Cutting Back on Community Reinvestment

Bloomberg Law quoted me in Banks Look to Narrow Exams Under Community Reinvestment Act. It opens,

Banks see an opening to limit the types of violations that could lead to a Community Reinvestment Act downgrade as federal regulators begin rewriting rules under the 1977 law.

Banks say regulators have improperly used consumer fair lending and other violations involving credit cards or other financial products to evaluate compliance with the law meant to increase lending and investment to lower-income communities.

“When a bank violates a consumer protection law, there is no shortage of enforcement agencies and legal regimes available to seek redress and punishment. Adding the CRA to that long list thus has little marginal benefit, and risks diluting and undermining the CRA’s core purpose of promoting community reinvestment,” the Bank Policy Institute, a leading bank lobbying group, said in a Nov. 19 comment letter to the Office of the Comptroller of the Currency.

The OCC set the stage for a CRA rewrite in August by releasing an advanced notice of proposed rulemaking. The Federal Reserve and Federal Deposit Insurance Corp. have signaled a desire to sign on to a joint proposal.

With that momentum building, banks are taking their shot to limit the types of enforcement actions included in CRA reviews. They want CRA reviews to focus on mortgages, small business and other community development investments.

The question of how non-CRA-related violations apply to banks’ community lending reviews is not merely a theoretical exercise.

Wells Fargo & Co. saw its CRA grade downgraded two levels to “needs to improve”in March 2017 following the revelation of the fake accounts it generated for consumers. Several states and municipalities cut off business with the bank in response.

CRA exam cycles run three years for large national banks and can run longer for smaller banks that perform well. Banks receive one of four grades—outstanding, satisfactory, needs to improve or substantial noncompliance—and a poor grade can restrict their merger and branch expansion plans.

OCC, Treasury Leading Push

The Trump administration, led by Treasury Secretary Steven Mnuchin and Comptroller of the Currency Joseph Otting, has been pushing for the latest CRA revision.

Both of those officials ran into CRA trouble when they tried to sell OneWest Bank to CIT Group Inc. Mnuchin was OneWest’s chairman and Otting its chief executive.

The Treasury Department released a report on “modernizing the CRA” in April. Included in that report is a call to not allow fair lending enforcement investigations from the Consumer Financial Protection Bureau and other regulators to slow down CRA reviews.

Otting went farther, issuing a bulletin on Aug. 15 highlighting that his agency’s examiners will no longer take into account non-CRA lending violations when assessing a bank’s CRA compliance.

The FDIC and the Fed have not yet followed suit. But banks want the three agencies to set a common policy on dealing with non-CRA related enforcement actions in their community lending reviews.

“Regulators should develop consistent policies clarifying that CRA will not be used as a general enforcement tool,” the American Bankers Association said in a Nov. 15 comment letter.

There is some merit to the idea, according to David Reiss, a professor at Brooklyn Law School and the research director at the Center for Urban Business Entrepreneurship.

“It’s delinking fair lending concerns, which are regulated elsewhere, from CRA concerns. From an industry perspective that may make a lot of sense,” he said in a Nov. 30 phone interview.

The proposal, taken in a vacuum, may be reasonable. But in the context of broader attempts to weaken the CRA, it should be viewed more skeptically.

Fight Over The Community Reinvestment Act

Bloomberg BNA quoted me in Community Investment Revamp for Banks Likely To Spark Fight (behind a paywall). It opens,

Community groups and banks agree that the Community Reinvestment Act needs an update, but with regulators beginning an ambitious overhaul of the 1977 law there is little agreement on how that update should look.

The Trump administration has been targeting the CRA — which measures how well banks lend to low- to middle-income areas — for a rewrite since last June. Comptroller of the Currency Joseph Otting said March 28 that the first draft would be coming in early April.

Otting set out some broad ideas that his agency, the Office of the Comptroller of the Currency, and the other regulators that oversee the CRA will present to the public. The Federal Reserve and the Federal Deposit Insurance Corporation also have responsibility for measuring banks’ compliance with the law, and the OCC says that it hopes the two agencies will sign on to the coming advanced notice of proposed rulemaking.

Banking industry experts and community groups all said that the broad strokes of the regulators’ plan sound promising, but few expect that comity to continue when the details come more into view.

“I think you can assume that everybody is not going to be happy,” Laurence Platt, a partner at Mayer Brown LLP, told Bloomberg Law.

