WASHINGTON - The Justice Department would be forced from center stage on the lending discrimination front under the latest version of a regulatory reform measure the House Banking Committee plans to consider today.
The bill would require a referral from a banking agency before Justice could investigate. Banking advocates praised the shift, but whether examiners are up to the challenge depends on whom one asks.
"I don't see why not," said Karen Thomas, director of regulatory affairs at the Independent Bankers Association of America. "They are the ones in the bank. They are qualified. They've been getting specialized training."
Also, the banking agencies modernized their lending bias review system about two years ago, said Paul Alan Smith, senior federal representative at the American Bankers Association.
"The system being used has been developed in conjunction with Justice, and Justice has had the opportunity to critique and instruct the agency staff," Mr. Smith said.
But, civil rights activists said examiners are incapable of detecting serious discrimination.
"They have no track record," said Allen Fishbein, general counsel to the Center for Community Change. "They have not been able to demonstrate that their on-site exams have been able to spot the discrimination that Justice has found."
Only two of Jutsice's six prosecutions to date were referred by bank regulators, Mr. Fishbein said.
The referrals the agencies do make are generally worthless, said Richard Ritter, a former prosecutor turned consultant.
"It sends a very alarming signal because most of the referrals to date from the banking agencies have been referrals that involve technical violations that Justice sent back fairly quickly as not being significant enough," he said.
The change would force antidiscrimination groups to file more private lawsuits, said John P. Relman, director of the housing project at the Washington Lawyers Committee for Civil Rights and Urban Affairs.
"But nothing really makes up for the Justice Department," Mr. Relman said. "Groups work where they happen to be located. The government has the luxury of seeing where the need is, and they can pick the cases that mean the most."
Officials from the four banking agencies declined to comment.
"Why would we think that compliance experts at Justice would be any better?" asked Bert Ely, the consultant. "That doesn't make sense.... They ought to be as good as anyone else. We are not talking about rocket science."
