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Will the next President crack down on predatory lenders?
By Lauren | September 19, 2008
The drama in U.S. financial markets continues, with the Treasury Department, SEC and Federal Reserve banding together to shore up the financial markets. The plan they’ve cobbled together – guaranteeing money market funds, temporarily banning short-selling of certain stocks and, of course, bailing out Fannie Mae, Freddie Mac, and AIG - is a bold one. I hope it works, but only time will tell if the American taxpayers will ultimately end up on the hook for trillions of dollars, victims of the uprecedented greed that created the subprime mortgage mess and subsequent cataclysm in the financial markets.
In researching this blog post, I was astonished to come across a February 14, 2008 op ed piece written for the Washington Post by none other than former New York Governor Eliot Spitzer, in which he accused the Bush Administration of “embarking on an aggressive and unprecedented campaign” to prevent states from prosecuting predatory subprime lenders. Then-Governor Spitzer claimed that the Bush Administration not only failed to protect American homeowners, but “chose to align itself with the banks that were victimizing consumers.” Spitzer charged that, in 2003, the Office of the Comptroller of the Currency (a federal agency under the President’s control) preempted all state predatory lending laws and adopted new rules preventing states from enforcing their consumer protection laws against national banks. Spitzer claimed that the Administration’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 to no avail. We’ve seen the train wreck that followed. (To read the Spitzer op ed piece, go to http://www.washingtonpost.com/wp-dyn/content/article/2008/02/13/AR2008021302783.html.)
Eliot Spitzer has taken his own hard ethical fall since his article was published, and no one could pretend he’s a saint. However, Spitzer knew his way around the ethical rules that govern mortgage lending, and his accusations seem eerily prophetic in light of this week’s events. Both Presidential candidates have given us a lot of talk about how they plan to control the damage from subprime mortgage lending and re-regulate going forward, but they’ve offered precious little insight into what, if anything, they would do to punish the predatory lenders who created this ungodly mess in the first place. What is your candidate’s position on prosecution of predatory subprime mortgage lenders, and are you okay with it? You decide.
Topics: Business Ethics, Presidential Campaign, Social Ethics, corporate responsibility, ethics |