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Newly uncovered internal memos reveal the Obama administration knowingly exaggerated charges of racial discrimination in probes of Ally Bank and other defendants in the $900 billion car-lending business as part of a “racial justice” campaign that’s looking more like a massive government extortion and shakedown operation.

So far, Obama’s Consumer Financial Protection Bureau has reached more than $220 million in settlements with several auto lenders since the agency launched its anti-discrimination crusade against the industry in 2013. Several other banks are under active investigation.

That’s despite the fact that the CFPB had no actual complaints of racial discrimination — it was all just based on half-baked statistics.
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Ally complained CFPB’s entire case was based on “disparate impact” statistics, not actual complaints by consumers, and that those estimates relied on guesswork about the race of the borrowers. (The auto industry does not report borrower race, so CFPB tried to ID race by last name and ZIP code, a so-called “proxy” method that is wildly inaccurate.)

“The evidence of discrimination on the basis of race and national origin is strictly statistical,” the agency confessed in a report footnote.

Nevertheless, Ally caved and cut a deal. Prosecutors initially demanded $204 million in payola before settling on $98 million.

With Ally’s holding-company status set to expire Dec. 24, 2013, it formally settled on Dec. 20, and was reapproved by the Fed on Dec. 23, 2013.

With all these machinations hidden from public view, Cordray held a press conference to announce “the federal government’s largest auto-loan discrimination settlement in history.” He claimed that 235,000 minorities had been harmed by Ally, even though he didn’t know the race of a single borrower or whether they had actually been harmed.

“He had no idea how many actual victims there were because their whole case rested entirely on statistical estimations they admitted internally were inaccurate,” said a senior staffer for the House Financial Services Committee, which recently obtained the internal documents from CFPB.

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Ally complained CFPB’s entire case was based on “disparate impact” statistics, not actual complaints by consumers, and that those estimates relied on guesswork about the race of the borrowers. (The auto industry does not report borrower race, so CFPB tried to ID race by last name and ZIP code, a so-called “proxy” method that is wildly inaccurate.)