Two Things You Won’t Be Hearing About Today
You won’t be hearing about a major Supreme Court decision regarding whether disparate impact analysis applies to the Fair Housing Act. As you all know, as a general rule of thumb lenders can be on the hook for intentional discrimination, as well as policies that have a disparate impact on minority groups. In a case called Township of Mt. Holly v. Mt. Holly Gardens Citizens in Action, the Court was going to address head-on whether or not housing policies that have a disproportionate and negative impact on minority groups absent any showing of discriminatory intent violate the Fair Housing Act. Even though the case dealt with redevelopment plans that long time residents argued would deprive residents of the overwhelmingly minority community access to affordable housing, the case had huge implications for lenders as well as HUD’s ability to enforce lending policies under the Fair Housing Act. Consequently, the American Bankers’ Association and others weighed in with an amicus brief arguing not only that disparate impact analysis can’t be applied under the Fair Housing Act, but also that there is no right of private citizens to sue under the Act.
I have to be honest with you, I feel like the kid who runs down to the Christmas tree on Christmas morning only to find that the one present he really wanted wasn’t there. Last night, the Mt. Holly Town Board voted to settle the law suit making the case moot. (http://www.philly.com/philly/news/20131114_Mount_Holly_Gardens_discrimination_dispute_settled.html) The decision comes after the town voted in candidates supporting a settlement. In other words, the legislative process trumped the judicial one. What a concept.
This marks the second year in a row that litigation involving disparate impact has been yanked from the Supreme Court’s agenda at the last second. But sooner or later, we are going to have to get this important issue resolved once and for all.
Another thing you won’t be hearing about today is equivocation on the part of Janet Yellen about the need to continue the FED’s $85 billion monthly bond buying binge. Although certain members of the FED have grumbled for months about the need to start “tapering” down the program, in her prepared testimony (http://www.federalreserve.gov/newsevents/testimony/yellen20131114a.htm) released yesterday evening in advance of today’s nomination hearing to be the next FED Chairman she argues that unemployment is still too high and that inflation continues to run below expectations and “is expected to continue to do so for some time.” Against this backdrop, she argues that:
”for these reasons, the Federal Reserve is using its monetary tools to promote a more robust recovery. A strong recovery will ultimately enable the FED to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases. I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy.”
Translation, the economy is still too weak to conclude that the value of monetary easing is outweighed by the potential inflationary dangers it poses to the economy. This is stronger language than was ever used by Chairman Bernanke. If Ms. Yellen’s live testimony is as straightforward as her written testimony, expect to see a big day on Wall Street and a rally in the bond markets.
On that note, have a good day.