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Are civil rights laws being exploited for political purposes?

In an editorial last Friday, the Washington Times asserts:

“The Justice Department has been empowered to use millions of dollars intended to go to victims of racial discrimination to enrich pressure groups with close White House ties. It's another revelation of the means the Obama administration is using to divert funds to political cronies.”

The editorial explains it this way:

“Information obtained by the public interest group Judicial Watch has exposed the details of this latest shady deal. On Dec. 28, the United States District Court for the Central District of California issued a consent order in the case of the United States v. Countrywide Financial Corporation et al. Under the terms of the settlement, Countrywide will pay $335 million to 200,000 blacks and Hispanics who took out home loans between 2004 and 2008. The Justice Department claims they were charged higher interest rates than white borrowers not because of poor credit scores but solely because of their race. The payment is intended to "compensate allegedly aggrieved persons for monetary and other damages they may have suffered." (emphasis added)

And the motive, according to the editorial"

“Organizations beholden to the Democratic Party and to President Obama in particular stand to gain millions of dollars, which could then be shifted into use for political purposes. It's another manifestation of the intentional, institutional corruption of American politics. The public has been forced to fund corporate handouts and sweetheart deals to political donors such as occurred in the Solyndra loan debacle. All these efforts are aimed at propping up those in power and seeking maximum benefits for their friends. It comes at the expense of working Americans, the economy and the legitimacy of the political system.”

Holman Jenkins of the Wall Street Journal wraps-up the motive in his column on the Countrywide settlement this way:

“Perhaps some truly believe society must be arranged to extirpate any sign of differences between groups. Justice certainly exhibits such perfectionism: It explicitly faults Countrywide for not monitoring lending data and rushing out proactively to compensate blacks and Hispanics (but not whites) whose loan terms exceeded the average of similarly placed whites.

“Think about the intrinsic Stalinism of this conceit. In the Los Angeles auto dealer case, which also targeted the city's Nara Bank, in servicing dealings between two "protected" groups, Asians and Hispanics, the bank presumably would have to know which group to compensate (and which not to compensate) when any of its members' individual deals exceeded the average price of the other group's.

“If this sounds insane, there's another way to think about it: Public choice theory holds (in essence) that those in power loot for the benefit of the constituencies that keep them in power. Law and regulation are tools for redistributing resources; the nature of politics is to seize every such opportunity and make it serve a political end. In the Countrywide settlement, Bank of America (without admitting fault) will hand over $335 million so Justice can distribute money to African-Americans and Hispanics (though not whites) who were charged more than the white average, with any surplus funds explicitly reserved for donations to Acorn-like groups that typically align with the Democratic Party.” (emphasis added)

Kudos to Judicial Watch for getting the information through the Freedom of Information Act. Here’s last week’s write-up of their efforts at Judicial Watch’s blog, Corruption Chronicles.

Additional resources: The New York Times story on December 21, 2011 is here. A commentary piece is posted at CBS News. An associate editor at Atlantic magazine writes that Countrywide's lending practices “were fueled by greed.” Finally, here is Fox News’ reporting of the $335 million settlement while Big Government's reporting is here.

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