National Review 

December 27, 1993 

QUIETLY, behind the scenes, the Clinton Administration is preparing for the biggest regulatory crackdown of recent years. Attorney General Janet Reno is linking up with banking regulators and with HUD Secretary Henry Cisneros to end the supposed epidemic of discrimination against minorities in making home loans. The implications for society at large are ominous.

By Robert Stowe England

Here, as in affirmative-action efforts in hiring, college admissions, and the drawing of voting districts, the Washington establishment is obsessed with "disparate impact," which it equates with racism. In the mortgage-lending area, there is ample evidence of disparate impact to feed this obsession. Data collected by the Federal Government reveal that in 1992, while 16 per cent of white applicants for mortgage loans were rejected, 36 per cent of black applicants were rejected.

But does disparate impact indicate racism? According to Lawrence Lindsey, the Federal Reserve governor who oversees the collection of mortgagelending data, even the celebrated Boston Fed study that inspired this crusade found that factors other than race--such as one's credit record and whether one has sufficient income to meet the payments--are enough to account for nearly all the difference in rejection rates. Furthermore, a different analysis of the data in the Boston Fed study by David Horne, an economist with the Federal Deposit Insurance Corporation, finds no evidence of a pattern of discrimination. In any case, Census data show whites and blacks, taken as groups, have similar default rates. If discrimination were in fact occurring--that is, if banks were applying a higher standard to blacks than to whites--you would expect blacks to have a lower default rate.

To read more, click the link below:

http://findarticles.com/p/articles/mi_m1282/is_n25_v45/ai_14779796/