaux’s suggestion will be met with the same deafening silence we’ve gotten from Yasafi when I suggested that he open a medical (mal)practice clinic where all of the staff works 32-hours-a-week for 40 hours of pay.

Apparently, these suggestions from our Statist philosophers work much better with other people’s money.

neal September 6, 2011 at 9:16 pm

Eric Holder should be in jail for Fast and Furious! And his boss too if proven to be involved.

Dan J September 6, 2011 at 10:00 pm

I say to the DOJ and others who proclaim discrimination based on stats to prove it with an individual. Just as the SCOTUS told the litigants to take a hike on proclaiming all people of a group were harmed if one was, supposedly. Case by case basis. Wanna bet the DOJ has no case should they have to submit an individual claim. This is how the Feds bullied lenders, those who were solvent and did not want to participate in the grand subprime scheme, into taking creative measures to secure loans for high risk borrowers. I would lime to see Muirgeo co-sign on these loans or Obama loan to the individuals. They won’t.

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