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"Big bank special interests with a record of discrimination have delivered a one-two punch against the bureau in their own selfish interest to turn away borrowers of color with impunity," said one consumer advocate.
A government watchdog on Tuesday said a federal judge's ruling in Texas blocking the Consumer Financial Protection Bureau from implementing an anti-discrimination rule was the outcome of a "long-running, organized effort by greedy industries" to defang the agency.
Judge Randy Crane, whom former Republican President George W. Bush appointed to be the chief U.S. district judge of the Southern District of Texas, handed down an injunction blocking the CFPB from implementing its rule requiring banks to collect data on loan applications for women-owned, minority-owned, and small businesses to identify and root out potential discrimination.
The ruling applies only to Rio Bank in McAllen, Texas, and members of the Texas Bankers Association (TBA) and American Bankers Association (ABA), which filed a lawsuit earlier this year challenging the rule, claiming it would do "irreparable" harm to banks that would be required to hire and train new employees and install new data collection software in order to comply.
Accountable.US pointed out that members of the banking associations have well-documented histories of discriminating against small business loan applicants in exactly the way the rule set out to eliminate.
"Anyone paying attention knows this latest legal assault against the CFPB has nothing to do with upholding the Constitution and everything to do with keeping the agency from protecting borrowers from industry discrimination and abuse," said Liz Zelnick, director of the economic security and corporate power program at Accountable.US. "Big bank special interests with a record of discrimination have delivered a one-two punch against the bureau in their own selfish interest to turn away borrowers of color with impunity."
"The bankers' case that discrimination is just a normal part of doing business only makes a stronger case for why everyday Americans need the bureau to stay strong, independent, and free from political influence in Congress," she added.
The group noted that ABA board member JPMorgan Chase settled with the U.S. Department of Justice in 2017 for $55 million over allegations of discrimination against mortgage borrowers who were members of minority groups. The CFPB has also fined Washington Federal Bank—whose president and CEO is on the trade group's board of directors—a total of $234,000 for data errors that the agency said could perpetuate discrimination.
The ABA and TBA also joined the U.S. Chamber of Commerce in filing a separate lawsuit last year to challenge the CFPB's crackdown on discrimination; the plaintiffs in that case have spent nearly $1 million to settle discrimination cases in the past decade.
Jesse Van Tol, president and CEO of the National Community Reinvestment Coalition, accused the Wall Street groups of "tedious whining."
"It's a ludicrous and retrograde position to take, in effect asserting a right to discriminate in secret to illegally deprive marginalized communities of economic opportunity," Van Tol told Bloomberg Law on Monday.
In October the U.S. Supreme Court is scheduled to hear arguments in the CFPB's appeal of a ruling last year which found the agency's funding structure through the Federal Reserve violates the Constitution's appropriations clause.
"If the financial industry is allowed to slam the door on Americans seeking financial services on the basis of identity without consequence, it will keep many families from getting ahead," said Zelnick on Tuesday. "If the special interests successfully cripple the CFPB's ability to protect all consumers, it will make it that much harder to grow the middle class."
The American Bankers Association, whose PAC has donated to Sen. Steve Daines, welcomed the Republican's defense of a 2018 law that weakened post-financial crisis regulations.
Republican Sen. Steve Daines of Montana garnered applause from a room full of bankers on Tuesday after he dismissed calls for tougher regulations following the collapse of Silicon Valley Bank and Signature Bank.
"There are a lot of talking heads out there who are saying that the solution is more regulation, and I strongly disagree," Daines said in remarks to the American Bankers Association's Washington Summit, an annual gathering of bank CEOs and other top executives.
The Montana Republican went on to defend a 2018 law that progressive lawmakers and experts have said is at least partly responsible for the recent bank failures. That measure, known as S.2155, weakened post-financial crisis regulations for banks with between $50 billion and $250 billion in assets, subjecting firms such as SVB—which lobbied for the changes—to less stringent oversight and paving the way for more risk-taking and industry consolidation.
Daines, a member of the Senate Banking Committee and a major recipient of securities industry donations, called the stricter liquidity requirements and other rules gutted by the 2018 law "overreaching regulations" and claimed that efforts to revive the safeguards are creating "more worry" in the banking sector.
"This was not the cause of this failure," Daines said of S.2155, which former President Donald Trump signed into law after it passed with bipartisan support.
Watch the senator's remarks, which begin at the 1:32:04 mark:
It's unsurprising that Daines' defense of S.2155 was received favorably by a gathering of the American Bankers Association, which was one of many industry groups that lobbied aggressively for the measure.
"The lobbyists were everywhere. You couldn't throw an elbow without running into one," Sen. Elizabeth Warren (D-Mass.), who vocally opposed S.2155, told reporters last week.
Warren and Rep. Katie Porter (D-Calif.) have introduced legislation that would repeal a critical section of the 2018 law.
The Associated Pressreported Tuesday that in the hours before Congress approved the measure, Sen. Jon Tester (D-Mont.)—one of the legislation's top Democratic supporters—"huddled with executives from Bank of America, Citigroup, Discover, and Wells Fargo, who were there on behalf of the American Bankers Association."
"The American Bankers Association, which helped lead the push, later paid $125,000 for an ad campaign thanking Tester for his role in the bill's passage," the Associated Press noted.
The banking group's PAC spent more than $2.6 million on campaign contributions during the 2018 election cycle, with more than 76% of the donations going to Republicans, according to OpenSecrets.
Daines, who won reelection in 2020, received $10,000 from the American Bankers Association PAC during that year's campaign.