There also was that important 2000 study from HUD and the Treasury, called “Curbing Predatory Home Mortgage Lending,” which warned of “widespread predatory practices in the subprime market,” and went on to describe both the problems and possible remedies for more than a hundred pages. Not to mention a lengthy 2004 GAO study, titled “Consumer Protection: Federal and State Agencies Face Challenges in Combating Predatory Lending,” which urged greater regulation and enforcement of “consumer protection laws applicable to predatory lending.”
Notice how little problem these reports have using the term “predatory lending.” And if you read them, you will see how strong their authors’ concern was. It seems that, problems in terminology aside, those who took the words seriously took the practice seriously as well.
This crisis without a name was always going to be difficult to cover—particularly given the rhetorical counteroffensive from the financial services industry and its backers among the political and intellectual elite. The story needed time and space, and, it must be said, journalistic vision and courage, all of which were lacking during the most critical years.
For proof, we circle back to the past two decades of news coverage. With the exception of a stray piece from The Financial Times in January 1983, the first Factiva hits for the phrase “predatory lending” come in the early 1990s from The Boston Globe and the Atlanta Journal-Constitution, as well as from a handful of other local papers. The Globe was covering Rhode Island-based Fleet, which was then the target of predatory lending accusations in Massachusetts. The Journal-Constitution got involved when a series of lawsuits filed by Georgia borrowers charged that Atlanta-based Fleet Finance, which was also the target of an investigation by the Georgia attorney general’s office, had victimized residents of low-income black neighborhoods.
Both the Globe and the Journal-Constitution—like other local and regional papers—produced some excellent work once the story landed in their backyards. One example is the AJC’s superb October 1992 piece by Jill Vejnoska, which carried the headline lenders prey on unwary; or an editorial that same month that told us how “deregulation has spawned a lending undercurrent resembling a cesspool.”
By 1993, the Georgia story had gained national attention, and it is interesting to see how the national press began to define predatory lending. Here is Reuters, on December 16, 1993: “Predatory lending takes place when a bank deliberately lends funds to people who would not normally qualify for such loans to foreclose on their properties and sell them at a profit.” That definition echoed one in the November 19 Wall Street Journal: “Under predatory lending, a bank knowingly lends money to people who it knows don’t qualify for loans, in order to foreclose on them later and sell the property at a profit.”
These are damning definitions. Their strength is that they clearly describe intent, and they call to mind the conspiratorial aspects of corruption in lending—an important component that was absent from most later uses of the term. By contrast, the vast majority of stories in the 1990s that mention “subprime” were market- or investor-oriented. The more a news outlet focused on the worsening position of borrowers—which turns out to be the angle closest to the truth—the more likely it was to use “predatory lending.”
The start of the new millennium brought rising concern over predatory lending practices, and the press reflected this concern. As the numbers in our graph indicate, The Washington Post, The New York Times, the Journal, and other outlets turned in strong performances from 2000 through 2003—years that featured aggressive regulatory action against Citigroup, First Alliance, