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Predatory
Lenders' Partner in Crime
How the Bush Administration Stopped the States From Stepping=
In
to Help Consumers
By Eliot Spitzer
Thursday, February 14, 2008; A25
Several years ago, state attorn=
eys general
and others involved in consumer protection began to notice a marked increas=
e in
a range of predatory lending practices by mortgage lenders. Some were
misrepresenting the terms of loans, making loans without regard to consumer=
s'
ability to repay, making loans with deceptive "teaser" rates that
later ballooned astronomically, packing loans with undisclosed charges and
fees, or even paying illegal kickbacks. These and other practices, we notic=
ed,
were having a devastating effect on home buyers. In addition, the widespread
nature of these practices, if left unchecked, threatened our financial mark=
ets.
Even though predatory lending w=
as
becoming a national problem, the Bush administration looked the other way a=
nd did
nothing to protect American homeowners. In fact, the government chose inste=
ad
to align itself with the banks that were victimizing consumers.
Predatory lending was widely
understood to present a looming national crisis. This threat was so clear t=
hat
as New
York attorney general, I joined with colleagues in the other 49 states =
in
attempting to fill the void left by the federal government. Individually, a=
nd
together, state attorneys general of both parties brought litigation or ent=
ered
into settlements with many subprime lenders that were engaged in predatory
lending practices. Several state legislatures, including
What did the Bush administratio=
n do
in response? Did it reverse course and decide to take action to halt this
burgeoning scourge? As Americans are now painfully aware, with hundreds of
thousands of homeowners facing foreclosure and our markets reeling, the ans=
wer
is a resounding no.
Not only did the Bush administr=
ation
do nothing to protect consumers, it embarked on an aggressive and unprecede=
nted
campaign to prevent states from protecting their residents from the very
problems to which the federal government was turning a blind eye.
Let me explain: The administrat=
ion
accomplished this feat through an obscure federal agency called the Office
of the Comptroller of the Currency (OCC). The OCC has been in existence
since the Civil War. Its mission is to ensure the fiscal soundness of natio=
nal
banks. For 140 years, the OCC examined the books of national banks to make =
sure
they were balanced, an important but uncontroversial function. But a few ye=
ars
ago, for the first time in its history, the OCC was used as a tool against
consumers.
In 2003, during the height of t=
he
predatory lending crisis, the OCC invoked a clause from the 1863 National B=
ank
Act to issue formal opinions preempting all state predatory lending laws,
thereby rendering them inoperative. The OCC also promulgated new rules that
prevented states from enforcing any of their own consumer protection laws
against national banks. The federal government's actions were so egregious =
and
so unprecedented that all 50 state attorneys general, and all 50 state bank=
ing
superintendents, actively fought the new rules.
But the unanimous opposition of=
the
50 states did not deter, or even slow, the Bush administration in its goal =
of
protecting the banks. In fact, when my office opened an investigation of
possible discrimination in mortgage lending by a number of banks, the OCC f=
iled
a federal lawsuit to stop the investigation.
Throughout our battles with the= OCC and the banks, the mantra of the banks and their defenders was that efforts= to curb predatory lending would deny access to credit to the very consumers the states were trying to protect. But the curbs we sought on predatory and unf= air lending would have in no way jeopardized access to the legitimate credit ma= rket for appropriately priced loans. Instead, they would have stopped the scourg= e of predatory lending practices that have resulted in countless thousands of consumers losing their homes and put our economy in a precarious position.<= o:p>
When history tells the story of=
the
subprime lending crisis and recounts its devastating effects on the lives o=
f so
many innocent homeowners, the Bush administration will not be judged favora=
bly.
The tale is still unfolding, but when the dust settles, it will be judged a=
s a
willing accomplice to the lenders who went to any lengths in their quest for
profits. So willing, in fact, that it used the power of=
the
federal government in an unprecedented assault on state legislatures, as we=
ll
as on state attorneys general and anyone else on the side of consumers.
The
writer is governor of New York
http://www.washingtonpost.com/wp-dyn/content/article/=
2008/02/13/AR2008021302783_pf.html
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