WASHINGTON - Bankers could face new fair-lending prosecutions if Senate Republicans successfully strip power from the Department of Housing and Urban Development.
Sen. Christopher S. "Kit" Bond, R-Mo., has proposed transferring HUD's fair-lending authority to the Justice Department. He included the proposal in the agency's 1996 spending bill, which is pending before the Senate Appropriations Committee and is expected to go to the Senate floor late this week.
Two attorneys who defend the industry in antidiscrimination cases said the change would lead to more litigation, rather than less regulation.
The attorneys, partners with different firms, said HUD is swamped with complaints, making it difficult for the agency to treat any single dispute seriously. That's why HUD has yet to bring a major fair-lending claim, they said.
"Where HUD has something real, HUD can't put it together," said one attorney, who requested anonymity.
The Justice Department, which has substantially more experience in this field, would clear out the hundreds of meritless claims and concentrate on the substantive ones, they said.
"Justice is much more capable," the one attorney said.
The Clinton administration opposes the transfer of power. HUD Secretary Henry Cisneros, in a Sept. 13 letter to Sen. Bond, said the measure would disrupt pending cases, and deprive people of an inexpensive forum to resolve discrimination complaints.
"The department plays a critical role in protecting individuals from discrimination, in settling disputes before they reach litigation, in working with industry to achieve voluntary compliance with the laws, and in ensuring the federal housing enterprises are safe and sound," he wrote. "The bill ... will eviscerate this role, to our nation's detriment."
(Mr. Cisneros' letter also expressed opposition to other proposed erosion of HUD's authority, including transferring oversight of Fannie and Freddie to the Treasury Department. See page 21).
Attorney General Janet Reno also objected, saying her department lacks the personnel and field offices necessary to handle the 10,000 complaints filed annually at HUD.
But Sen. Bond said the changes are necessary. HUD's discretionary programs have grown 15% a year. That's unsustainable in the present deficit-reduction environment, the senator said.
"If we all believe our rhetoric on the need to balance the federal budget in order to protect the economic futures of our children and grandchildren, then we must be willing to make the tough choices and set priorities now," he said in a statement. "This bill does that."