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Dr. Carson’s Slim Housing Credentials

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photo by Gage Skidmore

Law360 quoted me in Carson’s Slim Housing Credentials To Be Confirmation Focus (behind paywall). It opens,

Dr. Ben Carson will face a barrage of questions Thursday on topics ranging from his views on anti-discrimination enforcement to the basics of running a government agency with a multibillion-dollar budget at his confirmation hearing to lead the U.S. Department of Housing and Urban Development.

Carson, a famed neurosurgeon and former Republican presidential candidate, was President-elect Donald Trump’s surprise choice for HUD secretary, given the nominee’s lack of experience or statements on housing issues. That lack of a track record means that senators and housing policy advocates will have no shortage of areas to probe when Carson appears before the Senate Banking Committee.

“I want to know whether he has any firm ideas at all about housing and urban policy. Is he a quick study?” said David Reiss, a professor at Brooklyn Law School.

Trump tapped Carson in early December to lead HUD, saying that his former rival for the Republican presidential nomination shared in his vision of “revitalizing” inner cities and the families that live in them.

“Ben shares my optimism about the future of our country and is part of ensuring that this is a presidency representing all Americans. He is a tough competitor and never gives up,” Trump said in a statement released through his transition team.

Carson said he was honored to get the nod from the president-elect.

“I feel that I can make a significant contribution particularly by strengthening communities that are most in need. We have much work to do in enhancing every aspect of our nation and ensuring that our nation’s housing needs are met,” he said in the transition team’s statement.

The nomination came as a bit of a surprise given that Carson, who has decades of experience in medicine, has none in housing policy. It also came soon after a spokesman for Carson said that he had no interest in a Cabinet position because of a lack of qualifications.

Now lawmakers, particularly Democrats, will likely spend much of Thursday’s confirmation hearing attempting to suss out just what the HUD nominee thinks about the management of the Federal Housing Administration, which provides insurance on mortgages to low-income and first-time home buyers; the management and funding for public housing in the U.S.; and even the basics of how he will manage an agency that had an approximately $49 billion budget and employs some 8,300 people.

“You will have to overcome your lack of experience managing an organization this large to ensure that you do not waste taxpayer dollars and reduce assistance for families who desperately need it,” Sen. Elizabeth Warren, D-Mass., said in a letter to Carson earlier in the week.

To that end, Carson could help allay fears about management and experience by revealing who will be working under him, said Rick Lazio, a partner at Jones Walker LLP and a former four-term Republican congressman from New York.

“The question is will the senior staff have a diverse experience that includes management and housing policy,” Lazio said.

One area where Carson is likely to face tough questioning from Democrats is anti-discrimination and fair housing.

Carson’s only major public pronouncement on housing policy was a 2015 denunciation of the Affirmatively Furthering Fair Housing rule that the Obama administration finalized after it languished for years.

The rule, which was part of the 1968 Fair Housing Act but had been languishing for decades, requires each municipality that receives federal funding to assess their housing policies to determine whether they sufficiently encourage diversity in their communities.

In a Washington Times, op-ed, Carson compared the rule to failed efforts to integrate schools through busing and at other times called the rule akin to communism.

“These government-engineered attempts to legislate racial equality create consequences that often make matters worse. There are reasonable ways to use housing policy to enhance the opportunities available to lower-income citizens, but based on the history of failed socialist experiments in this country, entrusting the government to get it right can prove downright dangerous,” Carson wrote.

Warren has already indicated that she wants more answers about Carson’s view of the rule and has asked whether Carson plans to pursue disparate impact claims against lenders and other housing market participants, as is the current policy at HUD and the U.S. Department of Justice.

Warren’s concerns are echoed by current HUD Secretary Julian Castro, who said in an interview with National Public Radio Monday that he feared Carson could pull back on the efforts the Obama administration has undertaken to enforce fair housing laws.

“I’d be lying if I said that I’m not concerned about the possibility of going backward, over the next four years,” Castro said in the interview.

HUD, as the agency overseeing the Federal Housing Administration, has also been involved in significant litigation against the likes of Deutsche Bank, HSBC, Bank of America and JPMorgan Chase & Co., among others, seeking to recover money the FHA lost on bad loans they sold to the agency.

“Will you commit to continuing to strictly enforce these underwriting standards in order to protect taxpayers from fraud?” Warren asked.

Carson has also drawn criticism from fair housing advocates for his views on the assistance the government provides to the poor, saying in his memoir that such programs can breed dependency when they do not have time limits.

To that end, housing policy experts will want to hear what Carson wants to do to ease the affordability crisis, boost multifamily building and improve conditions inside public housing units. HUD also plays a major role in disaster relief operations, another area where people will be curious about Carson’s thinking.

“I’d be looking at hints of his positive agenda, not just critiques of past programs,” Reiss said.

Miami Vice?

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by Roberlan Borges

REFinBlog has been nominated for the second year in a row for The Expert Institute’s Best Legal Blog Competition in the Education Category.  Please vote here if you like what you read.

The BNA Banking Report quoted me in BofA, Wells Fargo Try to Squelch High-Risk City Bias Suits (behind a paywall). It opens,

Bank of America and Wells Fargo are hoping an Election-Day U.S. Supreme Court argument will help them sidestep allegations of biased lending practices and the massive liability that could follow (Bank of Am. Corp. v. Miami, U.S., No. 15-cv-01111, argument scheduled 11/8/16).

