Mr. Roberts, You're Off Base On Shawmut
The recent column by Paul Craig Roberts entitled "The Feds' sham settlement with Shawmut" (Economic Viewpoint, Jan. 24) was not up to the author's usual standards. Although I agree with Roberts' main premise, that statistics should be used only with great care in discrimination issues, some of his assertions were erroneous. At least three points need to be addressed.
First, the Federal Reserve referred Shawmut National Corp. to the Justice Dept. for further investigation, but the Federal Reserve was not a party to the suit brought by the Justice Dept. In December, 1992, the Federal Reserve Board found that there was reason to believe that a pattern or practice of lending discrimination existed at Shawmut. Under the law, such a pattern or practice does not require any specific complaints about discrimination from potential borrowers but only that the available information indicate unequal treatment. The Federal Reserve Bank of Boston had conducted careful statistical research into lending in the Boston area using lending institutions' own statistics and concluded such unequal treatment existed at Shawmut.
Second, the claim that I "organized the hit on Shawmut" does not comport with the facts. On Nov. 15, 1993, Shawmut failed in its attempt to get approval of the Federal Reserve Board to acquire the New Dartmouth Bank of Manchester, N.H., for two explicit reasons: the high rate of inaccurate data provided in Shawmut's Home Mortgage Disclosure Act filing and the inability of Shawmut to show that it had programs in place and working to ensure compliance with the Equal Credit Opportunity Act. In no way was the Shawmut disposition the result of any orchestration on my part or anyone else's. The case came before the board and was voted on. Period.
Third, Roberts' assertion that Shawmut's $1 million settlement with the Justice Dept. "was a bribe so that the Fed would remove barriers it had erected to the bank's acquisition plans" ignores both the stated reasons for Shawmut's rejection and that the Federal Reserve Board was not a party to the Shawmut settlement. The Federal Reserve was not involved in any of the settlement decisions, and the opinions of the governors in the Shawmut case did not suggest in any way that a settlement was a precondition for board approval of Shawmut acquisition applications.
Lawrence B. Lindsey, Governor
Federal Reserve Board