December 4, 1989 MORTGAGE MUMBO JUMBOBased on a reference to him in the Almanac of American Politics, we had always assumed that U.S. Senator Alan Dixon was relatively harmless. ("Among the least known of all Senators" was how the Almanac referred to the Illinois Democrat.) Based on his conduct in the current hearings on mortgage discrimination, we must rate him at least average as a menace.
[By the way, Dixon`s successors in that Senate seat have been Carol Mosley Brown, Peter Fitzgerald, Barack Obama, and Roland Burris.]The hearings, chaired by Dixon in his role as head of the Senate banking subcommittee on consumer affairs, have been something of a scream. The purpose of the hearings has been quite straightforward: to enable club members to garner headlines by posturing as antidiscrimination stalwarts and yelling at the various federal agencies that monitor all those laws banning bias in mortgage lending. So the agencies — the Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp., and the Office of Thrift Supervision — were roundly reproved for not detecting the avalanche of mortgage-based bias postulated to be discernible by anybody walking around the block.Is mortgage bias really a problem? A curious feature of the federal regulatory scene is that long after Congress passed the Equal Credit Opportunity Act and the Community Reinvestment Act (which bars redlining of urban minority population centers), the federal government seems not to generate many complaints of such bias. The regulators` reports indicate that they receive few complaints. And while the U.S. Justice Department has launched hundreds of housing-related antidiscrimination suits during the past 20 years, only a small fraction of them have involved lending practices.Dixon and the other solons nevertheless took it for granted that bankers have to be prodded on minority mortgage lending. Joining the long line of politicians who claim to know better than businessmen what`s good for business, Dixon returned repeatedly to the thought that such prodding always results in higher profits. "It`s good business," he burbled at the end of one session. "Everybody makes money."It is true that federal data show black loan applicants being rejected roughly twice as often as white applicants. But this does not mean blacks are subject to a tougher standard. The higher rate of black rejections might mean that weak black applicants are responding to bank "outreach" programs (as the Office of Thrift Supervision noted). It might mean that black applicants` buildings are on average less attractive as security — a thought no witness was foolish enough to mention aloud.A Fed governor did bravely mention a fact of possible relevance: that market forces work against discrimination. John LaWare argued that bankers are in business to make loans and that "the institutional commitment to doing business where it makes economic sense will win out over prejudice." Dixon did not pick up on this thought, plainly not what he came to hear.But he did get his picture in the Washington Post. Fame beckons.