As many of you know, Henry Paulson was on 60 minutes last night and stated that he did not see this coming. Well, I do know of one person that saw this coming, Eliot Spitzer. On the 14th of February of this year, Eliot Spitzer wrote an Oped Piece to the New York times.
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.
As attorney generals across the nation became alarmed at the number of predatory lending practices, the Bush administration took action in not helping them stop this practice but used the OCC to continue it.
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.
Like some of you, I have had my eyes and ears glued to the television the last few weeks trying to make sense of this. I couldn't help but wonder where the state attorney generals were. Why didn't they stop this? Well, according to this same article...
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.
Now, I am not a big fan of people sleeping around on their spouses, but I can't help but wonder if this was payback for fighting against predatory lending practices.
We also had our own attorney scandal here in Ohio which occurred after our attorney general and governor unleashed subpoenas on the subprime mortgage lending industry.
UPDATE! It is now breaking that their is now a probe into the US attorney general firings per MSNBC. I will send link as soon as I get it.
UPDATE2! Kudos to trixied13 for posting this link where Steven G. Brant writes a terrific piece back in March 2008] and thanks to Greg Palast as well for his terrific journalism.
UPDATE#3- I am not seeing this in print so I am diligently scanning front page news on CNN, MSNBC, the Huffington Post and of course, HERE for the breaking story.
UPDATE#4- I did find the link but it was completely unrelated to this story. It was related to the US Attorney firings. I apologize.