Alexander & Edwards

The mortgage foreclosure settlement announced this week is being hailed as a lifeline for homeowners. But it’s equally important as a kind of Waterloo for the banks and their conquest of the U.S. government. The financial services industry has been pillaging and plundering almost continuously since former Republican Senator Phil Gramm championed deregulation and repealed depression-era banking laws in 1999. The banks celebrated what may have been their most profitable victory in the mortgage business in the first part of the new century courtesy of former president George W. Bush. In 2002, concern was growing about the potentially disastrous impact of predatory home mortgage lending. Countrywide and other very aggressive lenders were growing their “subprime” lending businesses, with little regard to the risks for borrowers and the economy. President Bush was promoting homeownership at every turn, especially for minority first-time buyers, a fact that people on the right have conveniently forgotten A number of housing and consumer advocates raised alarms about fraud and abuse in mortgage lending. Attorneys general in several states attempted to take action to stop the predation. They were not permitted to do so. The Bush Administration forced the states to back down and let banks and mortgage bankers do whatever they pleased. As reported by Elliot Spitzer, former New York attorney general, in The Washington Post, the Bush Administration’s Office of Comptroller of the Currency (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, according to Spitzer. In response, all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules, Spitzer said. The states did not slow the Bush administration in its goal of “protecting the banks,” Spitzer said. When Spitzer’s 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. So, at last we have come full circle. Bush’s Justice Department worked to shield bankers and prevent state governments from protecting consumers. Now Obama has worked with all but one of the states (Oklahoma) to begin to hold banks accountable for deceptive and negligent practices in home lending and foreclosure processing. No one can say how many bad loans would have been avoided if Bush had not blocked state governments on mortgage regulation. But voters need to remember how this crisis came about, and just how badly our country was damaged by the failure to regulate the banks. Will the current Republican presidential candidates reinstate the bank-friendly, anti-consumer policies of George Bush? I am concerned that they will. I would not be surprised if the Republican-ruled House of Representatives even tries to block this settlement somehow. As the election approaches, even Republicans need to think about what happened on Bush’s watch. After all, using federal power to override states’ rights in order to shield unscrupulous lenders was not in the true spirit of either capitalism or political conservatism. It hurt millions of families and nearly destroyed our economy.