Right-wing media continue their relentless campaign to undermine the Labor Secretary nomination of Thomas Perez, pushing the baseless claim that he acted unethically in his involvement with a withdrawn Supreme Court case that could have undone decades of civil rights precedent.
The Wall Street Journal and the National Review Online have been at the forefront of allegations, most recently made by the WSJ on May 6, that Perez perpetuated a "shady quid pro quo" with the City of St. Paul, Minnesota, because of his involvement in deliberations that resulted in a withdrawn Supreme Court case, Magner v. Gallagher, and the decision of the Department of Justice to not intervene in an unrelated False Claims Act lawsuit.
By holding a surprise hearing for the "whistleblower" who initiated the False Claims Act case against St. Paul, Congressional Republicans have used the allegations that something "awfully suspicious" occurred to push back Senate mark-up of Perez's nomination until May 8. The "whistleblower," a small business owner named Frederick Newell, may have lost a sizeable sum of money he could have been awarded if DOJ had intervened. As explained by Mother Jones, "given all the hard work he put in, it's understandable he's ticked off at Perez. But the fact that Newell didn't get his money doesn't mean Perez did anything improper."
Indeed, it's unclear if Newell could have won even if DOJ had joined the case. DOJ's top expert on these sorts of claims, Deputy Assistant Attorney General Michael Hertz, determined the case was weak, reportedly deciding "this case sucks" and to not intervene. The Magner case at the other end of this "quid pro quo," however, was of far greater significance.
Because Magner had the potential to present yet another opportunity for the conservative Justices to dismantle long-standing civil rights precedent, advocates ranging from civil rights attorneys to former Vice President Walter Mondale joined the DOJ in requesting St. Paul drop its appeal that had brought the case to the Supreme Court. In a recent op-ed for Politico, Wade Henderson, president and CEO of The Leadership Conference on Civil and Human Rights, explained the stakes:
As any lawyer knows, bad facts make bad law. This adage aptly applies to a fair housing case involving the city of St. Paul, Minn., that is now being unfairly used to tarnish the integrity of Tom Perez[.]
What made [Magner] so unusual was landlords' claim that by enforcing housing codes against them the city was committing a civil rights violation under the Fair Housing Act. Their argument was that bringing their buildings up to code would cost too much money, cause them to dispose of the properties and thus, affect the access of their minority tenants to housing. The district court dismissed the landlords' claims, but they prevailed on appeal.
This case represented a real threat to established civil rights laws that have protected millions of Americans from discrimination. It would be a real threat to the integrity of the Fair Housing Act if these landlords could use it to keep tenants in squalor.
St. Paul's mayor, Chris Coleman, was working with Perez on this issue and on an unrelated False Claims Act case against the city. The false claims case was relatively weak, and the Justice Department chose to dismiss it. During this same period, I was among the civil rights advocates who initiated conversations with the mayor to ask if he would withdraw the city's Supreme Court appeal in the landlords' case. Coleman's public interest background and commitment to preserving the Fair Housing Act made him uniquely sympathetic to our concerns. After due deliberation, the city dropped its Supreme Court appeal.
A Wall Street Journal columnist cited a new Urban Institute study on the increased wealth gap between communities of color and whites to both revive the debunked accusations that fair housing policies caused the subprime mortgage bubble and falsely link Assistant Attorney General Thomas Perez to these claims.
Continuing the outlet's relentless attacks on current Labor Secretary nominee Perez, editorial board member Jason Riley wrote a WSJ column claiming Perez is responsible for the racial wealth gap documented by a recent Urban Institute report by purportedly "saddl[ing] a lot of minorities with foreclosed homes, huge debt burdens and bad credit scores."
The support for this backwards allegation was that as head of the Civil Rights Division at the Department of Justice under President Obama, Perez effectively pursued lawsuits against banks that impermissibly discriminated against communities of color during the administration of former President George W. Bush. From the WSJ:
Not surprisingly, neither the Urban Institute nor the New York Times have much to say about the federal policies that pushed lenders to loan money to people unlikely to be able to repay it. But the reality is that well-intentioned housing policies aimed at low-income minorities have ultimately left those folks worse off.
