[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]





                         A GENERAL OVERVIEW OF
                        DISPARATE IMPACT THEORY

=======================================================================

                                HEARING

                               BEFORE THE

                       SUBCOMMITTEE ON OVERSIGHT
                           AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           NOVEMBER 19, 2013

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 113-51




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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    JEB HENSARLING, Texas, Chairman

GARY G. MILLER, California, Vice     MAXINE WATERS, California, Ranking 
    Chairman                             Member
SPENCER BACHUS, Alabama, Chairman    CAROLYN B. MALONEY, New York
    Emeritus                         NYDIA M. VELAZQUEZ, New York
PETER T. KING, New York              MELVIN L. WATT, North Carolina
EDWARD R. ROYCE, California          BRAD SHERMAN, California
FRANK D. LUCAS, Oklahoma             GREGORY W. MEEKS, New York
SHELLEY MOORE CAPITO, West Virginia  MICHAEL E. CAPUANO, Massachusetts
SCOTT GARRETT, New Jersey            RUBEN HINOJOSA, Texas
RANDY NEUGEBAUER, Texas              WM. LACY CLAY, Missouri
PATRICK T. McHENRY, North Carolina   CAROLYN McCARTHY, New York
JOHN CAMPBELL, California            STEPHEN F. LYNCH, Massachusetts
MICHELE BACHMANN, Minnesota          DAVID SCOTT, Georgia
KEVIN McCARTHY, California           AL GREEN, Texas
STEVAN PEARCE, New Mexico            EMANUEL CLEAVER, Missouri
BILL POSEY, Florida                  GWEN MOORE, Wisconsin
MICHAEL G. FITZPATRICK,              KEITH ELLISON, Minnesota
    Pennsylvania                     ED PERLMUTTER, Colorado
LYNN A. WESTMORELAND, Georgia        JAMES A. HIMES, Connecticut
BLAINE LUETKEMEYER, Missouri         GARY C. PETERS, Michigan
BILL HUIZENGA, Michigan              JOHN C. CARNEY, Jr., Delaware
SEAN P. DUFFY, Wisconsin             TERRI A. SEWELL, Alabama
ROBERT HURT, Virginia                BILL FOSTER, Illinois
MICHAEL G. GRIMM, New York           DANIEL T. KILDEE, Michigan
STEVE STIVERS, Ohio                  PATRICK MURPHY, Florida
STEPHEN LEE FINCHER, Tennessee       JOHN K. DELANEY, Maryland
MARLIN A. STUTZMAN, Indiana          KYRSTEN SINEMA, Arizona
MICK MULVANEY, South Carolina        JOYCE BEATTY, Ohio
RANDY HULTGREN, Illinois             DENNY HECK, Washington
DENNIS A. ROSS, Florida
ROBERT PITTENGER, North Carolina
ANN WAGNER, Missouri
ANDY BARR, Kentucky
TOM COTTON, Arkansas
KEITH J. ROTHFUS, Pennsylvania

                     Shannon McGahn, Staff Director
                    James H. Clinger, Chief Counsel
              Subcommittee on Oversight and Investigations

              PATRICK T. McHENRY, North Carolina, Chairman

MICHAEL G. FITZPATRICK,              AL GREEN, Texas, Ranking Member
    Pennsylvania, Vice Chairman      EMANUEL CLEAVER, Missouri
PETER T. KING, New York              KEITH ELLISON, Minnesota
MICHELE BACHMANN, Minnesota          ED PERLMUTTER, Colorado
SEAN P. DUFFY, Wisconsin             CAROLYN B. MALONEY, New York
MICHAEL G. GRIMM, New York           JOHN K. DELANEY, Maryland
STEPHEN LEE FINCHER, Tennessee       KYRSTEN SINEMA, Arizona
RANDY HULTGREN, Illinois             JOYCE BEATTY, Ohio
DENNIS A. ROSS, Florida              DENNY HECK, Washington
ANN WAGNER, Missouri
ANDY BARR, Kentucky















                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    November 19, 2013............................................     1
Appendix:
    November 19, 2013............................................    33

                               WITNESSES
                       Tuesday, November 19, 2013

Kirsanow, Peter N., Commissioner, U.S. Commission on Civil 
  Rights, and Partner, Benesch, Friedlander, Coplan & Arnoff.....     5
Marcus, Kenneth L., President and General Counsel, Louis D. 
  Brandeis Center for Human Rights Under Law.....................     7
Parker, Dennis D., Director, Racial Justice Program, American 
  Civil Liberties Union..........................................     8

                                APPENDIX

Prepared statements:
    Kirsanow, Peter N............................................    34
    Marcus, Kenneth L............................................    39
    Parker, Dennis D.............................................    46

              Additional Material Submitted for the Record

McHenry, Hon. Patrick:
    Written statement of the National Association of Mutual 
      Insurance Companies (NAMIC)................................   110
Ellison, Hon. Keith:
    Written responses to questions submitted to Dennis Parker....   134