The CRA’s Present

The Trump administration first put the CRA in its sights in a June 2017 Treasury Department report outlining its broader views on altering the rules banks operate under.

The law calls for the OCC, the Fed and the FDIC to periodically measure how much lending the banks they oversee do inside geographical assessment areas based on their branch and ATM locations. If banks are found not to do enough of such lending, regulators can stop some business activities or hold up branch expansions and mergers. But it hasn’t been updated for nearly two decades.

The Treasury Department followed up the June 2017 statement on the CRA with an April 3 report outlining its thinking on ways to modernize the law. The report largely aligns with the path laid out by Otting.

“Our recommendations will improve the effectiveness of CRA by enhancing the assessment and examination process, enhancing the ability of banks to deliver services in the communities they serve while considering technological advances in the financial industry,” Treasury Secretary Steven Mnuchin said in a statement accompanying the report.

Changes to the Community Reinvestment Act have already begun, with the OCC under former acting Comptroller of the Currency Keith Noreika in October declaring that the OCC examiners would no longer include enforcement actions that are not linked to a bank’s CRA compliance in their rating.

That change was minor, and affected only one of the three regulators responsible for the CRA. Otting on March 28 laid out a host of other changes likely coming in a new proposal.

The CRA’s Future?

The broad outline Otting provided on March 28 largely highlights the areas in the CRA that community activists and banks have said need to be addressed.

Among the changes Otting said will be put out for comment include expanding the types of lending that would be included in calculations of banks’ CRA compliance to encompass small business, student lending and other money going into a community.

“I think there’s a sense that community-based activities, beyond individual lending, should be given more credit, such as small business loans and infrastructure loans,” Mayer Brown’s Platt said.

Other areas that are going to be addressed in the proposal will touch on the way CRA information is calculated and reported to the public. Currently, banks are examined for compliance every three to five years, and the banks’ reviews take an additional year.

Overall, Otting said the changes would be significant.

“This is monumental change for America,” Otting said in an appearance March 28 at the Operation Hope Global Forum in Atlanta.

The changes Otting discussed all sound promising, but they are vague. So fights are likely to emerge when the details come out.

“The comments that were made were vague enough to give you both concern and possible joy,” Taylor said.

One other aspect of the CRA that is ripe for reform is the geographic assessment areas regulators use to evaluate banks’ lending efforts. Otting and other regulators have yet to specifically outline their ideas for making changes to that, but both the comptroller and Fed Vice Chair for Supervision Randal Quarles have discussed including mobile banking, online lending, and other financial technology tools into their reviews.

How they elect to make that change is likely to be contentious as well.

“If the assessment area is poorly defined, then the CRA will lose its teeth and that’s going to drive CRA policy for a long time to come,” said David Reiss, a professor at Brooklyn Law School.

Mooting The CFPB Constitutional Challenge

Law360 quoted me in DC Circ. May Skip CFPB Fight After Cordray’s Exit. It opens,

The legal battle over who will temporarily lead the Consumer Financial Protection Bureau comes as the D.C. Circuit is considering whether the bureau’s structure is constitutional, and experts say the fight over its leadership could lead the appeals court to punt on the constitutional question.

The full D.C. Circuit has been considering an appeal filed by mortgage servicer PHH Corp. to overturn a $109 million judgment entered by former CFPB Director Richard Cordray over alleged violations of anti-kickback provisions of the Real Estate Settlement Procedures Act. PHH’s argument is that the agency’s structure, which includes a single director rather than a commission along with independent funding not appropriated by Congress, is unconstitutional.

But now that a political and legal fight has broken out over who should temporarily lead the CFPB since Cordray has left the bureau, the D.C. Circuit may be even more inclined to find a way to decide the underlying arguments about the CFPB’s enforcement of a decades-old mortgage law without touching the constitutional questions.

“If the D.C. Circuit wants to avoid this question, they certainly have plausible means to do it,” said Brian Knight, a senior research fellow at George Mason University’s Mercatus Center.

The battle over the CFPB’s constitutionality waged by PHH in some ways opened the door for the current conflict over who should serve as the bureau’s acting director.

PHH’s fight with the CFPB stems from Cordray’s decision to jack up a RESPA penalty against the New Jersey-based mortgage company in June 2015.

A CFPB administrative law judge had originally issued a $6.4 million judgement against PHH over alleged mortgage kickbacks, but on appeal Cordray slapped the company with a $109 million penalty.

