I repeat myself
One of the quips about me in my high school yearbook says: “repeats himself 10 times”. So, I guess my revisiting of topics has been going on a while and is not totally a sign of senility. Besides, Rob Chrisman occasionally reuses the same jokes[1] and doesn’t get cancelled or anything for it. People also forget a lot of stuff they were told (particularly when it comes to history)[2], or don’t acknowledge that they heard you the first time, so yeah, I repeat myself. So, I’m sorry if you’ve heard one of my discrimination rants before, but here’s a new twist.
Intentional discrimination is bad
In Musings #50 I cautioned that I expect all of my readers to agree with the following moral statement: “Intentionally discriminating against someone based on their race is bad.” Seriously, anyone who doesn’t share that view because they hate any particular group should please unsubscribe. I also previously mentioned in footnote #4 of that Musing that discriminating based on other characteristics (other than race) is also bad (and illegal). We can debate whether intentionality is required to prove illegal discrimination, but I hope my readers would also agree that intentional discrimination based on national origin or religion is as bad as racial discrimination. The reason I feel so strongly about this is because intentional discrimination is usually a result of animosity against a particular group[3] and I’m not interested in being around or helping people who are haters.
Beyond my own sense of morality, however, there is no question that a lender who intentionally treats people differently based on a prohibited characteristic is violating a multiplicity of fair lending laws. This should come as no surprise to anyone in the lending industry. I think the assumption behind anti-discrimination and fair lending laws is that anyone using such characteristics to make lending decisions is deemed to be acting out of hate. And hate needs to be removed from the decision of whether someone deserves a loan (or what the price will be). To intentionally discriminate suggests someone is using power over a protected class to further their own hate and bias objectives and not any legitimate business purpose.
Citi’s Armenian discrimination
With all of that to preface my thoughts, I think it is timely to remind everyone that groups that have been subjected to genocide probably deserve even greater sensitivity to avoid being intentionally discriminated against in this country. Discrimination against groups that in modern times[4]have had millions of their relatives murdered in genocidal purges should be called out as particularly pernicious and outrageous.
So it was with abject astonishment that I reacted to the following press release from the CFPB, “CFPB Orders Citi to Pay $25.9 million for Intentional Illegal Discrimination against Armenian Americans” [emphasis added]. The allegations of intentionality in Citi’s CFPB Consent Order are truly incredible and nothing like I have ever seen in any other lending discrimination case since the Civil Rights laws were passed in the 1960s. Notwithstanding longstanding federal and state laws demanding equal treatment, here you have a particular nationality being singled out for intentional discrimination without regard to their history of genocidal victimhood.
According to the CFPB, anyone suspected of being Armenian (such as anyone with an “ian” or “yan” in their last name) was subjected to multiple layers of additional scrutiny and sometimes outright rejected by Citi’s credit card division just because they were assumed to be Armenian. Now, I realize that Armenian discrimination is not something you hear about often, but Armenians were victims of probably the second worst genocide of the last century and continue to deal with ethnic violence and cleansing issues in the Southern Caucasus region of central Asia.[5]
Banking legend Tom Vartanian reacts
Needless to say, Thomas Vartanian, the renown banking attorney, author, (former) regulator, musician, educator, and apparently longtime Citibank customer[6] had every right to be outraged with his bank when he heard about this blatant discrimination against his fellow Armenians. Vartanian has a been one of the most respected and thoughtful banking attorneys in the nation for as long as I have been in banking, so I was very curious to hear his reaction, expecting nothing short of a full-throated condemnation. Yet, Vartanian took it easy on Citi in an opinion for The Messenger,
“While I was dismayed to learn that Citibank thought American Armenians were “bad guys” or some sort of “mafia,” I was delighted to see that the CFPB was there to protect Americans of Armenian descent.”
So much for any outrage in that statement. “Dismayed” was an interesting word choice that highlights an important insight into what I assume must be Vartanian’s thinking. Notably, Vartanian also used his opinion’s forum to criticize the CFPB for its use of statistical models and disparate impact to identify illegal discrimination (as contrasted with the obvious intentional discrimination alleged against Citi). Frankly, as angry as he had every right to be[7], I think Vartanian’s muted response reflects more about his banking knowledge (specifically regarding anti-money laundering obligations) than anything intended to excuse intentional discrimination against Armenians. That is, Vartanian is acutely aware that in addition to fair lending concerns, Citi, like other banks, was also under immense regulatory pressure to prevent money laundering and thus was probably acting out of risk management motivations more than any particular Armenian ethnic hatred.[8]
Sure enough, as reported by Law 360 a few weeks after the Citi Consent Order, I saw this news item,
“A phony Beverly Hills attorney with links to Armenian mobsters was sentenced to six months in prison and six months of home detention by a California federal judge Monday, after admitting to a long-running credit card scheme and bribing federal agents to gain access to sensitive law enforcement information.”