 
                         A GENERAL OVERVIEW OF
                        DISPARATE IMPACT THEORY

                              ----------                              


                       Tuesday, November 19, 2013

             U.S. House of Representatives,
                          Subcommittee on Oversight
                                and Investigations,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10:06 a.m., in 
room 2128, Rayburn House Office Building, Hon. Patrick McHenry 
[chairman of the subcommittee] presiding.
    Members present: Representatives McHenry, Duffy, Fincher, 
Hultgren, Barr, Rothfus; Green, Cleaver, Ellison, Maloney, 
Delaney, Beatty, and Heck.
    Ex officio present: Representatives Hensarling and Waters.
    Also present: Representative Garrett.
    Chairman McHenry. The Subcommittee on Oversight and 
Investigations will come to order. Without objection, the Chair 
is authorized to declare a recess of the subcommittee at any 
time.
    Today's hearing is entitled, ``A General Overview of 
Disparate Impact Theory.''
    I will now recognize myself for 5 minutes for an opening 
statement.
    Fairness, fundamental fairness, ensures that those who must 
enforce the law, know the law. Fairness, fundamental fairness, 
also says that those who are under the law will understand the 
law. Those who benefit from the law should have a level of 
understanding of what the rules of the game are as well.
    Discrimination based on race, sex, or other prohibitive 
factors is destructive and morally repugnant. More specific to 
the jurisdiction of this committee, discrimination in housing 
and in lending is unfair and unjust and has no place in the 
American marketplace. Unfortunately, discrimination still 
exists.
    For this reason, the protections afforded by the Federal 
Civil Rights Statutes remain important and necessary. These 
statutes, like the Fair Housing Act and the Equal Credit 
Opportunity Act, obligate the government to investigate 
allegations of discrimination, and to take appropriate action 
to end discriminatory practices and provide relief to victims.
    According to the legal theory of disparate impact, the 
government or private litigants can bring discrimination claims 
based solely on statistics that suggest an otherwise neutral 
policy disparately impacts protected classes. While I believe 
data can be helpful in better understanding the roots of 
disparity, it is disconcerting that unlike other illegal 
discrimination claims, disparate impact claims do not require 
the government or a private plaintiff to provide intent to 
discriminate.
    It is important to remember that resources to fight 
discrimination are not unlimited. I believe our witnesses today 
make a strong argument that precious resources to fight 
discrimination are needlessly diluted when agencies with civil 
rights missions attack disparities that arise for reasons other 
than discrimination.
    This is a timely hearing, as the Department of Housing and 
Urban Development (HUD) and the Consumer Financial Protection 
Bureau (CFPB) are considering disparate impact in their 
regulatory writing and the issuing of guidance. And up until a 
few days ago, the Supreme Court was planning to address the 
legitimacy of disparate impact claims under the Fair Housing 
Act this term.
    That, as has been covered in the press, is no longer the 
case.
    In front of us today, we have an expert panel of witnesses 
who have spent their careers fighting illegal discrimination. 
In the course of this hearing, I hope to gain a better 
understanding of the challenges facing those seeking fair 
treatment under the law and the best way to protect minorities 
and the most vulnerable in our society from illegal 
discrimination.
    And with that, I yield 5 minutes for an opening statement 
to the ranking member of the subcommittee, Mr. Green of Texas.
    Mr. Green. Thank you, Mr. Chairman.
    And I would like to thank you for acknowledging that we 
still have invidious discrimination, that the battle to end 
invidious discrimination is not yet over.
    I am also appreciative that you have embraced this hearing 
with an open mind so that we can come to conclusions about a 
long settled standard of disparate impact.
    It is my belief that this hearing will be about whether 
discrimination has to have intention to be harmful. It will be 
about whether good people can make bad policy. It will be about 
whether or not a financial institution can charge African 
Americans $2,937 more than similarly situated White customers 
for their loans, and charge Hispanics $2,187 more for their 
loans.
    I mention these specific examples because these are 
examples of how the disparate impact standard, well-settled 
standard, has had a positive impact on our society and 
especially on people in certain classes.
    I would like to hearken back, if I may, to 1968, because it 
was the death of Dr. King that allowed or caused, if you will, 
this Congress, meaning the Congress of the United States of 
America, to pass the Civil Rights Act of 1968, which has Title 
VIII within it, the Fair Housing Act.
    And it was not an easy time for us in this country. There 
was invidious discrimination. But there was also covert 
discrimination. And the Civil Rights Act of 1968 allows us to 
fight both overt and covert discrimination.
    It is great to be able to prove intentionality, that there 
was intent to do harm. But there are many cases wherein the 
intent is well-concealed, and the law allows us to use the 
disparate impact standard to get to that intent that is well-
concealed.
    We would not be here today, in my opinion, debating an 
issue of whether or not you have to have intent to do harm to 
me, if you should hit me with your car. And I am someplace that 
I lawfully should be. I am not in any way negligent.
    You don't have to have intent to harm me. And you don't 
have to have intent to be liable for the harm that you cause.
    Intentionality is obviously an element that, if proven, is 
beneficial. But there are other ways, there are other 
circumstances that allow us to prove harm.
    And this harm has been shown to be proven with the 
disparate impact theory.
    My hope, Mr. Chairman, is that after today's hearing, we 
will not find law being promulgated, legislation being 
promulgated to eliminate or limit what we have had for more 
than 40 years now as good standing law. My hope is that as we 
move forward, we may do some things to improve upon what was 
done in 1968, but not limit it and not circumvent what we have 
found to be a means by which we can continue to combat 
invidious discrimination.
    Finally, Mr. Chairman, let me say this: This has been a 
continuing fight to eradicate discrimination. The law in 1968 
was not passed unanimously. And since its passage, we have had 
many efforts to try to limit it, or eliminate it. We have had 
litigation. And some of the litigation has been settled.
    I think that this litigation has been settled had many 
aspects to it that we may discuss today. But I do believe that 
the courts, all of the courts that have taken up these issues 
which have walked away with the notion that it is a legitimate 
standard which can be used to help eliminate invidious 
discrimination.
    We have come a long way, but we are not there yet. And my 
hope is that we won't today or at some point in the near future 
decide that we are going to turn back the clock to a pre-1968 
era.
    I yield back the balance of my time.
    Chairman McHenry. And under prior agreement with the 
ranking member, Mrs. Beatty is recognized for 2 minutes.
    Mrs. Beatty. Thank you, Mr. Chairman, and Mr. Ranking 
Member, for holding this hearing today. I think it is very 
timely.
    Let me also thank you for being here as witnesses for 
something which is very difficult and painful for me, as I 
reflect back to growing up in 1968, and to being discriminated 
against in the housing market because of the color of my skin.
    Mr. Chairman, it was very welcoming to hear your opening 
remarks and also the remarks of Ranking Member Green.
    I will use your words, Mr. Chairman, throughout my 
conversation and dialogue with the witnesses today, that 
discrimination has no place in the American marketplace.
    And so, as we later question and have dialogue with the 
witnesses, you will hear those comments from me.
    Let me just say that today's hearing comes at a very 
interesting time, coming 1 week after the notice of the 
settlement in the Mount Holly case. Certainly, we all are 
familiar with that case, and this settlement seems to finally 
conclude the decade-long dispute regarding the use of disparate 
impact theory in the context of housing policy.
    Certainly, you know that this case was scheduled for 
argument before the Supreme Court, and was expected to be a 
landmark case, which would have given the highest court in the 
land the opportunity to evaluate the applicability and future 
of the legal theory of disparate impact in the housing market.
    And certainly, we know it was never argued before the 
Supreme Court, and the disparate impact clause of the Fair 
Housing Act has consistently been held up 11 different times in 
the court of appeals over the last 4 years.
    I think I will leave you with this thought: Has 
discrimination been so institutionalized that we don't know the 
difference between intentional and unintentional 
discrimination?
    Thank you, Mr. Chairman.
    Chairman McHenry. Thank you, Mrs. Beatty.
    We will now recognize our distinguished panel of witnesses.
    First, Peter N. Kirsanow, is a Commissioner on the United 
States Commission on Civil Rights, where he is currently 
serving his second 6-year term. From 2006 to 2008, Commissioner 
Kirsanow also served as a member of the National Labor 
Relations Board.
    He was appointed to both positions by President George W. 
Bush, and is a partner with the law firm of Benesch, 
Friedlander, Coplan & Arnoff, as part of its Labor Employment 
Practices Group, and is also a member of the firm's Diversity 
and Inclusion Committee.
    Commissioner Kirsanow received his B.A. in 1976 from 
Cornell University, and his J.D. with honors in 1979 from 
Cleveland State University, where he served as articles editor 
of the Cleveland State Law Review.
    Second, Kenneth L. Marcus is the President and General 
Counsel of the Louis D. Brandeis Center for Human Rights Under 
Law. Mr. Marcus founded the Brandeis Center in 2011 to combat 
the resurgence of anti-Semitism in American higher education.
    He is the author of the award-winning book, ``Jewish 
Identity and Civil Rights in America,'' and previously held the 
Lillie and Nathan Ackerman Chair in Equality and Justice in 
America at the Baruch School of Public Affairs at the City 
University of New York.
    Mr. Marcus served in the George W. Bush Administration as 
the Staff Director of the United States Commission on Civil 
Rights, and as the General Deputy Assistant Secretary of 
Housing and Urban Development for Fair Housing and Equal 
Opportunity.
    Mr. Marcus is a magna cum laude graduate of Williams 
College, and is also a graduate of the Boalt Hall School of Law 
at Berkeley.
    And finally, Dennis Parker is the Director of Civil Justice 
Programs with the American Civil Liberties Union. In that 
position, Mr. Parker focuses on combating discrimination and 
addressing other related issues.
    Prior to joining the ACLU, Mr. Parker was the Chief of the 
Civil Rights Bureau in the Office of the New York State 
Attorney General under Eliot Spitzer.
    Mr. Parker previously served for 14 years at the NAACP 
Legal Defense and Education Fund, and teaches race, poverty and 
constitutional law at the Columbia University School of Law 
Institute.
    And Mr. Parker is a graduate of Harvard Law School and 
Middlebury College.
    The witnesses will now be recognized for 5 minutes for an 
oral presentation of their testimony.
    And, without objection, the witnesses' written statements 
will be made a part of the record, and the witnesses will have 
until close of business Friday to revise and extend their 
witness testimony.
    On your tables, there are lights--red, yellow, and green--
and I don't have to explain the meaning of those. Even Members 
of Congress mostly understand that. The microphone is also very 
sensitive, so make sure it is directed towards your mouth. And 
dealing with the technology as we are, I have to say those 
things.
    So, with that, we will now recognize Commissioner Kirsanow 
for 5 minutes.

 STATEMENT OF PETER N. KIRSANOW, COMMISSIONER, U.S. COMMISSION 
 ON CIVIL RIGHTS, AND PARTNER, BENESCH, FRIEDLANDER, COPLAN & 
                             ARNOFF

    Mr. Kirsanow. Thank you, Chairman McHenry, Ranking Member 
Green, and members of the subcommittee.
    I am a member of the U.S. Commission on Civil Rights. And 
as you know, the Civil Rights Commission was created by the 
1957 Civil Rights Act to, among other things, investigate 
denials of equal protection and discrimination on the basis of 
race and other protected classifications.
    In furtherance of the Commission's objective to investigate 
denials of equal protection and discrimination on the basis of 
race and other protected classifications, we have held a number 
of hearings over the years related to disparate impact, either 
directly or indirectly. And the last such hearing occurred in 
December of 2012.
    There are four broad concepts or conclusions that can be 
drawn from those hearings. First, the doctrine of disparate 
impact is at least of dubious legality and provenance under the 
Equal Protection Clause.
    Second, in many respects, the implementation of disparate 
impact has been profoundly misguided and elevates equal 
outcomes over equal opportunity.
    Third, although in some respects it has definitely been 
well-intended, as we have seen in a number of Civil Rights 
Commission hearings, it has a tendency to harm its purported 
intended beneficiary.
    And finally, it is antithetical to the proposition that 
individuals are supposed to be judged by the content of their 
character, versus the color of their skin, because the 
qualifications standards test devices, policies, dealing with 
or that purportedly result in disparate impact reveal 
character--and that may reveal character--often are 
subordinated to raw color calculations.
    Expanding for a moment on the dubious legality of disparate 
impact, disparate impact emerged from the 1964 Civil Rights 
Act. If you take a look at the Floor debate among Floor 
managers of the 1964 Civil Rights Act, disparate impact was not 
contemplated as a doctrine to prove discrimination or any form 
of discrimination, as the 1964 Civil Rights Act, but the 
theoretical framework for disparate impact was already being 
developed by attorneys for the EEOC. And when the Fair Housing 
Act was adopted in 1968, disparate impact had not yet been 
adopted as a doctrine for demonstrating some type of 
discrimination under the 1964 Civil Rights Act.
    It wasn't until 1971, when the Supreme Court did adopt 
disparate impact under Griggs v. Duke Power, that it did become 
a doctrine with respect to employment law, with respect to 
Title VII. What is interesting about Griggs v. Duke Power is, 
you may recall, there was the requirement that was applied only 
after job positions were opened up to everybody, that everyone 
have a high school diploma, among other things, and that had 
disparate impact among Black employees.
    The Supreme Court indicated that it had to have some type 
of job relatedness or business necessity to be justified. What 
is often forgotten is that standard device test qualification 
was adopted with a discriminatory intent.
    After the 1971 decision in Griggs v. Duke Power, disparate 
impact metasticized into a number of other areas that there 
hadn't been up to that point any prediction that it would be 
expanded to other areas. Disparate impact necessarily 
classifies on the basis of race, and to that extent, unless it 
meets the strict scrutiny standard which is the highest 
standard of our Nation's juris prudence, it violates the equal 
protection clause unless it serves the compelling governmental 
interest or is nearly tailored to serve that interest.
    And that is of dubious probability given the Seattle case, 
the Louisville case, and even Grutter v. Bollinger.
    In terms of its misguidedness, any classification, any type 
of standard, any type of test will necessarily have a disparate 
impact, because we judge people on the basis of individuality 
and not race.
    Famously, one of my colleagues, during a debate, said that 
she would write a check for $10,000 to anyone who could 
identify any standard, any device, any policy, any practice 
that did not yield a disparate impact. I would never make such 
an offer, maybe $10, but I nonetheless go along with the 
proposition that it would be extremely difficult to find 
anything that didn't yield a disparate impact. With respect to 
housing criteria, and loan criteria for example, almost any 
qualification would yield a disparate impact on the basis of 
race, sex, national origin--maybe color--almost any protected 
class. Employment rates, income, assets, criminal history, 
family structure--each one of those has different yields 
depending upon which class someone belongs to.
    Finally, with respect to whether or not it has universally 
broadly--universal good effects, it has a tendency to harm its 
beneficiaries--I see my time is up. I would be glad to expand 
on these remarks in the question-and-answer period.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Kirsanow can be found on 
page 34 of the appendix.]
    Chairman McHenry. Mr. Marcus?