PHH then took its case to the D.C. Circuit, arguing that the single-director structure at the CFPB, which allowed Cordray to unilaterally hike the penalty, was a violation of the Constitution’s separation of powers clause.

Ultimately, a three-judge panel led by U.S. Circuit Judge Brett Kavanaugh found that the CFPB’s structure was unconstitutional but declined to eliminate the bureau and invalidate its actions. Instead, the panel elected to eliminate a provision that only allowed the president to fire the CFPB director for cause, rather than allowing the director to be fired at will by the president.

The original, now vacated, D.C. Circuit decision also overturned the CFPB’s penalty against PHH. That portion of the decision was unanimous.

The CFPB then sought an en banc review of the decision, with oral arguments held in May. Since then, the CFPB and the industry have waited for a decision.

In fact, the wait for that decision may have allowed Cordray to hang on as long as he did at the CFPB. Trump was expected to fire Cordray soon after taking office, but that never happened, and instead Cordray waited until November to depart the bureau for what many believe will be a run for governor in his home state of Ohio.

Many predicted the D.C. Circuit would go the route of U.S. Circuit Judge Karen L. Henderson, a member of the original panel that ruled in the PHH litigation. Judge Henderson dissented on the constitutional question but supported the decision on RESPA enforcement.

“You arguably don’t have to reach the constitutional question,” said Christopher Walker, a professor at Ohio State University’s Moritz School of Law.

But the D.C. Circuit’s decision comes as two individuals argue over which one of them is the CFPB’s rightful acting director.

Cordray last Friday promoted his chief of staff, Leandra English, to be the CFPB’s deputy director just moments before he formally announced his departure. Cordray and English argue that the 2010 Dodd-Frank Act, which created the CFPB, made the deputy director the acting director in his absence.

Hours later, Trump appointed Office of Management and Budget Director Mick Mulvaney, a fierce CFPB opponent, to be the federal consumer finance watchdog’s acting director under a different federal law.

English sued to block Mulvaney’s appointment, and although the case will continue, a judge on Tuesday rejected her request for a temporary restraining order.

Against that backdrop, the D.C. Circuit may have more of an incentive to lie low on the constitutional questions, said Brooklyn Law School professor David Reiss.

“My reading would be that if they reversed the agency on the RESPA issues, then they may be able to moot the constitutional issues,” he said.

Fox in The CRA Henhouse

Law360 quoted me in Treasury’s Fair Lending Review Worries Advocates (behind a paywall). It reads, in part,

President Donald Trump’s Treasury Department said Monday that revisiting a 1977 law aimed at boosting bank lending and branches in poor neighborhoods was a “high priority,” but backers of the Community Reinvestment Act fear that any move by this administration would be aimed at weakening, not modernizing, the law.

Critics and some backers of the Community Reinvestment Act say that the law does not take into account mobile banking and the decline of branch networks among a host of other updates needed to meet the realities of banking in 2017.

While there is some agreement on policy, the politics of reworking the CRA are always difficult. Those politics will be even more difficult with the Trump administration and Treasury Secretary Steven Mnuchin, who ran into problems with the CRA when he was the chairman of OneWest Bank, leading the review, said David Reiss, a professor at Brooklyn Law School.

“A team at Treasury led by the OneWest leadership should give consumer advocates pause,” he said.

*   *   *

Across the administration, from the U.S. Department of Education to the Department of Justice, civil rights enforcement has taken a back seat to other concerns. And Mnuchin is in the process of populating the Treasury Department with former colleagues from OneWest.

Trump nominated former OneWest CEO Joseph Otting to be comptroller of the currency earlier this month and is reportedly close to nominating former OneWest Vice Chairman and Chief Legal Officer Brian Brooks as deputy Treasury secretary. Brooks is currently the general counsel at Fannie Mae.

Activists who fought the CIT-OneWest merger on CRA grounds say that the placement of those former OneWest executives in positions of authority over the law should raise alarms.

“[Mnuchin’s] bank, OneWest, also had one of the worst community reinvestment records of all the banks that CRC analyzes in California, which raises questions about his motivation in ‘reforming’ the Community Reinvestment Act. Is he interested in reforming it to help communities, or to help the industry do even less?” said Paulina Gonzalez of the California Reinvestment Coalition.

The Treasury secretary has defended his bank’s foreclosure practices and others that drew fair lending advocates’ ire, saying that most of the problems at OneWest were holdovers from IndyMac, the failed subprime lender OneWest’s investors purchased after it failed.

