The Problem with Perez

From The WSJ

By JASON L. RILEY

President Obama has nominated Thomas Perez, head of the Justice Department's Civil Rights Division, to be the next secretary of labor. The White House cites as an attribute his work at Justice in settling several fair-lending cases involving banks. But Republicans ought to question Mr. Perez's fondness for using statistical analysis to bring discrimination cases.

Mr. Perez is a disciple of "disparate impact theory," which uses statistics (selectively) to "prove" discrimination. As the economist Walter Williams has noted, disparate-impact theorists worship at the altar of racial proportionality. If blacks are 13% of the population, they should be roughly 13% of police officers, dentists, UCLA's freshman class and residents of upscale suburbs like Scarsdale, N.Y. If they aren't, then racial discrimination is to blame and legal action against institutions, municipalities, businesses and landlords is warranted.

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Thomas Perez

So when Mr. Perez noticed that some lenders had denied certain loans to blacks at higher rates than whites, he took action. Never mind all the studies that show whites denied certain kinds of loans at higher rates than Asians, or that show black-owned banks have also rejected black applicants at higher rates—which suggests that something other than racial discrimination might be at work. Mr. Perez made selective use of the data to fit his theory, then pressured the banks into settling rather than suffer years of bad publicity from unproven accusations of racism.

Mr. Perez and the Obama administration insist that disparate-impact analysis helps minorities. But forcing banks to lend money to people who can't pay it back means more home foreclosures and ruined credit ratings. How does that help someone?

The Labor Department nominee, who needs Senate confirmation, might face some questioning along these lines from Republican Sen. Charles Grassley of Iowa, who wants to know if Justice pressured the city of St. Paul, Minn., last year to withdraw a housing discrimination suit that was before the Supreme Court. The case might have allowed the High Court to weigh in on the constitutionality of disparate-impact analyses, which is the last thing that Mr. Perez and the Obama administration want.