STATEMENT OF KENNETH L. MARCUS, PRESIDENT AND GENERAL COUNSEL, 
      LOUIS D. BRANDEIS CENTER FOR HUMAN RIGHTS UNDER LAW

    Mr. Marcus. Thank you, Chairman McHenry, Ranking Member 
Green, and distinguished members of the subcommittee. I am 
honored to appear again before this committee. At the same time 
I confess to being somewhat mortified to have to be discussing 
this particular topic.
    I don't think any of us is pleased by the obligation to be 
fighting discrimination in this day and age. And yet, we are 
continually reminded that discrimination persists despite the 
progress that we have made over the decades.
    When I was in the civil rights enforcement area within 
government, and even today in the public interest advocacy 
realm, I have found numerous instances of intentional 
discrimination and bigotry including in the housing realm in 
which, even nowadays, African Americans, Hispanics, and others 
are often faced with a situation in which renters do not want 
them, lenders do not want them, and so on and so forth, and I 
believe this to be one of the greatest evils that we face to 
this day.
    In my written testimony, I give a couple of examples from 
very recently in which HUD found blatant intentional 
discrimination, in one case against Burmese immigrants where 
renters simply did not want them on their premises. And in 
another instance, in which renters not only did not want 
African Americans in their mobile home community, but also 
didn't want anyone who would date an African American.
    We have these blatant cases, and it is my feeling that the 
scarce resources of the Federal civil rights agencies are 
seldom sufficient to deal with them.
    And one of the challenges that we have is that our 
governmental agencies are often dividing their resources 
between cases involving blatant intentional discrimination and 
other things.
    Now, it is my view that disparities are important to 
observe. As a civil rights enforcement official, I was 
certainly on the lookout for racial and ethnic disparities.
    For instance, at the Department of Education, I was 
continually sifting through data to see whether there were 
disparate rates of minorities being either subjected to 
discipline or to misidentification for special education.
    The reason I did that is because I have always considered 
disparities to be a kind of smoke. And where there is smoke, 
there is sometimes fire. And when there is smoke, a good fire 
department sends a truck to see what is going on. But, I also 
believe that it is possible to confuse the smoke and the fire. 
And I think too much of the time we say that the disparate 
impact is the problem when in fact it is in fact sometimes a 
symptom of the problem or a sign of the problem.
    Now, when we do that, when we say, we are not going to look 
for intentional discrimination, we are simply going to look for 
disparities, there are several different kinds of problems that 
arise.
    One is the diversion of resources that I mentioned. And I 
think that if you go through the most recent charges by the 
Office of Fair Housing and Equal Opportunity, you will find 
that there are some charges that appear to be based on actual 
discrimination. And, there are other charges where you would 
probably agree that they are not of the sort of severity that 
you would want them clogging up the system.
    So I think it is a real problem when our scarce resources 
are diverted into things other than discrimination. There is 
also a problem of equal protection. And Commissioner Kirsanow 
averred to that somewhat.
    One of the challenges with disparate impact is that 
virtually--I would say that when income and wealth are unevenly 
distributed in society, virtually any standard for underwriting 
or for determining who to rent to will have a disparate impact.
    And so that pushes people into an untenable situation: 
either be subject to potential liability for violation of Title 
VIII or other discrimination laws, even if there is no intent 
to discriminate or no unconscious discrimination; or try to 
eliminate that disparity in a way that may require race-
conscious action that will violate the equal protection clause.
    So in many cases, attempts to comply with disparate impact 
will run the risk of violating the equal protection clause, 
which is why Justice Scalia indicated in the Ricci v. DeStefano 
case that the day will come in which the conflict becomes 
unavoidable between those provisions.
    And finally, in many cases, there is a pressure to impose 
some sort of quota or other artificial means of eliminating a 
disparity rather than simply saying, we will use purely race-
neutral means.
    So what I would say is that while we need to push as hard 
as we can to eliminate intentional and even unconscious 
discrimination, disparate impact, as it has been applied, is 
often counterproductive towards those efforts.
    [The prepared statement of Mr. Marcus can be found on page 
39 of the appendix.]
    Chairman McHenry. Mr. Parker?

