WASHINGTON -- The Justice Department has broadened its investigation of lending discrimination at banks and thrifts, a top Justice official told Congress on Thursday.
The department recently initiated two full-scale and several preliminary investigations independent of the banking agencies, said Associated Attorney General Webster L. Hubbell.
In addition, the department has considered six separate cases referred by bank regulators, he said.
Shawmut Unit Under Scrutiny
While the Justice Department has already announced plans to target lenders, until now only one - a Shawmut National Corp. subsidiary - has been known to be under close scrutiny. These probes come in addition to that investigation, which is still under way.
"We are deeply committed to purging considerations of race from lending practices," the official said.
Mr. Hubbell made his comments in testimony before the House Banking subcommittee on consumer credit and insurance. He was joined by Henry B. Cisneros, secretary of Housing and Urban Development, and top banking regulators to discuss fair lending and the Community Reinvestment Act.
Bank regulators came under heavy fire from subcommittee chairman Joseph P. Kennedy 3d, D-Mass., who accused them of not aggressively enforcing fair lending laws.
Probe in Major City
Mr. Hubbell refused to name lenders that are being probed by the Justice Department. But he said one of the full-scale investigations is "well under way" in a major city, and another intensive probe has just begun. Justice officials are planning to visit the second lender in the next few months, he said.
In addition, the department has begun several preliminary investigations of lenders in other large metropolitan areas and in rural areas with significant minority populations, he said.
Separately, sources said a number of lenders have already received letters from the Justice Department notifying them of investigations and asking them to cooperate by providing data on their lending practices.
While a proposal for the Justice Department and bank regulators to conduct joint investigations was scrapped earlier this year, the agencies are trying to work together nonetheless, Mr. Hubbell said. This year, the Federal Reserve has sent one lender - Shawmut Mortgage Co. - to the Justice Department for investigation.
The OCC also has investigated and referred one lender to the Attorney General for racial discrimination. That case is close to being settled, OCC officials said.
The FDIC has referred three small lenders to the Attorney General, and OTS has referred one, but all four were returned to the regulators because there was insufficient evidence of illegal discrimination, Mr. Hubbell said.
And the regulators are interested in more than just racial discrimination. The OCC has referred three cases of discrimination on the basis of age and sex to Justice for investigation.
The Justice department has settled only one minority lending case in its history, with Decatur Federal Savings and Loan, in Atlanta. That $1 million settlement sent shock waves through the industry.
"Nothing will do more for ending discrimination than a few more Decaturs," Mr. Hubbell said.
Mr. Kennedy berated regulators on Thursday for, he said, avoiding their responsibilities in aggressively enforcing fair lending laws.
"It doesn't take a genius, you don't have to do another study," he said. "It shouldn't take five guys with degrees a long time to figure it out."
But regulators urged members of Congress to hold off on further criticism until they see the results of the regulators' efforts to revamp CRA, which the President has requested. While the reforms will steer clear of "credit allocation," they said, they will be sweeping nonetheless.
"I think we have a very aggressive reform under way," Mr. Lindsey said.