[Congressional Record Volume 154, Number 31 (Tuesday, February 26, 2008)]
[Extensions of Remarks]
[Pages E239-E240]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                  PREDATORY LENDERS CAUGHT THEIR PREY

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                         HON. CHARLES B. RANGEL

                              of new york

                    in the house of representatives

                       Tuesday, February 26, 2008

  Mr. RANGEL. Madam Speaker, I rise today to enter into the Record a 
February 14th editorial from the New York Times by Eliot Spitzer, 
Governor of New York, ``Predatory Lenders' Partner in Crime''.
  This editorial talks about the role the Office of the Comptroller of 
the Currency (OCC) had in preempting state laws designed to protect 
consumers from mortgage loans with deceptive ``teaser'' rates and 
hidden fees. Several states had enacted laws to protect consumers from 
these practices. Many low- and middle-income borrowers are not able to 
absorb monthly payment increases when variable terms reset, such as the 
expiration of teasers rates and/or interest rate increases. Many of 
these loan products are so complex, that the disclosures currently 
available are inadequate to protect consumers. The end result is that 
hardworking Americans are stripped of the equity they have built in 
their properties, and they lose their homes.
  Who would have thought that the OCC would issue formal opinions in 
2003 that preempted state laws designed to protect consumers from 
lending practices and would put consumers in jeopardy of losing their 
homes? This was so egregious that all 50 state attorney generals and 
state banking superintendents vigorously fought the new rules. The 
fight was to no avail--the Bush administration won and the banks were 
protected.
  Greater regulatory oversight is necessary to ensure borrower 
confidence in the banking system, and the availability of quality loan 
products in the market place. The end result is where the U.S. finds 
itself today--with record rates of foreclosures and an economy in a 
perilous condition.

                [From the New York Times, Feb. 14, 2008]

                  Predatory Lenders' Partner in Crime

                           (By Eliot Spitzer)

       Several years ago, state attorneys general and others 
     involved in consumer protection began to notice a marked 
     increase in a range

[[Page E240]]

     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.
       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.

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