…But the report doesn’t get to the mind-set that would go to extremes to manufacture evidence of racism where it doesn’t exist……In venturing down this trite and dishonest road, the new consumer bureau, a creature of Dodd-Frank, had a political goal: It would outdo its predecessors by ginning up enough cases to force the auto-lending industry to abandon dealer markups altogether. Framing people for crimes they didn’t commit presumably is justified if it serves a policy or political agenda. Stalin certainly thought so…..The story’s most troubling aspect, though, is that Congress, not the press, took the lead in exposing it. We expect bravery in pursuit of truth from reporters, not politicians, in this case the strikingly bipartisan House that two weeks ago voted 332-96 to call off the agency’s auto-loan witch hunt. But then suing auto lenders for imaginary discrimination would never have become the steady, go-to resort of enforcement agencies if not for the cringingly uncritical attitude of the media, until recently, toward such claims.”, Holman W. Jenkins Jr., “Shouting ‘Racism’ Is a Career Move”, The Wall Street Journal, December 5, 2015

Opinion

Shouting ‘Racism’ Is a Career Move

Framing people for crimes they didn’t commit presumably is justified if it serves a policy or political agenda.

PHOTO: GETTY IMAGES/IKON IMAGES

By Holman W. Jenkins, Jr.

A House Financial Services Committee investigation last week does a good job exposing the multiple dishonesties behind the Consumer Financial Protection Bureau crackdown on supposedly racist auto loans. But the report doesn’t get to the mind-set that would go to extremes to manufacture evidence of racism where it doesn’t exist.

America has, in some ways, become a culture of racial Stalinism. To inoculate oneself against charges of racism, which can come from anywhere at any time based on anything, the best strategy is routinely to fling accusations of racism at others.

In turn, chiseling opportunists will always be prepared to exploit the instant if ersatz moral status that accrues to anyone who shouts charges of racism. That should be your starting point for understanding this story.

Banks quote auto dealers a wholesale rate for auto loans. Dealers (within limits) are free to mark up this interest rate in negotiations with buyers.

The CFPB is expressly forbidden to regulate auto dealers, who in turn are not permitted to collect racial and ethnic data on car buyers. This opens the door to statistical mischief as lawyers, ex post facto, assign borrowers to racial categories using methods that would never survive peer review, then blame wholesale lenders for any pattern of “disparate impact.” After all, it’s always possible, when deals are negotiated, to find some minorities who got worse terms than the white-male average.

It’s important to understand that such auto-lending cases, long before the CFPB came along, were already a hardy perennial for enforcement agencies looking to make a splash. An apogee of silliness was a 2009 Justice Department case accusing two car dealers of favoring Asian over Hispanic car buyers because 600 of 1,300 “non-Asian” buyers were charged higher loan terms than the average of Asian buyers.

Notice that 600 is roughly half of 1,300. When defendants noted that Justice was basically saying “half of one group is above average, which means that the other half is below average,” a court dismissed the case on grounds of statistical malpractice. Which is why agencies strive to make sure their auto-lending cases never see the inside of a court.

All this we touched on in previous columns, but a few things have become clearer thanks to the House report.

In venturing down this trite and dishonest road, the new consumer bureau, a creature of Dodd-Frank, had a political goal: It would outdo its predecessors by ginning up enough cases to force the auto-lending industry to abandon dealer markups altogether. Framing people for crimes they didn’t commit presumably is justified if it serves a policy or political agenda. Stalin certainly thought so.

One problem, though, is that even settling banks refused to end the practice of dealer markups. It would be “corporate suicide,” they said, because dealers would simply take their business elsewhere.

This means: Either dealers are so darn determined to discriminate against minorities that they’ll switch banks in order to keep discriminating. Or—which blows up the CFPB’s whole case—the dealer markup serves a legitimate business purpose because it makes some transactions profitable that otherwise wouldn’t be profitable and wouldn’t take place.

This latter idea might seem obvious (whereas dealers leaving money on the table in dealings with 80% of clients who aren’t qualified minorities doesn’t). But it’s a consideration that disparate-impact cases resolutely refuse to entertain.

Why? The movie “Judgment at Nuremberg” featured Burt Lancaster as a respected German jurist who went along with the Nazis because, hey, that was the way to keep rising in his career.

Richard Cordray, the CFPB’s founding chief, has been a climber since high school. He has shrewdly conducted himself in his new job as if Elizabeth Warren, the bureau’s powerful Senate godmother, is president.

Whacking the same auto-loan punching bag that many before him have whacked was a way quickly to put his new agency, and himself, on the map. A briefing memo to sell this agenda to fellow enforcers at the Justice Department called it “one of our most exciting initiatives.” In other words, panting after some auto lenders to call racist was about institutional advancement.

The story’s most troubling aspect, though, is that Congress, not the press, took the lead in exposing it. We expect bravery in pursuit of truth from reporters, not politicians, in this case the strikingly bipartisan House that two weeks ago voted 332-96 to call off the agency’s auto-loan witch hunt.

But then suing auto lenders for imaginary discrimination would never have become the steady, go-to resort of enforcement agencies if not for the cringingly uncritical attitude of the media, until recently, toward such claims.