President Obama's nominee for labor secretary, Thomas Perez, made a name for himself in the Justice Department by shaking down some of these lenders for "racial discrimination" if blacks and Hispanic applicants weren't approved for some loans at the same rate as whites. Other lenders got the message.
Mr. Perez is getting a promotion, and the Obama administration is patting itself on the back for pursuing these so-called fair-lending cases. Of course, all they've really done is saddle a lot of minorities with foreclosed homes, huge debt burdens and bad credit scores.
Conservative media figures are painting a new White House push on affordable housing with the same dishonest brush they used to shift blame away from Wall Street for the housing bubble that precipitated the 2007-08 financial crisis.
On the April 3 edition of Fox News' America's Newsroom, Fox Business host Stuart Varney said that "lowering standards for who can borrow money to buy a home" is "what got us into trouble in the first place." The Washington Free Beacon made the same claim in an article titled "Subprime: The Sequel," and Ed Morrissey of HotAir.com claimed "the central failure in that bubble...was incentivizing increasingly risky loans with government cash and coercion."
But the housing bubble of the early 2000s was caused by private sector lending behavior, not government policy. The government-sponsored entities Fannie Mae and Freddie Mac, commonly called the GSEs, didn't lead private financial institutions into the subprime market and the complex financial instruments that made the bubble so toxic. Instead, they followed Wall Street there. As the University of North Carolina's Center for Community Capital explained, "Ultimately, profit not policy was what motivated Fannie and Freddie and loan products not borrowers were what caused their collapse."
The data support this explanation. The loans to borrowers with lower credit scores which the GSEs bought up fared much better than did similar privately-securitized loans. (Six times better, according to the Center for American Progress). A Federal Reserve report using different methodology "found no evidence" that government policies designed to encourage lending to lower-income borrowers had contributed to the subprime bubble. The Financial Crisis Inquiry Commission's final report examined and thoroughly debunked the contrary argument, primarily made by the American Enterprise Institute's Ed Pinto:
In direct contrast to Pinto's claim, GSE mortgages with some riskier characteristics such as high loan-to-value ratios are not at all equivalent to those mortgages in securitizations labeled subprime and Alt-A by issuers. The performance data assembled and analyzed by the FCIC show that non-GSE securitized loans experienced much higher rates of delinquency than did the GSE loans with similar characteristics.
Morrissey's post labels Pinto, former executive at Fannie Mae, a kind of soothsayer "who originally pointed out the failure at [the Federal Housing Administration]." But beyond the wonks who've debunked Pinto's claims, financial experts and journalists like Bailout Nation author Barry Ritholtz, The New York Times' Joe Nocera, and Bloomberg's David Lynch have shown him to be a primary driver of the false blame-the-government narrative of the crisis five years ago that conservative media are applying to housing policy developments in 2013.
An April 2 Washington Post article on the White House's efforts to broaden the reach of the current housing market resurgence notes that the recent improvement in the market "has been delivering most of the benefits to established homeowners with high credit scores or to investors who have been behind a significant number of new purchases." Housing officials, however, argue that a housing recovery that is limited to near-riskless buyers is constraining the broader economic recovery. According to the piece:
From 2007 through 2012, new-home purchases fell 30 percent for people with credit scores above 780 (out of 800), according to Federal Reserve Governor Elizabeth Duke. But they declined 90 percent for people with scores between 680 and 620 -- historically a respectable range for a credit score.
"If the only people who can get a loan have near-perfect credit and are putting down 25 percent, you're leaving out of the market an entire population of creditworthy folks, which constrains demand and slows the recovery," said Jim Parrott, who until January was the senior adviser on housing for the White House's National Economic Council.
"I think the ability of newly formed households, which are more likely to have lower incomes or weaker credit scores, to access the mortgage market will make a big difference in the shape of the recovery," Duke said last month. "Economic improvement will cause household formation to increase, but if credit is hard to get, these will be rental rather than owner-occupied households."