    STATEMENT OF DENNIS D. PARKER, DIRECTOR, RACIAL JUSTICE 
            PROGRAM, AMERICAN CIVIL LIBERTIES UNION

    Mr. Parker. Good morning, Chairman McHenry, Ranking Member 
Green, and members of the subcommittee.
    My name is Dennis Parker, and I am the director of the 
Racial Justice Program of the American Civil Liberties Union. 
Our charge is to eliminate barriers to full participation in 
civic society. And in the name of full disclosure, I am one of 
the attorneys on the Atkins v. Morgan Stanley case, a case that 
relies on disparate impact to prove the devastating impact of 
unfair lending practices on people of color in Detroit.
    The Fair Housing Act was passed nearly 50 years ago to 
address problems of residential segregation and conditions of 
poverty which had blocked access to opportunity to communities 
of color and led to civil unrest.
    From the outset, the bipartisan sponsors and supporters of 
the Fair Housing Act recognized that it was necessary to 
prohibit all forms of discrimination--both acts resulting from 
discriminatory intent as well as acts neutral on their face, 
which had an unjustified discriminatory effect.
    In order to achieve the broad antidiscrimination goals of 
the Act, Congress, the government agencies charged with 
enforcing the Act, and each of the courts which had interpreted 
the Act have recognized that the disparate impact standard is a 
necessary tool in fighting discrimination in all of its forms, 
and that without the standard practices which have the same 
discriminatory consequences as intentional discrimination would 
be shielded from the reach of the law.
    Both at the time that the statute was passed, and on 
subsequent occasions, Congress has resisted attempts to limit 
the application of the law to instances of intentional 
discrimination.
    Between the enactment of the Fair Housing Act in 1968 and 
the time when Congress made significant changes to the Act in 
1988, all nine courts of appeals which considered the issue 
concluded that the Fair Housing Act permitted the use of 
disparate impact claims to fight discrimination in all of its 
forms.
    In 1988, against the backdrop of the unanimous approval of 
disparate impact claims by all courts of appeals, Congress 
extended the coverage of the Act to prohibit discrimination 
based on familial status and disability, added specific 
exemptions to the Act which would only make sense in light of a 
continuing disparate impact standard, and enhanced the 
Department of Housing and Urban Development's authority to 
interpret the Fair Housing Act.
    In the years following the amendments, HUD, the Justice 
Department, and the agencies charged with enforcing the fair 
housing and fair lending laws have interpreted the fair housing 
laws to permit disparate impact claims; have trained their 
employees to use disparate impact analysis, and have brought 
enforcement actions relying on disparate impact.
    During that same period, the two circuit courts which had 
not previously addressed the question of the validity of the 
disparate impact statement, joined the other nine circuits in 
approving it. On February 15th of this year, HUD reaffirmed the 
decades-long recognition of the availability of the standard 
after going through a period of formal notice and comment.
    The need for the disparate impact standard as a tool in 
fighting discrimination is as great or greater now than it has 
ever been. Problems of residential segregation and the 
accompanying limitation on access to fine schools, 
transportation, healthy environments, and employment 
opportunities continue to plague the Nation.
    One striking example of the continuing need for an 
effective way of addressing the increasingly subtle way in 
which protected classes are denied fair housing can be seen in 
the wake of the economic crisis of 2008. Discriminatory lending 
practices, which included providing high-risk subprime loans to 
members of communities of color, communities which had 
previously experienced a long history of intentional 
discrimination in the form of racial steering, redlining, and 
lack of access to financial institutions. The combination of 
the abusive lending practices and the history of discrimination 
resulted in a foreclosure crisis which had a particularly 
serious impact on communities of color. And I would point out 
that the impact of these loans extended to people who had good 
credit. An African American or a Latino person with a high 
credit rating was more likely to get an abusive subprime loan 
than a White similarly-situated person.
    The impact was serious on the communities of color and it 
reversed many of the gains that were made over the past 50 
years.
    I notice that my time is up and so I will just say that the 
disparate impact standard permits the defendant in the case to 
show that there was a justification for the policy and practice 
that is being challenged. By permitting the balance between 
impact goals and the means of achieving those goals, the 
disparate impact standard permits challenges to barriers which 
prohibit equal opportunity to fair housing.
    It is common sense that any policy which unnecessarily 
excludes people from housing because of their race, gender, 
ethnicity or any other protected class should be set aside for 
one which asserts everyone's needs fairly, effectively, and 
without discrimination.
    Disparate impact is a commonsense way, and we urge that its 
continued use be permitted.
    [The prepared statement of Mr. Parker can be found on page 
46 of the appendix.]
    Chairman McHenry. I will now recognize myself for 5 minutes 
for questioning.
    Commissioner Kirsanow, what is disparate impact?
    Mr. Kirsanow. Disparate impact is the result of any type of 
standard, test, qualification, policy, or practice which yields 
a disproportionate outcome for members of a protected class. At 
least, that is the colloquial definition of it.
    Now, disparate impact obviously deals with outcome. It is 
not necessarily anything to do with opportunity and input. In 
addition to that, disparate impact has no bearing on whether or 
not some type of device, policy, or practice is intentionally 
adopted in order to discriminate on the basis of a protected 
class.
    Chairman McHenry. I am not a lawyer, so how does disparate 
impact differ from disparate treatment discrimination?
    Mr. Kirsanow. Right. Disparate treatment presumes some type 
of intentional treatment, disparate treatment. That is, you 
take a Black applicant and a White applicant and you 
consciously and intentionally--because you can have unconscious 
discrimination also--or unconsciously and intentionally 
discriminate against someone on the basis of their protected 
class, the Black applicant for example.
    Disparate impact is where there was no intent necessarily 
to discriminate, yet because of a qualification standard--let's 
say, for example, in Griggs v. Duke Power, that you have a 
requirement that everybody who obtains a particular employment 
position have a high school diploma. At least in that area, 
North Carolina--I'm sorry, South Carolina at the time--the 
number of Black applicants for a position who had a high school 
diploma would be far below that of Whites. The outcome 
therefore would be that more Whites would get that position. 
That would be disparate impact.
    In Griggs v. Duke Power, that was done intentionally. In 
many disparate impact cases, there has been no proof of 
discrimination as the motivating factor for that particular 
qualification or standard.
    Chairman McHenry. So, Mr. Marcus, is disparate impact fair? 
The use of disparate impact as a legal theory, is it fair?
    Mr. Marcus. In my view, some uses are fair. Some may not 
be. I would say there are two ways of looking at disparate 
impact. For some, disparate impact is a way of smoking out 
intentional discrimination that cannot be demonstrated through 
other ways. So we say, there may not be evidence of intentional 
discrimination, and yet we think it is there. So we create an 
analytical device that will help us to find it.
    The other approach is to say, no, disparate impact has 
nothing to do with intent. It is all about the effect. It is a 
way of eliminating certain effects on minorities that cannot be 
justified by business necessity.
    I believe that there may be ways of using disparate impact 
to find intentional discrimination, and perhaps the courts will 
even narrow disparate impact doctrine in order to do that. But 
where disparate impact becomes detached from discrimination, 
where it is no longer about intentional discrimination, it has 
all kinds of unfair ramifications.
    One is that it prevents agencies and lawyers from focusing 
on real intentional or even unconscious discrimination. And 
another is that it treats employers or lenders or others as if 
they were bigots, as if they were discriminators when they have 
no conscious or even unconscious intent to discriminate against 
anybody.
    So by lumping real bigots in with people who develop 
policies that have no conscious or unconscious animus, I think 
it can be unfair.
    Chairman McHenry. So, Commissioner Kirsanow, was disparate 
impact discrimination prohibited under the Civil Rights Act of 
1964?
    Mr. Kirsanow. The intent in 1964, if you look at what the 
Floor managers were talking about, Congressman McCullough for 
example and others, there was no intent to use disparate 
impact, that is to have equality of outcomes. There was 
considerable debate about that. Clearly, there was an element 
within Congress that wanted to use that as a tool or device, as 
Ken indicated, but the outcome of all that was that it would--
that is, the 1964 Civil Rights Act, would be calculated to 
address, as Ranking Member Green talked about, invidious 
discrimination; an intent to discriminate on the basis of, back 
in 1964, race and all the other protected classes.
    Chairman McHenry. My time is short. So was disparate impact 
addressed in the original Fair Housing Act of 1968?
    Mr. Kirsanow. Not specifically. There was considerable 
debate about that, and disparate impact first came to fruition 
in 1971 with Griggs v. Duke Power.
    Chairman McHenry. Okay. We will now recognize Mr. Cleaver 
for 5 minutes.
    Mr. Cleaver. Thank you, Mr. Chairman.
    And to the ranking member, thank you for the hearing.
    Mr. Marcus, let us assume that in 1984, a certain 
neighborhood had filed a covenant with the mortgages of the 
land involved in a subdivision. And the covenant prohibited 
selling your home to an African American. And then they put a 
list together of individuals who wanted to buy in that area, 
but since African Americans could not buy based on the 
covenant, the list was non-African American or predominantly 
Anglo Whites.
    And then we then have people filing a lawsuit based on 
exclusion because they are Black and they can't move in. There 
is a list of people who can move in. And everybody who lives 
there is White. How do we deal with that kind of an issue?
    Mr. Marcus. That is an interesting hypothetical, 
Congressman Cleaver.
    Mr. Cleaver. It may not be that hypothetical. I am just 
creating something, but it may not be that hypothetical.
    Mr. Marcus. Either way, it is an interesting one. I do 
think that racially restrictive covenants are repugnant. Now, I 
have argued in my written testimony and elsewhere that 
disparate impact can avert a conflict with the equal protection 
clause if the courts allow a good faith affirmative defense. In 
my view, that is a way of separating out disparate impact cases 
that are based on intentional or unconscious discrimination 
from those that are not.
    Now, if a court were to apply the sort of standard that I 
have suggested, then they would look at this list, which 
appears facially neutral. If they find that there is this sort 
of impact, that is to say, all of the names are White names, 
then one would look at why is that; why are all of the names 
White names? Is there some entirely good faith reason? Maybe 
they are all family members. Or maybe there is some legitimate 
reason.
    But if it turns out that there is no good-faith reason, and 
that it was intended as a way of excluding numbers of a 
particular racial group, then I think that it is discriminatory 
and should be considered discriminatory.
    Mr. Cleaver. Okay.
    Mr. Parker, I want to stay on this.
    Mr. Parker. Yes.
    And I would also--because there are actually concrete 
examples of exactly what you are talking about. Towns which 
have restrictions, or that give advantages to current residents 
of that town, that can have the impact of excluding people of 
color if the town is a single-race town.
    There is no allegation of intentional discrimination or a 
hatred toward people of color, but the effect is the same. And 
the Fair Housing Act looks at the consequence. If you are 
excluded from property, if your house is foreclosed on and it 
is because of disparate impact, it is little consolation that 
it is not the result of some intentional discrimination.
    But the consequences are still there. And it is important 
that the law recognize the fact that those consequences have 
occurred and continue to occur.
    Mr. Cleaver. Now, we still have racial covenants--on the 
books all over the country, just to my knowledge, they are not 
being enforced. The Civil Rights Act said you can't do that, so 
public accommodation in most cities eliminated that.
    But there are still administered, nobody bothered to clean 
it up. So if you go in the courthouses you are going to find 
this.
    I guess my issue is--in 2013, nobody, nobody is going to 
admit discrimination. I mean, nobody. I am talking about nobody 
and so, if nobody admits it then they are either 