At issue is a 2015 federal appeals court ruling that reinstated a Fair Housing Act lawsuit by the city of Miami. The suit said Bank of America and Wells Fargo made discriminatory home loans that spurred widespread foreclosures while driving tax revenues down and city expenditures skyward.

The U.S. Supreme Court is set to hear arguments Nov. 8, with a focus on two questions – whether Miami has the right to assert such claims, and whether it can establish the critical “causal link” by tracing its problems to actions by the banks.

The case is high on the “must-watch” list of banks and consumer advocates. The court’s decision will affect a series of separate lawsuits against Bank of America and Wells Fargo by other cities that are now on hold and awaiting a decision in this case, as well as lawsuits against JPMorgan, Citigroup, and HSBC.

“There are suits all over the country raising these issues,” said Karen McDonald Henning, associate professor at the University of Detroit Mercy School of Law. “The potential exposure to banks could be enormous.”

The case also could clarify how the law is applied to address societal wrongs, Henning added in an assessment echoed by Mehrsa Baradaran, associate professor of law at the University of Georgia School of Law in Athens, Ga.

“This could really give the Fair Housing Act some teeth to do away with problems it was meant to remedy,” she said.

Fair Housing Act

According to Miami, Bank of America and Wells Fargo violated the Fair Housing Act in two ways. The city said the banks intentionally discriminated against minority borrowers by targeting them for loans with burdensome terms.

Miami also said the banks’ practices had a disparate impact on minority borrowers that resulted in a disproportionate number of foreclosures and exploitive loans in minority neighborhoods.

Bank of America did not immediately respond to a request for comment ahead of the argument. Wells Fargo spokesman Tom Goyda declined to comment.

Both banks have consistently defended their lending practices, citing efforts to boost community development and trying in some cases to take what Wells Fargo has called “a collaborative approach” when it comes to disputes.

But both banks say the lawsuits are off-base as a matter of law. In its petition to the U.S. Supreme Court in June, Bank of America said the plaintiffs are making demands “based on a multi-step theory of causation that would have made Rube Goldberg proud.”

Risk Goes Local

Even so, if Miami’s suit is allowed to go forward, it could expose global financial institutions to liability from local governments across the nation, said Professor David Reiss of Brooklyn Law School in New York.

That’s new, he said. Although the federal government and state attorneys general have reached multi-billion settlements with banks in the wake of the financial crisis, local governments haven’t had much of a role in those battles, Reiss told Bloomberg BNA.

But if Miami’s suit goes ahead, mortgage lenders could face significant litigation costs and monetary judgments under new theories of liability. “These new theories are independent of the theories relied upon by the federal government and the states and could therefore expand the overall liability of financial institutions from the same underlying set of facts,” Reiss said.

Monday’s Adjudication Roundup

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Monday’s Adjudication Roundup

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Monday’s Adjudication Roundup

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Monday’s Adjudication Roundup

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AG Lynch on Wall Street

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Loretta_Lynch_US_Attorney

Institutional Investor quoted me in Will New Attorney General Loretta Lynch Shake up Wall Street? It opens,

Those unhappy with the lack of personal accountability for the 2008–’09 financial crisis are running out of time to see justice served: In the U.S., the statute of limitations for many bank-related criminal charges is ten years. But the recent appointment of Loretta Lynch as the first black woman to the post of attorney general could present a window of opportunity.

Given mounting public frustration over the failure to punish financial executives who helped push the world to the brink of another Great Depression, Lynch may be well positioned to act where her predecessor, Eric Holder, was unsuccessful. The U.S. Department of Justice has often talked up its efforts to hold individuals responsible for crimes they may have committed, but there hasn’t been much progress. Last year, however, saw an uptick in the size of bank settlements related to the crash, including a $16.65 billion deal with Bank of America Corp. and a $7 billion agreement with Citigroup.

Some industry observers believe Lynch, who turns 56 on Thursday, could use this momentum to target people. “If she does anything differently [than Holder did], she may push her folks to try to make those cases against individuals higher up the corporate ladder,” says Glen Kopp, former assistant U.S. attorney in the Southern District of New York and a New York–based partner in the white-collar practice at law firm Bracewell & Giuliani.

Lynch’s critics have griped that she may be not be strict enough with Wall Street. They point to her 1980s stint with law firm Cahill Gordon & Reindel, which has counted among its clients BofA, Credit Suisse Group and HSBC Holdings, and to a spell early last decade at Hogan & Hartson (now Hogan Lovells), where she practiced white -collar criminal defense.

Detractors say both positions, as well as her tenure at the Federal Reserve Bank of New York from 2003 to 2005, have compromised her ability to prosecute big banks by establishing relationships that she may not wish to jeopardize as attorney general. During Lynch’s lengthy confirmation process, Republicans criticized her for being too soft on HSBC in a 2012 settlement; the British bank agreed to pay $1.92 billion in a money-laundering case after New York and federal authorities decided that criminal charges might bring down the institution.

But many in the legal community believe the more likely outcome will be somewhere in the middle.

“The financial industry will be dealing with an extremely well-informed AG who will seek to balance the competing concerns that arise when investigating and prosecuting large enterprises like those that dominate Wall Street,” says David Reiss, a professor at Brooklyn Law School with expertise in property, mortgage lending and consumer financial services matters.