Yet conservative ideologues in the media appear eager to cast any attempt to expand the list of winners in the housing market's comeback as a doomed repetition of an invented history of a crisis that was actually caused by widespread private-sector fraud, greed, and collusion.
National Review Online misrepresented the conclusions of a recent Department of Justice (DoJ) Office of the Inspector General (OIG) report on current hiring practices in the department's Voting Section in order to join the right-wing assault on the Labor Secretary nomination of Assistant Attorney General for Civil Rights Thomas Perez.
NRO's aversion to the effective enforcement of civil rights law is well-established and the outlet's wish that precedent in this area is overturned has been repeatedly stated. In addition to Section 5 of the Voting Rights Act and affirmative action, NRO has also expressed its dislike for the currently constitutional "disparate impact" doctrine. This doctrine proves impermissible discrimination against protected groups by demonstrating the disproportionate effects of challenged policies and laws, an evidence-based approach that has drawn the NRO's particular ire in the area of fair housing. A recent NRO post attempted to recycle these attacks as new ones on Perez by observing not many conservatives go to work for DoJ's Civil Rights Division (CRD).
The NRO accuses Perez of dismissing the fact that not enough conservatives serve in the Voting Section - a "disparate impact" - even though Perez enforces "disparate impact" law against banks that impermissibly discriminated against communities of color.
The Wall Street Journal is joining the right-wing campaign against President Obama's nominee for Secretary of Labor, Assistant Attorney General for Civil Rights Thomas Perez, by uncritically pushing the unsubstantiated claim that Perez improperly colluded with the City of St. Paul, Minnesota, to withdraw a Supreme Court civil rights case.
In reporting on President Obama's official nomination of Perez to head the Department of Labor, the WSJ repeated the claim that Perez inappropriately interfered with Magner v. Gallagher, a Supreme Court civil rights case that could have provided the conservative justices with an opportunity to strike down decades of civil rights precedent. Specifically, although the City of St. Paul has clearly stated it withdrew Magner v. Gallagher because it feared a split Court might use it to strike down the established practice of proving discrimination by showing the racial effects of challenged policies - "disparate impact" litigation - the WSJ uncritically repeated the allegation that Perez was improperly involved. From the WSJ:
The nomination of Mr. Perez as labor secretary comes as some congressional Republicans have raised questions about his alleged involvement in the Justice Department's decision to stay out of two lawsuits against St. Paul, Minn., in which private plaintiffs alleged the city defrauded the U.S. in its use of housing funds.
Republicans have questioned whether the Justice Department stayed out of those cases in exchange for St. Paul dropping an appeal pending at the Supreme Court in a case that civil-rights advocates had feared would undercut enforcement of U.S. housing-discrimination law.
Rush Limbaugh falsely redefined redlining, claiming that it involves forcing banks to loan money to people who can't afford to pay it back in order to blame liberals for the financial crisis. In fact, the prohibited practice involves a lending institution's refusal to lend money based on location.
After noting a news article stating that new regulations will require mortgage lenders to verify and inspect borrowers' financial records, Limbaugh said on the January 10 edition of his radio show:
LIMBAUGH: You know what Obama and the Rev. Jackson and the Democrats used to call that? Redlining. When the banks would look at people's financial records and determine whether or not they could pay them back, if they couldn't, they'd line them out in red and they wouldn't get the loan. And of course, the civil rights crowd said "racist, racist, racist" because the minorities were among the largest group not being given loans, and they said it wasn't because of their inability to pay, it's because people are racist at the banks. So they changed the rules to give them the money.
Limbaugh used his definition of redlining in order to promote the persistent myth that efforts by Democrats to expand homeownership to lower-income families caused the housing crisis in 2008. But redlining as it applies to mortgage lending is discrimination against a borrower based on where the property is located -- typically an area dominated by low-income or minority residents -- regardless of the borrower's ability to pay it back.