unintentionally committing discriminatory acts or they are 
denying that what they are doing is in fact discriminatory.
    So I am always concerned about this issue because I think 
at this moment in time, we are having some--it is a weird 
moment in history. And I am not sure that we need to take too 
many steps away from the Civil Rights Acts that have been 
passed in the past.
    I have gone over my time, Mr. Chairman. I apologize, and I 
yield back.
    Chairman McHenry. I thank my colleague.
    We will now recognize Mr. Duffy for 5 minutes.
    Mr. Duffy. Thank you, Mr. Chairman, and I appreciate the 
witnesses' testimony this morning and the conversation we are 
having on what I think is a very important topic.
    I would agree, I think, with everyone today that 
discrimination still exists in America. It hasn't been rooted 
out, and I think it is incumbent upon the Congress and the 
country to do all we can to make sure we do root it out and 
make sure it doesn't exist.
    But we are not at that point today.
    But I do want to have a more in-depth conversation on 
disparate impact, and Mr. Kirsanow, I think in your opening 
statement, you had indicated that there were potential 
unintentional consequences that would negatively affect those 
whom you think would be beneficiaries of disparate impact.
    And I think you were running out of time, so I wanted to 
ask you a follow-up to give you an opportunity to explain that 
further, how people could actually be hurt under this theory 
who were supposed to be benefited.
    Mr. Kirsanow. Yes, thank you, Congressman.
    There are a number of examples, but I would like to limit 
them to the area which I know best, and that is with respect to 
employment law, where you see the greatest amount of litigation 
with respect to disparate impact.
    We had a hearing just recently at the Civil Rights 
Commission against--with respect to the EEOC's relatively new 
criminal background check policy, which makes it a little bit 
more difficult than it had in the past for employers to conduct 
criminal background checks on applicants.
    I will cut right to the chase on this. It is well-intended, 
it is designed to increase the reentry of felons into the 
workplace, something that needs to be done. It is based on the 
presumption, the realistic presumption that Black and Hispanic 
applicants are more likely to be screened out as the result of 
criminal background checks.
    But as well-intended as it may be, in many respects it may 
be misguided.
    I will just give you a little bit of information with 
respect to how it harms the intended beneficiaries. The 
presumption was that it would increase the probability that 
Blacks and Hispanics would be hired because the rigorous nature 
of the background check that is employing what is known as the 
green standards based on the 11th Circuit, I think it was, case 
outlying under what circumstances a criminal background check 
would be permissible.
    That is, what type of offense was it? Which job are you 
applying for? How long ago was the offense? It made the green 
standards a little bit more stringent. But at the same time 
what happened is, employers, because it was so difficult to 
implement the background checks, would abandon their use and 
resort to impermissible criteria with which to make hiring 
decisions.
    There have been several studies that show that where 
employers are allowed or have less of a burden, in terms of 
having criminal background checks, and use background checks 
robustly, they are more likely to hire Black and Hispanic 
applicants rather than resort to impermissible stereotypes and 
thereby exclude them.
    In one study, employers were 4 times more likely--4 is not 
a minor matter--to do so. And in another State, 10.7--I will 
strike that. Employers who used criminal background checks were 
10.7 percent more likely to have recently hired a Black 
applicant than those who did not.
    And the reason, obviously, is because employers are--they 
make judgments and they have to make judgments with respect to 
who they are hiring. And they prefer not to have felons, if 
they don't know what kind of felony it is.
    Mr. Duffy. All right. And I thank you for expanding upon 
that. Taking intentional discrimination and setting that aside 
for a moment, I would--they exist, and I want to move it over.
    But I want to look at the unintentional discrimination, if 
you want to call it disparate impact.
    If there is no intentional discrimination and we find there 
is disparate impact, in the end is the consequence that we have 
now different standards for different people? Different 
standards if it is based on race or color or sex or national 
origin that we will have different standards for different 
people, if we find disparate impact in a certain space? Or am I 
wrong on that?
    Mr. Kirsanow. It is more likely that you have no or lowered 
standards. It is--
    Mr. Duffy. What was that?
    Mr. Kirsanow. It is more likely that rather than having 
different standards, you will have lowered standards or no 
standards whatsoever.
    So that you tend to eliminate the impact as much as 
possible. That won't happen, however. In some cases you will 
have some slightly different standards, at least that are 
unconsciously applied to different protected classes. But what 
we have seen, and especially in the employment context is, an 
abandonment of standards so that you don't get hit with the 
disparate impact liability.
    You may see that, kind of the reverse of that in the 
Richard--
    Mr. Duffy. What is the consequence of far lower standards?
    Mr. Kirsanow. The consequence is, in an employment context 
for example, you will hire employees who may not make the 
grade. They come in, can't make the grade, then get fired. Then 
the employer gets sued for disparate treatment, based on that.
    Or you get individuals who are not eligible for a 
particular loan, they cannot make the payments, or the monthly 
payments, and are more likely to be foreclosed upon. So there 
are unintended consequences that harm the intended 
beneficiaries.
    Chairman McHenry. The gentleman's time has expired.
    Mr. Duffy. I yield back.
    Chairman McHenry. Thank you. We will now recognize Mrs. 
Maloney for 5 minutes.
    Mrs. Maloney. I would like to thank the chairman and the 
ranking member for holding this hearing and really focusing on 
this important issue.
    The purpose of the Fair Housing Act of 1968 was to reverse 
what Bobby Kennedy described as the insidious effect of racial 
segregation in housing. And to accomplish this goal, the Fair 
Housing Act prohibits housing providers from discriminating on 
the basis of race, color, religion, sex, disability, family 
status, and national origin.
    Earlier this year, HUD issued a final rule stating that a 
housing-related practice is discriminatory if it has a so-
called disparate impact on one of those protected classes and 
does not serve a legitimate business purpose.
    Opponents of this rule argue that it creates too much 
uncertainty for lenders. However, it is important to note that 
HUD's rule did not change the law in any way, shape, or form; 
it just formalized the disparate impact test that HUD and the 
Department of Justice had been using for over 40 years.
    More importantly, the disparate impact test, contrary to 
popular belief, does not punish sound business decisions. All a 
housing lender has to do to avoid liability for a business 
practice that has a discriminatory effect is show that the 
practice serves an important business purpose, and there aren't 
less discriminatory ways to serve that same important business 
service.
    So, I would just call that common sense, and if the end 
result of the disparate impact rule is that it forces lenders 
to think twice about whether or not there are less 
discriminatory ways to accomplish its business objectives, then 
I say this is all the better for our country.
    I would like to ask Mr. Parker, do the same types of 
problems exist, the entrenched residential segregation that 
drove Congress to enact the Landmark Fair Housing Act back in 
1968, does that still exist today?
    Mr. Parker. Many of the problems that existed then continue 
to exist. As has been mentioned, there are still instances of 
intentional discrimination. But there are also a web of 
practices that working together, tend to deprive protected 
classes of equal opportunity in housing.
    And the example that I gave of the lending market of the 
mortgages that were given in the run up to 2008, is a perfect 
example that it had a disparate impact on particular 
communities and it is an impact that could only be gotten at by 
using the disparate impacts standard, because there aren't 
individuals whom you can show acted intentionally to 
discriminate.
    You rely on the statistical evidence to show that there is 
a difference in treatment that would result in highly qualified 
people of color being denied mortgages or being given mortgages 
with terms that are detrimental.
    Mrs. Maloney. So you still believe the disparate impact 
rule is necessary, and it is necessary as an appropriate 
remedy, and you can't get to this determination without the 
disparate impact, is that correct?
    Mr. Parker. I believe it is at least as necessary as it was 
at the time when the Fair Housing Act was passed.
    Mrs. Maloney. Given that HUD and the courts have been 
enforcing the disparate impact rule for over 40 years now, Mr. 
Parker, do you think that lenders and other housing providers 
have had sufficient time to adjust and be aware of the rule and 
the standards?
    Mr. Parker. I think they certainly have.
    And, as you pointed out, the disparate impact standard 
creates a structure that permits them to assert a legitimate 
business interest.
    And unless there is a finding that either that interest is 
not legitimate or that there is no other way to serve the 
goals, then it will stand.
    Mrs. Maloney. I am looking at the successful cases that the 
Justice Department has brought, using the disparate impact 
theory after the financial crisis, and particularly the 
Countrywide case that they brought.
    Do you think that these cases will have a positive impact 
by deterring other lenders from engaging in the same kinds of 
practices that Countrywide engaged in, in their lending 
practices?
    Mr. Parker. Yes, I think it will. And I think it serves the 
Nation as a whole because it eliminates the sort of practices 
that led to the economic disaster that we had in 2008.
    Mrs. Maloney. My time has expired. Thank you very much.
    Chairman McHenry. The gentlelady's time has expired.
    The gentleman from Illinois, Mr. Hultgren, is recognized 
for 5 minutes.
    Mr. Hultgren. Thank you, Mr. Chairman.
    And thank you all so much for being here today to discuss a 
very important topic. I wonder if I could address this first 
question to follow up on some of the discussion that my 
colleague from Wisconsin, Mr. Duffy, had started. I wanted to 
follow up a little bit more, go a little deeper on that.
    Commissioner Kirsanow, and Mr. Marcus, I wonder if you 
could talk briefly--are neutral practices with the disparate 
impact on protected groups necessarily indicative of 
intentional discrimination?
    Mr. Kirsanow. No, they are not necessarily indicative of 
intentional discrimination.
    One of the reasons under Griggs v. Duke Power that scholars 
say the Supreme Court had adopted the disparate impact standard 
was the difficulty in many occasions in proving intentional 
disparate treatment, as opposed to disparate outcomes.
    Disparate outcomes, you can see, it is quite simple.
    Is that necessarily evidence of disparate treatment or 
intentional discrimination? Sometimes, as Ken indicated? Yes, 
it is. It is smoke, but there is not always fire where there is 
smoke.
    Mr. Hultgren. Mr. Marcus, any thoughts?
    Mr. Marcus. No, it isn't.
    I have spent countless hours identifying disparities, 
especially in education, to ask the question, is there a 
reason, in a particular school district, that certain 
minorities have been designated for this or not designated for 
that, is there a reason?
    And over and over again, I would find legitimate, 
nondiscriminatory reasons for it, and then move on.
    Once in a while you can't find a legitimate reason, and you 
have to conclude at the end of the day, that it was based on 
discrimination.
    In my view, we need a better test for separating the wheat 
from the chaff. The current tests used by HUD, EEOC, and others 
don't really do that, in part, I think because they are not 
just looking for intentional discrimination, but they are also 
looking for other kinds of effects.
    And unless we say we are focused on discrimination, on 
intentional or even unconscious discrimination, we are going to 
pull them all in together. We are going to pull in both 
discrimination and also nondiscriminatory effects, and we will 
end up with the sorts of consequences that Commissioner 
Kirsanow described.
    Mr. Hultgren. Mr. Marcus, digging a little deeper on that, 
will the Obama Administration's embrace of disparate impact 
divert government resources away from combating intentional 
discrimination?
    Mr. Marcus. It can't help but do that. It is not as if our 
civil rights enforcement agencies have so much in the way of 
excessive funds that they can look for exotic or extraneous 
forms of cases.
    When you have to divide the work between as many different 
kinds of statutes as they do, and then you are looking not just 
for intentional and conscious discrimination, but also other 
nondiscriminatory effects, it means at the end of the day you 
are not able to do an effective job at enforcing any of the 
civil rights statutes.
