On the Friday before the Martin Luther King, Jr. Holiday, the U.S. government filed its complaint against KleinBank charging the bank with “red-lining” in the U.S. District Court (D. Minn.).
Historically, “red-lining” was a practice by which lenders would avoid offering credit to majority-minority neighborhoods. In our economy, cutting off access to credit, whether both individuals or businesses is tantamount to cutting off oxygen.
Paradoxically, it simultaneously seems unbelievable and obvious that, historically, in the United States racism trumped the profit motive for many lenders. But, in the present day, could this really still be the case?
Some quick research on the internet reflects several defense law firms’ marketing to banks, in which the lawyers argue that a statistical showing of fewer loans or loan applications in majority-minority neighborhoods does not necessarily reflect a lender’s discriminatory practices (here is one example).
Presumably KleinBank will defend the case, arguing that there is no discriminatory intent and the imbalance of business from majority-minority neighborhoods does not violate federal law. The U.S. government will argue otherwise but, ultimately, the likely resolution is some negotiated compromise.
Some might decry such a resolution as “blackmail” by the federal government. Others might criticize such a resolution as the government “going soft” on discrimination. Given how incredibly difficult it is to prove “intent” and how insidious, destructive, and devastating economic discrimination is, maybe meeting more or less half-way (at the lowest possible expense) is the optimal solution to a longstanding social ill.