From the January 10 edition of Premiere Radio Networks' The Rush Limbaugh Show:
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Media coverage of the economic consequences of sequestration -- steep federal budget cuts mandated by Congress' failure to pass deficit reduction legislation -- has largely ignored the effects of these cuts to the Department of Justice, which in recent years has brought a number of enforcement actions against financial institutions that violate fraud and fair lending laws.
However, comments from Attorney General Eric Holder in an interview with NPR Legal Affairs correspondent Nina Totenberg make clear that the potential effects of the now-delayed sequester could be especially damaging to the DOJ and could seriously hamper litigation against the financial institutions that fueled the Great Recession.
A Media Matters search of major newspapers and evening news transcripts available on Nexis indicated that the media did not explain the economic consequences of mandatory budget cuts to the Department of Justice prior to the fiscal cliff deal, which postponed sequestration for two months.
In the interview given after a speech he delivered at the John F. Kennedy Presidential Library and Museum, Holder revealed that DOJ's need to budget public safety programs in the event of sequestration would sideline successful attempts to hold banks accountable for the mortgage fraud and discrimination that partially caused the Great Recession.
Holder explained the "reality" that civil cases brought by DOJ and the recovery of "money on behalf of the American people" will "have to wait" if sequestration goes through, because public safety - such as maintenance of federal prisons - must be "prioritized." As reported by CNN.com:
U.S. Attorney General Eric Holder said Tuesday that if the Justice Department were faced with budget cuts due to sequestration, he believes that he would be able to maintain public safety by shifting resources and that the federal prison system could operate "for months" if necessary.
"I have the flexibility to move funds within the Department," Holder said.
However, nearly all civil cases would have to be put on hold, he added during an extended interview with National Public Radio reporter Nina Totenberg after giving an address at the John F. Kennedy Presidential Library in Boston.
If DOJ civil litigation is placed on the back burner, then so too is a large component of DOJ's efforts at compensating victims of the illegal mortgage practices of financial institutions before the recession. The DOJ has filed six lawsuits in response to past fraud and discrimination allegedly endemic among banks such as Wells Fargo, Citigroup, and Deutsche Bank, including a recently settled case against the Bank of America.
The DOJ alleged that one of Bank of America's acquisitions "charged black and Hispanic borrowers higher mortgage-lending fees or steered them into costly subprime loans even though their credit histories qualified them for a mortgage with more favorable terms."
DOJ has also recently accused Bank of America of engaging in a "spectacularly brazen" fraud that cost taxpayers more than $1 billion by "selling defective residential mortgage loans to Fannie Mae and Freddie Mac that later defaulted."
Now that the sequester has been postponed, national media has another chance to explain how mandatory budget cuts to DOJ, not just to the U.S. Courts, will affect access to justice for victims of big banks' financial malfeasance. As DOJ's civil litigation over illegal mortgage practices makes clear, the actions of institutions like Bank of America directly contributed to the housing bubble that fueled the Great Recession. In its coverage of the economic consequences of the sequester, the media should point out this specific harm to vulnerable homeowners.
In the continuing campaign against effective civil rights law, right-wing media have recently stepped up their attacks against a federal statute that prohibits acts that have a discriminatory effect on housing patterns. Contrary to this misinformation campaign, "disparate impact" analysis (as this technique is known) is not unconstitutional under the Fair Housing Act of 1968, and conservatives' rejection of this analysis abandons its bipartisan origins.
Disparate impact is the legal term for antidiscrimination law that prohibits actions that have a disproportionate effect on vulnerable groups. Despite its effectiveness - most recently, blocking discriminatory mortgage policies and voter suppression that targeted communities of color - conservative media have attacked disparate impact's legitimacy and dismissed it as a partisan technique only progressives support.