    Mr. Hultgren. Mr. Marcus, based on your experience working 
in civil rights enforcement at the Department of Education, the 
Department of Housing and Urban Development, and also the Civil 
Rights Commission, do you believe using government resources to 
fight and overturn neutral practices that have a disparate 
impact on minorities, but are not rooted in intentional 
discrimination, is the best way to fight discrimination?
    Mr. Marcus. No, but I would make one distinction that I 
think that Commissioner Kirsanow did as well; there is 
intentional discrimination, and there is unconscious 
discrimination. And I think both need to be combated.
    If someone is intentionally trying to exclude minorities, 
we need to fight that. Even if they don't know that is what 
they are doing, but they are doing it, we need to fight that, 
too.
    But if neither exists, then there might be unfortunate 
policies, there might be policies that we want to speak out 
against because of inequities that we perceive, but if it is 
not discrimination, I don't think that we should be focusing 
our scarce civil rights resources on them.
    Mr. Hultgren. I have less than a minute left. If I can 
direct this to Commissioner Kirsanow and Mr. Marcus, if we have 
time, will the Obama Administration's insistence on pursuing 
disparate impact claims allow cases of intentional 
discrimination to go unpunished? And does pursuing disparate 
impact make society more vulnerable to intentional 
discrimination?
    Mr. Kirsanow. It could, because as Mr. Marcus indicated, 
when you have limited resources, you have to decide where you 
are going to direct those resources.
    And when you are talking about disparate impact claims, I 
don't want to overstate this, but it is in some respects easier 
to make out a case of disparate impact than it is intentional 
discrimination. So you go where the money is; you go where you 
are more likely to achieve a desired result.
    Whether or not--we have a multi-billion dollar apparatus 
designed to address discrimination in this country. Even that 
may be insufficient. But if you are going to focus on something 
that arguably could be in violation of the Equal Protection 
Clause, you are diverting resources away from intentional 
discrimination, where there is no dispute that we need robust 
enforcement activities.
    Chairman McHenry. I will now recognize--
    Mr. Hultgren. Thanks very much, Commissioner.
    I yield back.
    Chairman McHenry. We will now recognize the ranking member 
of the full Financial Services Committee, Ms. Waters.
    Ms. Waters. Thank you very much.
    I am sorry that I was not here for the opening of this 
hearing. However, it is extremely important that we understand 
that the Fair Housing Act established a framework for rooting 
out both intentionally discriminatory acts and seemingly 
neutral policies that produce a disparate impact on 
discriminatory effects on certain groups or populations.
    Let me just ask our representative here from the ACLU about 
the Department of Justice, which reached a $335 million 
settlement with Countrywide, a now defunct mortgage company 
owned by Bank of America, the largest fair lending settlement 
on record in the United States.
    In that case, the Justice Department alleged that more than 
200,000 African-American and Hispanic borrowers who qualified 
for loans were charged higher fees or placed into subprime 
loans while prime loans were provided for White borrowers with 
similar financial situations.
    As I look through all of the information, I see that 
similar actions by lenders such as Wells Fargo and others have 
taken place.
    Now, in African-American and Latino communities, we have 
had foreclosures which have basically caused great harm and 
pain in these communities, and we have been struggling trying 
to get corrections. We have been struggling trying to make sure 
that we give support to the communities, because when they do 
these foreclosures, it causes the value of other houses in the 
community to go down, et cetera, et cetera.
    It has been very harmful, and very painful. How was the 
disparate impact legal theory applied in these cases that I am 
talking about, in Countrywide in particular? How may the 
outcome in the Countrywide case have differed if the victims 
were unable to use the disparate impact doctrine?
    Mr. Parker. The Countrywide case and similar cases are 
perfect examples of the utility of the disparate impact 
standard.
    It is a perfect example of how the resources that were 
expended pursuing that case had an impact that, as you 
suggested, affects tens of thousands of African Americans. It 
had a profound effect on a large population of people. It 
permitted the court to address practices that cost these 
communities enormous sums of money.
    And all of it was made possible by a standard that could 
only--or by a case that could only have been brought using a 
disparate impact standard. It would have been impossible for 
individuals to show that they were the victims of intentional 
discrimination, but they were victims. And the communities of 
color have been victims of practices to the tune of tens of 
billions of dollars that have been lost to the--
    Ms. Waters. If I may, I have a few minutes here.
    Mr. Parker. Sorry.
    Ms. Waters. This is true of the case against Wells Fargo, 
Morgan Stanley, Sun Trust, C&F Mortgage, and even HUD.
    And so, the question becomes whether it is intentional or 
not, the harm that can be caused, such as we see in these 
cases, is significant. And if we did not have disparate impact 
to bring these cases, what would happen?
    Mr. Parker. We would lose the opportunity to address some 
of the biggest problems that are facing our protected classes. 
We would deny opportunity to fair housing to a significant part 
of the population.
    Ms. Waters. Thank you, Mr. Chairman. I yield back the 
balance of my time.
    Chairman McHenry. I thank the ranking member.
    We will now recognize Mr. Barr for 5 minutes.
    Mr. Barr. Thank you, Mr. Chairman.
    Commissioner Kirsanow, I wanted to explore with you what 
the meaning of some of these Federal civil rights statutes 
actually is, specifically the statutory authority that some of 
these enforcement agencies actually have with respect to 
applying the disparate impact theory.
    So, what is the meaning of these statutes? Are these 
statutes designed to remedy intentional discrimination, 
disparate impact, or both?
    Mr. Kirsanow. With the exception of the 1991 Civil Rights 
Act, which was passed in large measure to address Ward's Cove 
Packing, all the other civil rights statutes were designed to 
address intentional discrimination, not disparate impact.
    Mr. Barr. Okay. And so the statutory language of, for 
example, the Fair Housing Act, and the statutory language of 
the Equal Credit Opportunity Act, is there any statutory 
language that mentions disparate impact?
    Mr. Kirsanow. There are rules that mention it or at least 
allude to it. But I would have to think about whether or not 
there is any statutory language that mentions disparate impact 
per se.
    Mr. Barr. So putting aside administrative regulations or 
rulemakings, does the statutory language authorize these 
enforcement agencies to apply disparate impact theory?
    Mr. Kirsanow. No, that has been an administrative 
prerogative.
    Mr. Barr. Okay. So under the Chevron doctrine, which grants 
to administrative agencies the ability to issue rules or 
interpretations based on a reasonable construction of an 
ambiguous statute, are these statutes sufficiently ambiguous--
in your judgment, are these statutes sufficiently ambiguous to 
confer the authority upon these agencies to apply disparate 
impact theory under Chevron, and are those rulemakings 
enforceable under the Chevron deference standard?
    Mr. Kirsanow. Right. I believe both under Chevron I and 
Chevron II, they would not be. However, having said that, as 
was stated in the concurring opinion Ricci v. DeStefano, the 
Supreme Court has not yet pronounced on that.
    Mr. Barr. So that is an unsettled question?
    Mr. Kirsanow. I would say it is still unsettled, but in my 
judgment, if you take a critical look, a rigorous look at 
Chevron I or Chevron II, the agencies go beyond the statutory 
authority in determining their authority under their governing 
statute.
    Mr. Barr. So the bottom line is that the statutes 
themselves do not authorize these agencies to apply disparate 
impact, at least not explicitly.
    Mr. Kirsanow. Not explicitly.
    Mr. Barr. Okay. With respect to the equal protection 
arguments and Scalia's concurring opinion in Ricci where he 
talks about the fact that there could be a war between 
disparate impact and equal protection, would the race-conscious 
decision-making that would naturally result from the 
application of disparate impact theory survive strict scrutiny 
under current Supreme Court precedent?
    Mr. Kirsanow. No.
    Mr. Barr. Okay. Would application--and let me ask Mr. 
Marcus the same question. Would you concur with the 
Commissioner's assessment of that, based on current Supreme 
Court precedent?
    Mr. Marcus. I would agree based on current Supreme Court 
precedent and based on the conception of disparate impact that 
is in all of the regulatory schemas that you described. I think 
it is possible to narrowly construe disparate impact in a way 
that saves it, but as currently written, I believe these 
disparate impact provisions violate equal protection.
    Mr. Barr. And Mr. Marcus, just a follow-up question. My 
time is expiring. I have about a minute left, so maybe you 
could take the remainder of the time and answer this question 
about your earlier testimony. Amplify your earlier testimony, 
when you discussed how application of disparate impact theory 
could very well harm the intended beneficiaries.
    Obviously, the objective of this hearing is to make sure we 
don't have discrimination in lending practices in this country. 
So, aside from diversion of scarce resources away from 
enforcement of intentional discrimination, could there be--or 
could you discuss the possibility of denying minorities or 
protected classes of people from credit because of application 
of disparate impact. Could this have a negative impact on 
access to credit for protected classes? And if so, how? How 
would application of disparate impact theory harm those 
intended beneficiaries, particularly in the way of access to 
credit?
    Mr. Marcus. It could, and along the lines that Commissioner 
Kirsanow also described. I think the problem is that virtually 
any facially-neutral standards that are effective for 
underwriting are going to create disparate impacts.
    So, if a lending institution wants to avoid liability, 
there are various things that it could do. One is to introduce 
a greater subjective component to eliminate the standards in 
question. In the event that it uses a more subjective approach, 
there is a greater likelihood of invidious discrimination. To 
the extent that it dilutes the criteria, this has the potential 
also of undermining the safety and soundness of the institution 
and the resulting potential instability certainly harms 
everyone.
    Chairman McHenry. The gentleman's time has expired. And we 
will have to move on here. Thank you, though.
    I will now recognize Mr. Ellison for 5 minutes.
    Mr. Ellison. Thank you, Mr. Chairman.
    And I thank the ranking member.
    I am really pleased that we are having this hearing because 
there is not enough discussion around civil rights, inclusion 
at all. And even if it is cast in this light, we still need to 
talk about civil and human rights.
    I just want to say, though, that I do find it amusing even 
that somebody would suggest that if we try to protect people 
from the discrimination that comes in the form of a statistical 
imbalance or disparate impact, that could undermine the effort 
to stop discrimination.
    Nobody who is a victim of discrimination or potentially is 
one would ever say such a ridiculous thing. That is the 
position of a privileged, comfortable person who really wants 
to discriminate, but wants to look good and feel good as they 
do it.
    This country of ours had legally sanctioned--you could 
legally discriminate against somebody because they were Black 
for about 346 years in the United States, from 1619 to 1965. 
You could say, ``You are Black; you are not allowed to be 
here.'' And yet not even, I don't know, not even 60 years pass, 
and all of a sudden we are just beyond that, even though we 
have disparities in everything.
    And of course, we have disparities in everything. If 
somebody were to restrict your legal right to freely exercise 
your rights for 11 hours, 15 minutes after they stopped saying 
they were doing it, admitting they were doing it, you still 
would be feeling the effects of it, of course.
    Now, this whole conversation I think just is evidence that 
people who believe in civil and human rights of all colors 
better really get busy because the people who want to recreate 
American apartheid are busy, active, and absolutely committed 
to reinstituting racial subordination in America.
    But you know what? People of all colors oppose the efforts 
that some are engaged in. And I think that they need to have as 
much vigor as the people who want to recreate a pre-civil 
rights America.
    So with that, that is just my candid views.
    Let me ask this question. I am curious to ask you a 
question, Mr. Parker. The disparity in subprime lending and 
foreclosure rates among minority communities is indisputable. 
According to a 2009 report by the Center for Responsible 
Lending, African Americans and Latinos are 47 percent and 45 
percent more likely to face foreclosure than Whites. What role 
