Two governors of the Federal Reserve System have criticized the proposed CRA regulations, saying financial institutions will make risky loans to women or racial minorities so that they can avoid discrimination lawsuits. Fed Governor Lawrence Lindsey considers the regulations a blatant power grab by political micromanagers in Congress and the White House. He has recently encouraged public comments, presumably critical, of the regulations. And Governor John LaWare told the Dow Jones News Service, "I feel very uneasy about the de facto allocation of credit and banking resources by administrative fiat."
It isn't necessary for the Clinton team to sue employers en masse to guarantee that money and jobs flow to members of favored groups: A few high- profile cases will do. Companies shy away from the glare of publicity in discrimination cases, even if they are blameless. And when a firm faces a discrimination charge, says Stephen A. Bokat, general counsel for the U.S. Chamber of Commerce, managers "are faced with a Hobson's Choice: spend a fortune to defend yourself, having a jury which isn't sympathetic to business decide the case, or settle."
Though the 104th Congress will presumably look askance at even tougher business regulations, the administration's civil- rights team can still cause plenty of mischief for business operators. Karen Kerrigan, president of the Small Business Survival Committee, says civil- rights advocates and union leaders can use their contacts with sympathetic government officials to push tougher regulations without the help of Congress. Reich, for instance, has cultivated contacts with feminist groups who want to implement comparable worth.
In the long run, however, Kerrigan predicts these backroom deals between activists and regulators will backfire. She notes a growing sentiment among business operators that "government has overstepped its boundaries. Employers and average citizens have recognized this and have called a halt to new legislation." Stopping new laws may well slow down hyperactive regulators. A more daunting task will be rolling back the regulatory apparatus that's already in place.
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