Redlining: the Justice Department cases.

Knowing how the Justice Department gathers and weighs its evidence in a redlining investigation is important for lenders today. The lead attorney in the investigation of Chevy Chase chronicles how the department stacked up its evidence in two much-debated cases.

The justice department's

recent redlining lawsuit against chevy chase federal savings bank and its mortgage subsidiary has been the subject of intense debate and criticism. The department accused the institution of redlining black neighborhoods through sophisticated marketing practices designed to avoid soliciting loans from those areas. The case was settled by a consent decree in which the thrift agreed to commit $11 million to the redlined areas through special loan programs and the opening of branches and offices. As with earlier Justice Department fair lending lawsuits, this case was settled without contested litigation, and thus, Chevy Chase's rebuttal to the department's evidence was not formally articulated in court. Accordingly, this article reflects only evidence relied upon by Justice in bringing its case against Chevy Chase.

Many critics allege the Justice Department brought this case using novel and untested theories. Some have called it a backdoor effort by the Clinton administration to promote a Community Reinvestment Act (CRA) agenda by forcing banks and thrifts to allocate credit equally among white and minority neighborhoods. Others are more pejorative, calling the case "true evil" and a jackbooted assault on the lending industry by government bureaucrats, evoking comparisons to Waco (Washingtonian magazine, July 1995).

Much of this mounting chorus of criticism, which has now reached the halls of Congress, stems from a fundamental misunderstanding of the facts and the law that, in my judgment, clearly justified the department's action. This misunderstanding has led some to unfairly impugn the motives of the Justice Department and its career attorneys and support staff, but more important seems to have created genuine confusion in the industry as to its compliance responsibilities under fair lending laws.

I served as the attorney who headed the Justice Department's investigation of Chevy Chase and many of its prior fair-lending cases. Accordingly, my article is intended to provide some guidance and understanding of the facts and legal principles supporting the department's redlining claims against Chevy Chase. Since I no longer work for the department, the views expressed are my own.