Hatred or fraud risk management
That there was a fraud ring among Armenians doesn’t excuse Citi’s violation of fair lending laws. In fact, we have seen similar problems in the home mortgage industry where efforts to combat fraud crossed the line into fair lending violations. For example, longtime California-based fraud expert,[9] Bob Simpson, pointed out to me that “back in the 80s and 90s there was an unspoken presumption that mortgage brokers in the 3500 block of Wilshire Blvd in Los Angeles, largely Korean, were not to be trusted. Loan applications were routinely scrutinized or turned down based on the address of the originating broker.” Similarly, another loyal and highly respected reader reminded me about how the mortgage lending industry had a fraud risk problem with Baltimore row houses years ago that also resulted in significant fair lending implications.
Legally it doesn’t matter for Citi, but should it matter why Citi intentionally discriminated? That is, does it matter if Citi’s motivation was not ethnic or racial hatred and bias, but a sincere fraud prevention concern? Clearly, Citi’s intent mattered to Tom Vartanian in terms of his lack of outrage. Further, Vartanian’s critical discussion of disparate impact in the context of Citi’s Armenian discrimination suggests that CFPB’s fair lending enforcers overplay their hand when they suggest racial or ethnic animus or hatred can be found in the results of disparate impact type numerical analysis. As I have noted previously[10], CFPB, however, seems compelled to find institutional hatred in many of its fair lending consent orders. Again, I don’t agree that disparate impact alone proves illegal discrimination, and a stray inappropriate or insensitive email or joke by someone doesn’t offer a smoking gun to prove institutional hatred either. As noted in Musing #62, the CFPB out on a limb in much of its fair lending enforcement based interpretations and the Townstone case (the appeal was recently heard by the 7th Circuit) may prove to be its Waterloo.
College Presidents and hate
Meanwhile, speaking of groups who have experienced genocide (and bad risk management decisions), I’ve got my own outrage issue to deal with after hearing the responses of several Ivy League[11]Presidents[12] to recent Congressional questioning. To be clear, I believe advocating genocide is unequivocally bad and always reflects “hate speech” regardless of who it is directed towards. These university leaders, on the other hand, seem to think certain genocidal advocacy needs to be “taken in context”. OK, I know quite well that the First Amendment protects all speech; even speech I find abhorrent, but places like Harvard and Penn haven’t exactly been such great First Amendment advocates[13]…, until now.[14] Rather, they have aggressively and without due process punished and prohibited any speech on campus they found hateful.
So, if context must be considered as these Presidents claim, when exactly is it not hateful to advocate genocide?
[1] Rob, however, probably will blame senility for repeating jokes.
[2] “Those who cannot remember the past are condemned to repeat it.” George Santayana
[3]Overcoming our tribal instincts of hatred and fear towards those outside our group is one of the features of modern civilization that deserves to be part of our moral and legal framework as well. That is under threat today. See generally, Suicide of the West by Jonah Goldberg
[4]Humans have been wired to exterminate other tribes since the dawn of time, but at some point in the last couple hundred years I thought we learned that promoting and engaging in genocide as course of action for dealing with conflict was not a civilized thing to do.
[5] It appears some progress is being made on that front.
[6] Vartanian is a true Renaissance Man (the part about being a Citi customer doesn’t really count though).
[7] Intentional illegal discrimination should make everyone mad from a fairness perspective, not just the direct victims.
[8] The challenge of navigating a course through competing regulatory obligations such as fair lending and anti-money laundering risk management gives me another opportunity to use my favorite scene from Raising Arizona. Sorry for repeating Musing #44 on that score, but it is such a good clip.
[9] I always think it’s funny to call someone a fraud expert, but Bob is one of the best since in addition to running a company that investigated fraud, he also is a lawyer and was a mortgage broker at one time. “He knows where the fraudsters bury the bodies”. Bob is now living on the East Coast in Savannah, Georgia.
[10]See e.g., footnote 12 in Musings #50.
[11]Harvard itself apparently thinks its President did a great job of fighting antisemitism in her testimony and decided not to fire her after plagiarism allegations surfaced. https://news.harvard.edu/gazette/story/2023/12/president-gay-details-fight-against-threats-harassment-bigotry-at-house-hearing/ If you agree with Harvard about Gay’s performance, please keep it to yourself.
[12]Actually, one is now a former Ivy League University President. Her smirking while (non)responding to Congresswoman Elise Stefanik’s questions as if Harvard grad Stefanik was a turnip truck drop-off who just doesn’t “get it”, probably was too much even for Penn.
[13] A better approach to campus speech issues is the one adopted by the University of Chicago.
[14] The schools are private institutions, so the First Amendment doesn’t apply as if they were government officials. Still, Harvard and Penn were ranked at the very bottom of all US Universitiesfor free speech climate by the Foundation for Individual Rights and Expression (FIRE). In fact, Harvard has a special rating category all to itself– “Abysmal”. Way to go Crimson! Since Harvard often likes to promote its rankings, it is surprising that I didn’t see that #1 worst ranking mentioned in the Harvard Gazette puff piece story linked at footnote 11 above.