has disparate impact doctrine had in fighting lending 
discrimination since the financial crisis?
    Mr. Parker. Disparate impact is the main tool for fighting 
it. And I think it is important, as you pointed out, to 
recognize that in those cases, in the analyses that were done, 
they showed that employing correct underwriting standards, that 
African Americans and Latinos were still more likely to get 
risky subprime loans, in spite of their own creditworthiness.
    So all of this discussion about doing things that undercut 
credit examinations is completely counter to the reality of 
what is happening to communities of color.
    Mr. Ellison. Mr. Parker, if--let's just say we didn't have 
disparate impact and you had to prove case-by-case that the 
people involved in putting together those loans were 
intentionally discriminating because of race bias. Would there 
be any chance to try to counteract the overall effect of racial 
disparity?
    Mr. Parker. It would be virtually impossible for a number 
of reasons. One is the complexity of the lending process. One 
is that you don't know how similarly-situated people are 
treated unless you have access to that overall data. So that, 
yes, it would be virtually impossible to prove that.
    Mr. Ellison. Now, we live in 2013. How many mortgage 
lenders do you know who are going to say, ``You are Black; I 
don't like you; I don't think you ought to own a home, or if 
you do, you ought to have a higher-price mortgage.'' How many 
people are saying that? Is that a commonly done thing?
    Mr. Parker. It is not commonly done, but I think it is also 
necessary to recognize that the disparate impact standard, as 
has been suggested, makes it possible to ferret out intentional 
discrimination. But more importantly, it makes it possible to 
address unjustified practices that have a discriminatory impact 
on the basis of a protected category.
    Mr. Ellison. But may be arbitrary?
    Mr. Parker. That are arbitrary, and as I said, unjustified 
or not justified by either business necessity or any other 
acceptable goal. And the idea that you would permit that to 
continue operating when it serves no legitimate purpose at the 
expense of protected classes is completely counter to the 
intent of the Fair Housing Act.
    Mr. Ellison. Thank you, Mr. Parker. Keep up the good work.
    Chairman McHenry. We will now recognize Mr. Rothfus for 5 
minutes.
    Mr. Rothfus. Thank you, Mr. Chairman.
    Mr. Marcus, could you provide your insight on the impact of 
disparate impact and how it affects the availability of 
mortgages?
    Mr. Marcus. Now, that is a very, very, hard question. I 
will take a very broad look at it. And what I would say it 
this. To the extent that lending institutions are dissuaded 
from using nondiscriminatory facially neutral underwriting 
standards simply because they have a particular effect that 
could create legal liability, they will need to use other kinds 
of standards which may be less effective in determining a 
credit risk.
    And so what that does is ultimately create a weakening of 
the financial system.
    Mr. Rothfus. We are having this debate right now about 
Qualified Mortgages and the ability-to-repay rules that the 
Consumer Financial Protection Bureau has come out with. If an 
entity like the CFPB were, say, a private sector association 
that lending institutions had joined and the CFPB came up with 
some guidelines on lending such as the debt-to-income ratio at 
43 percent for what is going to be a Qualified Mortgage, and it 
were determined under a disparate impact theory that would be 
found to disproportionately affect a protected class, might 
there be liability for such an association?
    Mr. Marcus. There could be. And it seems to me that there 
are legitimate enforcement methods of finding intentional 
discrimination that don't require any of that. What we found 
indication of at HUD is that there are many cases where 
minorities are treated less well when they walk into a lending 
institution.
    It is not as if someone will say, point blank, ``We don't 
want to lend to African Americans.'' Of course, that doesn't 
happen. But, there are certainly plenty of instances where you 
can find that the White person who walks in will be given 
information and encouragement, and the minority will be given 
discouragement and made to wait.
    There are lots of cases in which one can find different 
treatment. It is not easy. It often requires very patient 
enforcement activity, perhaps with pair testers, but there are 
ways of getting at different kinds of discrimination faced by 
minorities that don't create this unintended consequence.
    Mr. Rothfus. Is it more difficult than to find evidence of 
intentional discrimination?
    Mr. Marcus. It depends on the particular case, of course. 
There are cases in which intentional discrimination is fairly 
easy to find. And there are some cases in which people do 
explicitly state their prejudice, but they don't--
    Mr. Rothfus. If you are observing a practice, for example, 
where they are giving more information to White people and less 
information to people of color, that is going to be evidence 
that you are going to be taking to determine whether there is a 
discriminatory intent there.
    Mr. Marcus. Yes.
    Mr. Rothfus. And it takes some time to do that?
    Mr. Marcus. Yes, it takes some time. It takes training and 
pair testers or something of that sort, but--
    Mr. Rothfus. And resources to do that--
    Mr. Marcus. Yes, yes--
    Mr. Rothfus. --and to go after individuals like that?
    Mr. Marcus. Yes.
    Mr. Rothfus. Mr. Kirsanow, how would the defendant assert a 
legitimate business interest in the context of defending a 
claim rising under disparate impact?
    Mr. Kirsanow. One of the problems that any defendant has 
whether it is the employment context, the credit context, the 
housing context is you don't know going in. It is like the 
Laritzen case where I think it was Judge Easterbrook who said, 
``You are going into litigation not knowing what standard is 
going to apply to you.''
    It is the standard that the EEOC establishes for housing--
the HUD establishes or some other entity establishes.
    And to go for a moment back to the unintended consequences 
and the potential harms to the intended beneficiaries, I think 
Congressman Ellison cited the fact that Blacks have a 47 
percent to 45 percent greater foreclosure rate.
    One of the things that lenders or employers--whoever the 
potential charged party does is, they change their standards to 
avoid disparate impact liability. And in the context of 
changing that standard, what happens then is loans may be let 
to people who may not be able to pay those loans back. If it 
was a level playing field in terms of the administration of 
loans, that is if there were no intentional discrimination you 
would think--and on a regression analysis--that Blacks, 
Hispanics and Whites would all have the same foreclosure rates.
    But that is not the case, which suggests that the changing 
or lowering of standards actually has a deleterious impact on 
the intended beneficiaries.
    Mr. Rothfus. I see my time has expired.
    Thank you, Mr. Chairman.
    Chairman McHenry. We will now recognize Mrs. Beatty for 5 
minutes.
    Mrs. Beatty. Thank you so much, Mr. Chairman, and Mr. 
Ranking Member.
    I have two questions for the witnesses.
    Mr. Parker, the Federal courts and the U.S. Government have 
applied the disparate impact standards since the 1970s. And the 
financial services industry has had very clear guidance, I have 
been told, as to the application of the standard since at least 
1994 when the Federal agencies with jurisdiction for lending 
discrimination issued interagency guidances.
    In other words, the industry has known for decades that 
they had to conform their businesses with the disparate impact 
standards.
    Can you point to any evidence whatsoever that the disparate 
impact standard has had negative effects on the lending 
industry?
    Mr. Parker. I can point to no such evidence.
    And there are two things I would like to say.
    First, the question of the legality of disparate impact is 
not unsettled. Every circuit court in the country has upheld 
the practice. And so it is the law in every circuit court in 
the country.
    Second, I would take vigorous exception to the idea that 
the financial collapse was due to overregulation or enforcement 
of our fair housing laws.
    The abandonment of the usual underwriting standards for a 
loan-to-value or debt-to-income were not abandoned because 
people were afraid that the law would be enforced against them. 
It was abandoned because of greed. It was abandoned because 
there was a way to make money, and it was money that was made 
at the expense of the communities that the laws were designed 
to protect.
    And to suggest that it was the law that was responsible for 
this is outrageous.
    Mrs. Beatty. Thank you so much.
    Mr. Commissioner, in reading your testimony--and let me 
quote--``The Supreme Court originally approved the use of 
disparate impact theory in the employment context. 
Unfortunately, the theory has metasticized and is being used in 
an area of law for which it was never intended. Rather than 
being used as a way to prove disparate treatment in cases where 
there is no smoking gun, it is now being used in a way to 
achieve racial balancing across society...''
    I find it amazing, and in light of our history of disparate 
treatment in policies and the impact and what we just heard 
from Mr. Parker somewhat inappropriate, when I think of the 
word ``metasticize.'' Deadly cancer. Something that spreads, 
which is negative.
    And I guess, I am curious as to why you would use a term to 
say this is equivalent now to a deadly cancer that we are 
looking in this, especially when our chairman and others have 
said there is no place in the marketplace for discrimination.
    He didn't say intentional, unintentional, or as a result of 
disparate impact. We have come a long way from red-lining and 
from the prejudices, and it also made me think--and you can 
respond to this--that when you said there is no smoking gun.
    I think for many of us who grew up during this era or time, 
I don't care if it is the little lady with gloves and a purse 
who is standing there and denying me a right because of my skin 
color, versus a big smoking gun.
    Could you express to us why you chose those words?
    Mr. Kirsanow. Absolutely, thank you very much for that 
question.
    I do think that it is invidious to insist upon outcomes. 
Forty years ago--prior to 40 years ago, 50 years ago, 70 years 
ago, the outcome was that Whites would be advantaged. That was 
the desired outcome. It was wrong then. It is wrong now to seek 
a desired outcome on the basis of race. That is clearly in 
violation of the equal protection clause.
    Today, it may not be as big a problem as it was before, 
because maybe the right people are in charge. It all depends on 
where you sit. But to make determinations on the basis of race 
is antithetical to how this country is supposed to be governed. 
It is not a function of equal outcome; it is a function of 
equal opportunity.
    Mrs. Beatty. Well, unfortunately, some of us don't sit on 
that side. And certainly I hope you are not expecting me to 
believe that we live in a world that is fair no matter where 
you sit.
    We wouldn't be having this discussion, in my opinion, if 
there was still not discrimination and if there was not an 
impact from disparate impact treatment.
    Mr. Kirsanow. And Congresswoman, thank you very much for 
that, because in fact we have copious mechanisms for dealing 
with that. No one at this table is suggesting that intentional 
discrimination, disparate treatment not be addressed in a 
robust fashion.
    What we are talking about here is whether or not designing 
a process to yield a specific outcome is what this country 
should have. And I would suggest to you that the 14th Amendment 
says, no.
    Mrs. Beatty. We probably just have a little difference of 
opinion and I notice I only have--I am over.
    So maybe off-line, we can have another discussion. Thank 
you, Mr. Chairman.
    Chairman McHenry. I thank my colleague.
    Without objection, Mr. Garrett, a member of the full 
Financial Services Committee but not a member of the 
subcommittee, will have 5 minutes to ask his questions.
    Mr. Garrett. I thank the Chair.
    And I thank the panel.
    So at the end of the day, we are trying to achieve that 
goal of fair treatment for everyone. Let me start then with Mr. 
Marcus.
    You write in your testimony that, ``Potential defendants 
would be forced to demonstrate a business necessity for a 
policy, and that might not have nondiscriminatory rationales, 
but adverse impacts on some groups.''
    By doing that, of course, you shift the burden of proof 
from the prosecutor to the defendant, which effectively erases 
our system in this government of innocent until proven guilty 
standard, I would suggest.
    Can you tell me how you think this burden shifting will 
affect the housing industry per se, and business practices as 
well as our judiciary system as a whole?
    Mr. Marcus. Their effects are already there. In terms of 
the judicial system as a whole--and I might add the civil 
rights enforcement system in particular--it shifts our focus 
away from where, I believe it should be, which is treating 
people differently based on their race, color, ethnicity so on 
and so forth.
    In terms of the housing market, again, it takes the focus 
away from nondiscrimination and towards eliminating disparities 
that may have other reasons whatsoever.
    Mr. Marcus. With due respect, I don't think I would say for 
me that the goal should be fair treatment for everyone, if we 
