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#  Reverse Redlining? Shame on Paul Koretz

![](https://mail.citywatchla.com/images/stories/Dec-2011/cw9100h.png)MAILANDER MUSINGS - City Council should save the city money and shoot down the Alarcon/Koretz-sponsored pitch by Johnny Cochran's old law firm to file a "reverse redlining" suit on behalf of the City against local banks. Such suits are based on flaky, partisan research, and have failed elsewhere.

Written by Joseph Mailander.

December 15 2011

<a class="a2a_button_facebook"></a><a class="a2a_button_twitter"></a><a class="a2a_button_email"></a><a class="a2a_button_print"></a>[](https://www.addtoany.com/share)

![](https://mail.citywatchla.com/images/stories/Dec-2011/cw9100h.png)MAILANDER MUSINGS - City Council should save the city money and shoot down the Alarcon/Koretz-sponsored pitch by Johnny Cochran's old law firm to file a "reverse redlining" suit on behalf of the City against local banks. Such suits are based on flaky, partisan research, and have failed elsewhere.
Councilmember Richard Alarcon has some funny ideas about banking; I've watched them unfold with considerable interest.

Now he wants the City of Los Angeles to hire the firm that defended OJ--Johnny Cochran's old firm--to sue banks that extended credit to high-risk borrowers. [ \[link\]](http://blogdowntown.com/2011/12/6523-around-the-halls-singleuse-bag-ban-building) A couple of out-of-it municipalities (Baltimore and Memphis) have done this inconclusively, and other cities have tried it and courts have shown them the door, but no place the size and scale of Los Angeles has done it.

The would-be minoritized here, backed by very suspicious, partisan [research](http://www.innercitypress.org/2008hmda1.html), which has been debunked by top-drawer [research,](http://www.housingwire.com/2009/04/02/ny-fed-study-debunks-reverse-redlining) are claiming "reverse redlining"--an odd scenario in which banks willfully extend tough-to-pay loans to minorities who might not qualify for loans with better terms.

In truth anyone in banking would be hard pressed even to fantasize a scenario in which a bank would willfully extend a note on a property to a customer it knew it likely couldn't pay. This would force the result of the bank acquiring the property. Banks do not want to hold property...period. It's a nuisance for them to do so, and they always lose when they do. When they hold property, they miss payments on loans.

Money is far more liquid than property, and therefore far more valuable to banks than property is, as the more liquid the asset, the closer to the core competency of the bank the asset remains. It's that simple. This is why the claims of those who have made up "reverse redlining" make absolutely no sense for banks with long traditions of banking wisdom behind them, and every banker knows that.

Nonetheless, we expect this of Alarcon by now. His view of banking is colored by his idea that home ownership itself is a civil rights issue. But it is an enormous surprise to see an ordinarily responsible lawmaker like Councilmember Paul Koretz backing this silly motion, penned by Alarcon, that would if successful bring the full force of shame of the nation's most esteemed banks, all for the sake of hoping to retain (at taxpayer expense) a law firm not known for its expertise in the financial service sector.

If you want the crudest ad hominem, you have the study of the nation's most esteemed east coast bank and one of its most esteemed ivies on one side, and on the other side you have the firm that sprung OJ and the Councilmember too afraid of the law even call police on a squatter in his own house. But that's a mere guilt-by-association argument; there are plenty of far better arguments against this motion coming before Council Wednesday.

Council sent this back to committee on Wednesday. Council should vote it down. Don't waste money on this kind of frivolous suit, that has been dismissed three times out of five that it has been tried, and may face even more dismissal.

*(Joseph Mailander is a writer, an LA observer and a contributor to CityWatch. He is also the author of The Plasma of Terror. Mailander blogs at [street-hassle.blogspot.com](http://street-hassle.blogspot.com) where this article first appeared.)* –cw

Tags: reverse redlining, Joseph Mailander, Paul Koretz, Richard Alarcon, City Council, banks, Johnny Cochran

CityWatch
Vol 9 Issue 100
Pub: Dec 16, 2011

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