Discussing reforms to the CRA under any administration, particularly a typical Republican administration, would be difficult on its own for lawmakers and inside regulatory agencies, Schaberg said.

“Anybody down in the middle-management tier of any of the banking agencies, they’re not going to touch this because it’s so politically charged,” he said.

The added distrust of the Trump administration and Mnuchin among fair housing advocates makes the prospect of any legislation to reshape even harder to imagine. Even without legislation, new leadership at the regulatory agencies that monitor for CRA compliance could take a lighter touch. And that has fair housing backers on edge.

“In my mind, there’s a fox-in-the-henhouse mentality,” Reiss said.

AIG Suit Strengthens Government Powers

photo by Tim Evanson

Law360 quoted me in Greenberg’s AIG Loss Strengthens Gov’t’s Crisis Powers (behind a paywall). It reads, in part,

The Federal Circuit’s decision reversing Maurice R. “Hank” Greenberg’s win in his campaign against the U.S. government over its bailout of American International Group Inc. was the latest in a string of defeats for investors challenging financial crisis bailouts, and could further strengthen the government’s hand in future crises, experts say.

The Federal Circuit on Tuesday rejected claims by Greenberg, AIG’s former chief executive, and his current company, Starr International Co. Inc., that the government engaged in an unconstitutional taking of property when it demanded and received 80 percent of the giant insurance company’s stock in exchange for an $85 billion bailout in September 2008.

Although the appellate panel overturned a lower court ruling by rejecting Greenberg’s standing to sue, it came in the wake of a series of rulings against shareholders in Fannie Mae and Freddie Mac. Those shareholders are seeking to overturn a President Barack Obama-era move to sweep profits from the bailed out mortgage giants back to the U.S. Department of the Treasury rather than into shareholder dividends, cases courts have repeatedly rejected.

Those wins mean that courts are giving the government wide latitude to respond to a financial crisis, even if some shareholders are harmed, said David Reiss, a professor at Brooklyn Law School.

“There’s now a lot of judges who have come down to effectively say, ‘The government had very broad authority to address the financial crisis, and we’re not going to second-guess that,'” he said.

Greenberg’s campaign against the Federal Reserve, the Treasury Department and other arms of the U.S. government stems from the effort to bail out AIG in 2008 after it was brought to the brink of insolvency due to the failure of credit default swaps held by its structured finance unit.

In exchange for the $85 billion loan that the Federal Reserve Bank of New York ultimately extended, AIG and its board agreed to hand over nearly 80 percent of its equity and fire its top executives.

Greenberg, who left AIG in 2005 under a cloud, and his current firm Starr International were the largest shareholders in the world’s largest insurer, and argued in a 2011 lawsuit that the government had engaged in an illegal taking of shareholder property.

Federal Claims Judge Thomas C. Wheeler agreed with at least part of Greenberg’s argument in a June 2015 decision, saying that the Fed had placed unduly tough terms on AIG in exchange for the bailout loan, with those terms exceeding the central bank’s authority under Section 13(3) of the Bank Holding Company Act.

However, Judge Wheeler did not award any damages to Greenberg and shareholders in the class action, arguing that their shares would have been worth nothing without the government’s action.

Both Greenberg and the government appealed, and the Federal Circuit on Tuesday reversed Judge Wheeler’s holding on the question of whether the government exceeded its authority by placing tough terms on the bailout.

However, the opinion did not focus on the government’s actions but on the question of standing. Greenberg and his company did not have it, so the rest of his argument was moot, the panel said.

    *     *     *

While the Federal Circuit did not address the substance of Greenberg’s claims, the U.S. Supreme Court might.

Greenberg and Starr said Tuesday they plan to take their case to the U.S. Supreme Court. If the high court takes up the case, despite a lack of a circuit split on the issue of lawsuits over financial crisis-era bailouts, they could set the terms under which the government acts in a future financial crisis.

But even without a Supreme Court ruling in their favor, the government should feel that it is on stronger legal ground during a financial crisis with its two wins at the appellate court level, Reiss said.

“Companies who are looking to reverse government actions at the height of the financial crisis … are having a really tough row to hoe,” he said.

Dr. Carson’s Slim Housing Credentials

photo by Gage Skidmore

Law360 quoted me in Carson’s Slim Housing Credentials To Be Confirmation Focus (behind paywall). It opens,

Dr. Ben Carson will face a barrage of questions Thursday on topics ranging from his views on anti-discrimination enforcement to the basics of running a government agency with a multibillion-dollar budget at his confirmation hearing to lead the U.S. Department of Housing and Urban Development.