are talking about anti-discrimination laws. There are lots of 
ways in which practices may be fair or unfair, but not 
necessarily illegal and not necessarily discriminatory. And 
given the peculiar evils of discrimination, and given the 
narrow resources, I believe that those who are combating 
discrimination should be focused on discrimination, and the 
goal of eliminating bias, animus, things of that sort.
    Mr. Garrett. So, the answer to my question is that the 
burden is shifted then in this situation from who is actually 
trying to prove it to who is actually having to defend it.
    So the burden is no longer on the State or the prosecutor, 
if you will, in order to prove that there was this wrong being 
done. Now it is on the business entity or the individuals to 
prove that it was done right.
    Isn't that an unfair shifting of that burden? And how do 
you prove that, if you are in that entity?
    Mr. Marcus. It may be, but then it may be--
    Mr. Garrett. Yes, yes, true, but you have to prove a 
business's necessity, I think is--
    Mr. Marcus. Yes. To me the concern is not just a shifting 
of the burden, but also that the way in which the burden is 
defined may make it difficult or impossible, even for innocent, 
nondiscriminatory entities to defend themselves.
    Mr. Garrett. But is--and that is interesting, that is why 
it is interesting, because does that mean because there is not 
an identifiable standard as to what the adverse impact effect 
would be?
    Mr. Marcus. The standards differ slightly. But if the 
entity has to show that there wasn't a nondiscriminatory 
alternative that lack the same disparities--
    Mr. Garrett. Yes.
    Mr. Marcus. --then they simply--they are put in a position 
where they are not even allowed to demonstrate their innocence.
    Mr. Garrett. Right.
    Mr. Marcus. The question isn't innocence or guilt, the 
question isn't discrimination or nondiscrimination, the 
question is whether there is simply a different process that 
could have led to a different outcome.
    Mr. Garrett. Exactly. I think that is important.
    Mr. Kirsanow, you were just getting into the end of Mr. 
Rothfus' questions, here, that the impact--that the goal--that 
the laudable goal that we may all have here, on both sides of 
the aisle, may not actually be achieved at the end of the day 
by the intentions that some Members may have here.
    You were just getting that at the end of Mr. Rothfus' 
questions, when you said, if you do a regression analysis and 
you could see how it actually does impact upon certain groups 
of people. Can you just elaborate on that--
    Mr. Kirsanow. It is the law of unintended consequences. And 
what we found at the Civil Rights Commission--
    Mr. Garrett. Law of unintended consequences, right.
    Mr. Kirsanow. Right, if you take a look at a number of the 
studies out there, again, these may be well-intended 
initiatives. But good intentions are not necessarily good 
results.
    Mr. Garrett. Okay.
    Mr. Kirsanow. And when you look at some of the results, 
both in terms of mortgage lending, credit, and in terms of 
employment, what happens when the potential charged party 
attempts to avoid liability by getting numbers right, and 
thereby possibly changing or lowering standards is, that it can 
have a negative outcome at the back end.
    That minorities are the ones actually holding the bucket at 
the end. Where you have greater number of minorities who are 
fired, because they have been hired under standards for which 
necessarily under that particular job, they couldn't comply 
with, or credit histories, where they couldn't necessarily 
sustain a particular mortgage.
    One of the reasons--one of the reasons, not the exclusive, 
you may have a higher foreclosure rate or a higher default 
rate, is because standards were changed or modified to avoid 
disparate impact liability.
    Mr. Garrett. So, we are hurting the people we are trying to 
help eventually. Thank you.
    Chairman McHenry. We will now recognize Mr. Heck for 5 
minutes.
    Mr. Heck. Thank you, Mr. Chairman, and I hope to not use 
all 5 minutes.
    Is any one of you arguing that there is a material 
difference to the victim between intentional discrimination or 
unconscious discrimination, or discrimination that is the 
consequence of ``unfortunate policies?''
    Does any one of you believe that the material impact to the 
victim is different?
    Mr. Kirsanow. Yes.
    I do believe there is a significant material impact to 
the--
    Mr. Heck. No, no, no. That wasn't my question, sir. My 
question is, do you believe there is a material difference to 
the victim--
    Mr. Kirsanow. Yes.
    Mr. Heck. --between these forms of discrimination?
    Mr. Kirsanow. Absolutely. Because where a victim is living 
in a country where outcomes are determined by race, there is a 
material difference. Where you have a disparate impact 
standard, or any other kind of standard that yields outcome, 
based not on content of character, based not on neutral 
characteristics, but on race, then you have a real impact.
    Mr. Heck. I feel like we are speaking different languages. 
My question is if I am, for example, a person of color, and I 
am unable to procure the housing because I am a person of 
color, whether that is the lenders' intent or not, it seems to 
me the impact on me is the same.
    Mr. Kirsanow. I would disagree. Again, if you are living in 
a country that doesn't honor the equal protection clause, the 
impact on you is different.
    Mr. Parker. May I interject?
    Mr. Heck. Absolutely, please.
    Mr. Parker. If you are a single woman who is evicted from 
your apartment because there is a policy of evicting someone 
who is the victim of a crime, or there is a crime in the 
apartment, spousal abuse, it doesn't matter that the policy was 
not implemented out of animus.
    The fact is that single mother, who is the victim of abuse, 
is now homeless. And the idea that the Fair Housing Laws would 
not be able to assist that woman, would not be able to assist a 
veteran who is not able to meet a full-time employment status, 
but could afford to live in an apartment, the idea that they 
are unprotected by the Fair Housing Act is a serious 
undercutting of that Act.
    Mr. Heck. Mr. Marcus, here is part of what I have heard you 
say. You have decried discrimination, evidently, especially the 
blatant and intentional forms, those are quotes. I have heard 
you discount the use of disparate impacts, either from some 
legal question, which I don't understand, given the cumulative 
case law.
    And that, if unfortunate policies or unconscious 
discrimination yield disparate impacts, it is harder to 
determine and therefore we shouldn't use scarce resources to 
prosecute or litigate?
    Mr. Marcus. Yes. I think that there is a huge difference 
between being told you can't live here because I don't like 
people like you, versus being told you can't live here because 
the apartment is unavailable.
    I think that there is a very distinct and peculiar harm 
that one faces if one is the subject of discrimination.
    To amplify, yes, I have argued that civil rights 
enforcement should focus on intentional and even unconscious 
discrimination.
    Mr. Heck. But not unfortunate policies that yield disparate 
impacts, and therefore may be, in fact, discriminatory, because 
we have scarce resources?
    Mr. Marcus. No, the latter, I would--the latter I would go 
after if they are discriminatory, meaning that they are 
motivated by intentional discrimination or unconscious 
discrimination.
    And I think that there are times when it is difficult to 
ferret it out, the discrimination, using different treatment. 
And that is why I have indicated that I think that disparate 
impact theories could be used, but I have argued for an 
affirmative defense of good faith.
    Mr. Heck. In which case, in my 10 seconds remaining, I wish 
to strongly associate myself with the comments of Mrs. Beatty 
and to suggest, sir, that if you believe that as deep down as 
we who are asking questions of this nature do, then I would 
have thought that you would have led and ended all of your 
comments with an argument for increased resources to ferret out 
discrimination, which should not exist in this country.
    I yield back the balance of my time, which I don't have.
    Chairman McHenry. We will now recognize the ranking member 
of the subcommittee, Mr. Green, for the final questioning of 
the day.
    Mr. Green. Thank you, Mr. Chairman, and let me move quickly 
to this notion that you have to have explicit authorization for 
a law or a standard to be implemented.
    My suspicion is that you would all agree that the 
Constitution of the United States of America does not call for 
judicial review. Is there anyone who differs with me in terms 
of judicial review that is not explicitly mentioned in the 
Constitution? And we all know, as first-year law students, that 
it is in the case of what? Marbury v. Madison. That is where it 
comes from.
    So you don't have to have explicit language for a court to 
recognize that a standard can be established.
    Next point, let's talk about this whole notion, it seems to 
me, from some of you, that courts are granting summary 
judgments, based upon numbers that are presented.
    There are no summary judgments being presented on some sort 
of regular basis, with reference to disparate impact.
    Mr. Parker, you are a practitioner, how many years you have 
been practicing law?
    Mr. Parker. Thirty-three.
    Mr. Green. And have you handled few or many cases of this 
type?
    Mr. Parker. Many cases.
    Mr. Green. Do you find that summary judgment is the usual 
circumstance wherein a defendant has given an affirmative 
defense by way of answer?
    Mr. Parker. No, I find that, in fact, that the plaintiff is 
at a disadvantage in many cases, that it is very difficult to 
bring and to prove these cases.
    Mr. Green. And do you also find that after disparate impact 
has been presented, a defendant still has the opportunity to 
refute the evidence that has been shown, such that the 
defendant can still prevail?
    Mr. Parker. They do have that opportunity, at least once.
    Mr. Green. And do you find that--at least once?
    Mr. Parker. Yes.
    Mr. Green. Do you find that even if the plaintiff then, the 
moving party presents additional evidence, the defendant still 
has an additional opportunity to refute the last evidence 
presented?
    Mr. Parker. That is correct.
    Mr. Green. So there is a system in place that the courts 
have recognized now for some 40 years, working efficaciously 
that there seems to be a desire to overturn. Can you quickly 
tell me, one more time, because you have said it to others, 
what would be the implications of eliminating the disparate 
impact standard, not theory, because it is now a standard?
    Mr. Parker. The impact of eliminating what has been a long-
standing practice in the courts, in the agencies that enforce 
the law, would be to make it difficult, if not impossible, to 
show that policies which are unnecessary and unjustified have 
an impact on protected classes to the detriment of those 
classes.
    It would eliminate a whole class of cases, which affect an 
enormous number of people.
    Mr. Green. I marvel at how a good many people who are 
opposed to disparate impact also oppose testing. Testing is the 
methodology by which we can ascertain whether or not 
discrimination exists also. It seems that I am seeing a lot of 
consistency here. Opposed to testing, opposed to disparate 
impact, but opposed to invidious discrimination.
    How do you prove invidious discrimination other than a guy 
shows up with a white cape and a hood? How do you prove it?
    You have to have some tools available to you to deal with 
people who are intelligent. These people are not idiots. They 
understand the consequences of their actions. And many of them 
disguise their actions with clever policies.
    But the law wasn't intended just to deal with people who 
make intentional, overt manifestations. The law is also 
designed to deal with good people who set bad policies. Can you 
give an example of a good person who may have had a bad policy? 
Quickly, because I have a closing statement, Mr. Parker.
    Mr. Parker. Yes. One such policy might be, as I mentioned 
before, the policy that says you have to be employed in a full-
time job to get an apartment. That would have an impact on 
someone who, because of disability--
    Mr. Green. A veteran, for example.
    Mr. Parker. Right.
    Mr. Green. A veteran who has other sources of income. You 
should consider all sources of income in deciding to rent, not 
just a person having a full-time job. Because there are people 
who don't have full-time jobs who can afford the apartment that 
you are leasing.
    Mr. Parker. And everyone's interest is protected in that 
case.
    Mr. Green. Thank you.
    My closing comment is this. It has always been the 
intelligentsia that perpetrates. The ignorant may perpetuate, 
but it is the intelligentsia that perpetrates. It was the 
intelligentsia that gave us Dred Scott. It was the 
intelligentsia that gave us a lot of these laws that we find 
ourselves having to overturn. And in fact, we have overcome.
    So I would hope that this hearing will not allow us to find 
ourselves having to combat some rule or some law that 
eventually could overturn 40 years of progress.
    I yield back.
    Chairman McHenry. The gentleman yields back.
    I would like to thank our witnesses today. This hearing was 
very informative. Thank you for your time.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    This hearing is adjourned.
    [Whereupon, at 11:50 a.m., the hearing was adjourned.]
















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