The National Review Online is a frequent critic, calling civil rights litigation based on disparate impact "not grounded...in sound constitutional theory" and part of a "partisan policy agenda." The Wall Street Journal has echoed claims about this "dubious legal theory," joining NRO in criticizing a recent withdrawal of a disparate impact Supreme Court case under the Fair Housing Act, Magner v. Gallagher. This week, WSJ columnist Mary Kissel recycled her conspiracy theory that the Obama administration's participation in convincing the parties to withdraw the case was "shady" because the administration "didn't want the High Court to rule on the legal theory[.]"
But these right-wing critics ignore that disparate impact has been legally accepted under numerous civil rights laws for decades, and in the housing context was part of a bipartisan effort to aggressively prevent the segregation of American society. They also ignore basic Supreme Court litigation strategy.
The constitutionality of disparate impact under the Fair Housing Act has never been addressed by the Supreme Court. There has been no need to take up the issue, as all 11 Circuit Courts have recognized it as a legal method of fair housing enforcement. As explained in a recent ProPublica report, this unanimity is expected given that aggressive government attempts to reverse discriminatory effects in housing patterns were originally considered a core function of the bipartisan Fair Housing Act:
The plan, [Republican Secretary of Housing and Urban Development] George Romney wrote in a confidential memo to aides, was to use his power as secretary of Housing and Urban Development to remake America's housing patterns, which he described as a "high-income white noose" around the black inner city.
The 1968 Fair Housing Act, passed months earlier in the tumultuous aftermath of the Rev. Martin Luther King Jr.'s assassination, directed the government to "affirmatively further" fair housing. Romney believed those words gave him the authority to pressure predominantly white communities to build more affordable housing and end discriminatory zoning practices.
Furthermore, with regards to the Obama administration's alleged influence in the Magner dismissal, there is nothing unusual about Supreme Court litigators considering the Court's ideological composition in deciding whether to pursue a legal theory that breaks on ideological lines. The ability to calculate a majority is basic Supreme Court litigation strategy. Indeed, it would be surprising if the Department of Justice did not calculate the odds regarding how justices are likely to rule in its cases. This is especially true of civil rights cases, in which conservative and progressive justices have sharply diverging views on the law. As Reuters recently reported, this is why DOJ's opponents are currently rushing to the Court in their attempts to overturn decades of civil rights law:
[I]n recent years liberals have sought to avoid going to the Supreme Court in cases ranging from affirmative action to voting rights. Advocates for liberal concerns such as abortion rights and gay marriage have also kept a wary eye on the justices while devising strategy in lower courts. Some abortion-rights advocates, for example, have so far declined to challenge state restrictions on abortion based on the notion that a fetus can feel pain, even though they believe the restrictions unconstitutional.
Those on the other side have taken the opposite tack. Conservatives who have labored to get their cases to the court include Edward Blum, director of the Project on Fair Representation, founded in 2005 to challenge race-based policies in education and voting. He recently helped lawyers bring an appeal by a white student who said she was denied admission to the University of Texas because of a policy favoring minorities.
"The timing is fortuitous," said Blum, who for two decades has worked with lawyers to challenge racial policies in education and voting districts. Citing the makeup of the Supreme Court, he said: "It's well-known that there are three members of a conservative bloc who have already expressed opinions on this and it's likely that the two new members of the conservative bloc will fall into that camp as well."
If the right-wing media do not like disparate impact theory because the modern conservative movement has abandoned it, or because the theory rejects the dissenting "colorblind" perspective on modern equal protection law, it should say so and leave it at that. By instead falsely asserting disparate impact laws are illegitimate and thereby calling for the reversal of decades of precedent - and bipartisan legislation - the right-wing media not only misinform their audience, they also disregard the words of Justice Antonin Scalia in one of the Court's most recent Civil Rights Act cases: "If [disparate impact litigation] was unintended, it is a problem for Congress, not one that federal courts can fix."
From the October 25 edition of Fox News' The Five:
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Fox Business host Stuart Varney blamed President Obama for the decline in incomes for American families, for the decrease in Americans' net worth, and for the decrease in home values. In fact, each of these trends started before Obama's presidency.
