Lies, damned lies, and the financial meltdown

Luther Burbank, visionary, namesake.

A recent article in the Attleboro Sun Chronicle welcomes three new principals to our local school system (“Class Acts”, 9/3/2012). It is a heartwarming article and we all share in the excitement and promise of these promotions. But then, almost an afterthought, we notice something – the three new principals are all female.

There is a little known statistic that approximately half of our population is male. So when three executive positions are filled in the district, mightn’t we expect that at least one would be male?

Curious, we check the district’s website. Of the ten executive positions (nine principals and the superintendent), two are male and eight female. It looks pretty grim for the local guys.

On its face, just based on the numbers, this is highly discriminatory.

But there are lots of good reasons for the disparity. There are cultural and social forces at work that make the pool of female educators much larger than that of males. Females enter the profession at a much higher rate than males. The federal government (National Center for Education Statistics) reports that as of 2008, 76% of all public school teachers were female. So the fact that 80% of Attleboro’s school executives are female is not far off the mark.

It just goes to show that sometimes prima facie (“on its face”) discrimination can be explained by a deeper understanding of background facts.

Meanwhile, there is a small California savings and loan institution named after Luther Burbank, the famed botanist. Luther Burbank Savings was founded in 1983, committed to serving and retaining its customers rather than profiting public stockholders.

The bank is financially conservative and handily survived the financial meltdown of 2008. It did so by avoiding exotic financial vehicles such as sub-prime mortgages and collateralized mortgage obligations. It held the mortgages it issued for its own portfolio and did not sell them off. The funds released to mortgage borrowers came from the bank’s own depositors to whom it owed a fiduciary duty of care. It was successful because it required borrowers to qualify for the mortgage commitments they were about to undertake.

It would seem that this behavior should be congratulated and emulated. If more banks had behaved like this, there would have been no housing bubble and no financial meltdown.

So to honor Luther Burbank, your Department of Justice sued them for maintaining loan policies that had a “disparate impact” on African-Americans and Hispanics. The government observed that loans were made to the minority community at a statistically lower rate than their population.

The bank, admitting no guilt, settled the suit to avoid ruinously expensive litigation. It has loosened its lending standards and its depositors money is now at much greater risk. This is all due to the government’s “disparate impact” theory which says, regardless of fundamental causes, that if statistical variances exist, they must be discriminatory. No analysis of underlying causes is permitted.

If the problem is that minorities fail to qualify for standard mortgages, then we need to address those core issues. Holding a figurative gun to the head of a small community bank and forcing it to take greater risks runs counter to the lessons learned since 2008. And basing this on superficial statistics seems nonsensical at best.

If similar reasoning were applied to the Attleboro School district’s hiring policies, heads would roll.