The Washington Post published this op-ed by then New York Governor Eliot Spitzer just three weeks before he was taken down. Coincidence?
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 attorneys general and others involved in consumer
protection began to notice a marked increase in a range of predatory
lending practices by mortgage lenders. Some were misrepresenting the
terms of loans, making loans without regard to consumers' 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 noticed,
were having a devastating effect on home buyers. In addition, the
widespread nature of these practices, if left unchecked, threatened our
financial markets.
Even though predatory lending was becoming a
national problem, the Bush administration looked the other way and did
nothing to protect American homeowners. In fact, the government chose
instead to align itself with the banks that were victimizing consumers.
The federal government's
actions were so egregious and so unprecedented that all 50 state
attorneys general, and all 50 state banking superintendents, actively
fought the new rules.
Predatory lending was widely understood to present a looming national crisis. This threat was so clear that 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, and together, state attorneys general of both parties
brought litigation or entered into settlements with many subprime
lenders that were engaged in predatory lending practices. Several state
legislatures, including New York's, enacted laws aimed at curbing such
practices.
What did the Bush administration 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
answer is a resounding no.
Not only did the Bush administration
do nothing to protect consumers, it embarked on an aggressive and
unprecedented 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 administration 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 national 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 years
ago, for the first time in its history, the OCC was used as a tool
against consumers.
In 2003, during the height of the predatory
lending crisis, the OCC invoked a clause from the 1863 National Bank
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 banking 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 filed 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
unfair lending would have in no way jeopardized access to the
legitimate credit market for appropriately priced loans. Instead, they
would have stopped the scourge of predatory lending practices that have
resulted in countless thousands of consumers losing their homes and put
our economy in a precarious position.
When history tells the
story of the subprime lending crisis and recounts its devastating
effects on the lives of so many innocent homeowners, the Bush
administration will not be judged favorably. The tale is still
unfolding, but when the dust settles, it will be judged as 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 well
as on state attorneys general and anyone else on the side of consumers.
The writer is governor of New York.