On the eve of the Democratic National Convention, The Daily Caller has published a four-part, 6,000+ word series alleging that President Obama was "listed as the lead attorney" in a class action discrimination lawsuit decades ago and thus participated in a process the publication claims triggered the economic collapse of 2008. The Caller appears to have conferred the status of "lead attorney" on Obama on the basis of the fact that his name comes first on an alphabetically ordered list of attorneys; moreover, experts have said that such class-action lawsuits did not trigger the mortgage crisis.
In the 1995 class action lawsuit in question, Buycks-Roberson v. Citibank, the plaintiffs alleged that Citibank had racially discriminated against them when they sought home loans. They pointed to bank data indicating that "the percentage of loan applications approved by Citibank was far lower in areas where the racial composition of the neighborhood was predominantly African-American than it was in areas where the composition of the neighborhood was predominantly White," even when the applicants were in the same income bracket.
According to the Caller, Obama's participation in the lawsuit makes him "a pioneering contributor to the national subprime real estate bubble" and part of a movement that "contributed greatly to a housing bubble that burst in 2007, crashed the nation's economy in 2008." But both their discussion of his role in the case and their analysis of its result are deeply flawed.
Despite its flaws, the Caller piece has already been promoted by Fox News. Caller editor in chief Tucker Carlson appeared on Fox & Friends yesterday to discuss the piece and claimed that Obama "was the lead plaintiff on some of these cases," adding that the lawsuit is "significant" because it is "at the heart of the 2007-2008 economic meltdown."
Throughout its 5,000 word lead story and multiple side pieces, the Caller repeatedly inflates Obama's role in the lawsuit. In the lead piece, Neil Munro reports that Obama "helmed" the lawsuit as "the lead plaintiff's attorney." While he writes that Obama's "role was limited," he also claims that it was "his lawsuit" and that Obama "sought public credit for the lawsuit: His employer submitted a docket to the court that listed him as the lead attorney for two of the three named plaintiffs in the case." Three other Caller stories refer to Obama as the "lead attorney" or "lead counsel" for the plaintiffs.
The sole basis the Caller articles cite for this claim is the case docket. That document lists Fay Clayton as "LEAD ATTORNEY" and lists her first among the attorneys representing plaintiff Selma S Buycks-Roberson. It then provides a list of attorneys for Buycks-Roberson listed alphabetically by first name; "Barack H. Obama" is listed first. That list of attorneys includes Judson Hirsch Miner, who was a name partner at Obama's firm; at the time, Obama was an associate.
With regard to plaintiffs Calvin R Roberson and Renee Brooks, whom the Caller claimed Obama served as "lead attorney," no separate lead attorney is indicated as Clayton was for Buycks-Roberson. While Obama is the first lawyer listed representing each plaintiff, followed by Clayton and the other attorneys, these lists again are ordered alphabetically by first name. But even for Roberson and Brooks, the docket does not ask the court clerk to provide notices regarding the case to Obama; instead such notices are directed to Miner and other attorneys involved in the case.
Moreover, Obama is not listed as one of the attorneys who worked on the complaint filed on behalf of the plaintiffs. Obama also did not speak or even register an appearance during a court hearing in which the judge considered whether to dismiss the case without holding a trial. Nor did Obama sign the agreement that settled the case.
Indeed, a 2007 Chicago Sun-Times article indicates that Obama did not have an extensive role in the lawsuit, with the lead attorney for the plaintiff stating that Obama was "the very junior lawyer in that case" and "not visible" to him during court proceedings.
From the August 16 edition of Fox News' The Five:
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A recent Federal Reserve study found that the wealth gap increased during the recent recession with the median net worth of the wealthiest Americans increasing between 2007 and 2010, while the median net worth for all Americans decreased. But right-wing media have ignored or misrepresented this aspect of the report in order to attack President Obama.
Right-wing media are attacking President Obama over a recent Federal Reserve report that found that the median net worth of American families contracted between 2007 and 2010. However, right-wing media are ignoring the effects of the burst of the housing bubble and its central role in causing the decrease in the median wealth of families.