Carson, a famed neurosurgeon and former Republican presidential candidate, was President-elect Donald Trump’s surprise choice for HUD secretary, given the nominee’s lack of experience or statements on housing issues. That lack of a track record means that senators and housing policy advocates will have no shortage of areas to probe when Carson appears before the Senate Banking Committee.

“I want to know whether he has any firm ideas at all about housing and urban policy. Is he a quick study?” said David Reiss, a professor at Brooklyn Law School.

Trump tapped Carson in early December to lead HUD, saying that his former rival for the Republican presidential nomination shared in his vision of “revitalizing” inner cities and the families that live in them.

“Ben shares my optimism about the future of our country and is part of ensuring that this is a presidency representing all Americans. He is a tough competitor and never gives up,” Trump said in a statement released through his transition team.

Carson said he was honored to get the nod from the president-elect.

“I feel that I can make a significant contribution particularly by strengthening communities that are most in need. We have much work to do in enhancing every aspect of our nation and ensuring that our nation’s housing needs are met,” he said in the transition team’s statement.

The nomination came as a bit of a surprise given that Carson, who has decades of experience in medicine, has none in housing policy. It also came soon after a spokesman for Carson said that he had no interest in a Cabinet position because of a lack of qualifications.

Now lawmakers, particularly Democrats, will likely spend much of Thursday’s confirmation hearing attempting to suss out just what the HUD nominee thinks about the management of the Federal Housing Administration, which provides insurance on mortgages to low-income and first-time home buyers; the management and funding for public housing in the U.S.; and even the basics of how he will manage an agency that had an approximately $49 billion budget and employs some 8,300 people.

“You will have to overcome your lack of experience managing an organization this large to ensure that you do not waste taxpayer dollars and reduce assistance for families who desperately need it,” Sen. Elizabeth Warren, D-Mass., said in a letter to Carson earlier in the week.

To that end, Carson could help allay fears about management and experience by revealing who will be working under him, said Rick Lazio, a partner at Jones Walker LLP and a former four-term Republican congressman from New York.

“The question is will the senior staff have a diverse experience that includes management and housing policy,” Lazio said.

One area where Carson is likely to face tough questioning from Democrats is anti-discrimination and fair housing.

Carson’s only major public pronouncement on housing policy was a 2015 denunciation of the Affirmatively Furthering Fair Housing rule that the Obama administration finalized after it languished for years.

The rule, which was part of the 1968 Fair Housing Act but had been languishing for decades, requires each municipality that receives federal funding to assess their housing policies to determine whether they sufficiently encourage diversity in their communities.

In a Washington Times, op-ed, Carson compared the rule to failed efforts to integrate schools through busing and at other times called the rule akin to communism.

“These government-engineered attempts to legislate racial equality create consequences that often make matters worse. There are reasonable ways to use housing policy to enhance the opportunities available to lower-income citizens, but based on the history of failed socialist experiments in this country, entrusting the government to get it right can prove downright dangerous,” Carson wrote.

Warren has already indicated that she wants more answers about Carson’s view of the rule and has asked whether Carson plans to pursue disparate impact claims against lenders and other housing market participants, as is the current policy at HUD and the U.S. Department of Justice.

Warren’s concerns are echoed by current HUD Secretary Julian Castro, who said in an interview with National Public Radio Monday that he feared Carson could pull back on the efforts the Obama administration has undertaken to enforce fair housing laws.

“I’d be lying if I said that I’m not concerned about the possibility of going backward, over the next four years,” Castro said in the interview.

HUD, as the agency overseeing the Federal Housing Administration, has also been involved in significant litigation against the likes of Deutsche Bank, HSBC, Bank of America and JPMorgan Chase & Co., among others, seeking to recover money the FHA lost on bad loans they sold to the agency.

“Will you commit to continuing to strictly enforce these underwriting standards in order to protect taxpayers from fraud?” Warren asked.

Carson has also drawn criticism from fair housing advocates for his views on the assistance the government provides to the poor, saying in his memoir that such programs can breed dependency when they do not have time limits.

To that end, housing policy experts will want to hear what Carson wants to do to ease the affordability crisis, boost multifamily building and improve conditions inside public housing units. HUD also plays a major role in disaster relief operations, another area where people will be curious about Carson’s thinking.

“I’d be looking at hints of his positive agenda, not just critiques of past programs,” Reiss said.

Carson and Fair Housing

photo by Warren K. Leffler

President Johnson signing the Civil Rights Act of 1968 (also known as the Fair Housing Act)

Law360 quoted me in Carson’s HUD Nom Adds To Fair Housing Advocates’ Worries (behind a paywall). It opens,

President-elect Donald Trump’s Monday choice of Ben Carson to lead the U.S. Department of Housing and Urban Development added to fears that the incoming administration would pull back from the aggressive enforcement of fair housing laws that marked President Barack Obama’s term, experts said.

The tapping of Carson to lead HUD despite a lack of any relative experience in the housing sector came after Trump named Steven Mnuchin to lead the U.S. Department of the Treasury amid concerns that the bank for which he served as chairman engaged in rampant foreclosure abuses. Trump has also nominated Sen. Jeff Sessions, R-Ala., to serve as attorney general. Sessions has drawn scrutiny for his own attitudes towards civil rights enforcement.

Coupled with Trump’s own checkered history of run-ins with the U.S. Justice Department over discriminatory housing practices, those appointments signal that enforcement of fair housing laws are likely to be a low priority for the Trump administration when it takes office in January, said Christopher Odinet, a professor at Southern University Law Center.

“I can’t imagine that we’ll see any robust enforcement or even attention paid to fair housing in this next administration,” he said.

Trump said that Carson, who backed the winning candidate after his own unsuccessful run for the presidency, shared in his vision of “revitalizing” inner cities and the families that live in them.

“Ben shares my optimism about the future of our country and is part of ensuring that this is a presidency representing all Americans. He is a tough competitor and never gives up,” Trump said in a statement released through his transition team.

Carson said he was honored to get the nod from the president-elect.

“I feel that I can make a significant contribution particularly by strengthening communities that are most in need. We have much work to do in enhancing every aspect of our nation and ensuring that our nation’s housing needs are met,” he said in the transition team’s statement.

The problem that many are having with this nomination is that Carson has little to no experience with federal housing policy. A renowned neurosurgeon, Carson’s presidential campaign website made no mention of housing, and there is little record of him having spoken about it on the campaign trail. One Carson campaign document called for privatizing Fannie Mae and Freddie Mac, the government-run mortgage backstops that were bailed out in 2008.

The nomination also comes in the weeks after a spokesman for Carson said that the former presidential candidate had no interest in serving in a cabinet post because he lacked the qualifications. That statement has since been walked back but has been cited by Democrats unhappy with the Carson selection.

“Cities coping with crumbling infrastructure and families struggling to afford a roof overhead cannot afford a HUD secretary whose spokesperson said he doesn’t believe he’s up for the job,” said Sen. Sherrod Brown of Ohio, the ranking Democrat on the Senate Banking Committee. “President-elect Trump made big promises to rebuild American infrastructure and revitalize our cities, but this appointment raises real questions about how serious he is about actually getting anything done.”

HUD is a sprawling government agency with a budget around $50 billion and programs that include the Federal Housing Administration, which provides financing for lower-income and first-time homebuyers, funding and administration of public housing programs, disaster relief, and other key housing policies.

It also helps enforce anti-discrimination policies, in particular the Affirmatively Furthering Fair Housing rule that the Obama administration finalized. The rule, which was part of the 1968 Fair Housing Act but had been languishing for decades, requires each municipality that receives federal funding to assess their housing policies to determine whether they sufficiently encourage diversity in their communities.

Carson has not said much publicly about housing policy, but in a 2015 op-ed in the Washington Times compared the rule to failed school busing efforts of the 1970s and at other times called the rule akin to communism.

“These government-engineered attempts to legislate racial equality create consequences that often make matters worse. There are reasonable ways to use housing policy to enhance the opportunities available to lower-income citizens, but based on the history of failed socialist experiments in this country, entrusting the government to get it right can prove downright dangerous,” wrote Carson, who lived in public housing for a time while growing up in Detroit.

That dismissiveness toward the rule has people who are concerned about diversity in U.S. neighborhoods and anti-discrimination efforts on edge, and could put an end to federal efforts to improve those metrics.

“If you’re not affirmatively furthering fair housing, we’re going to be stuck with the same situation we have now or it’s going to get worse over time,” said David Reiss, a professor at Brooklyn Law School and research affiliate at New York University’s Furman Center.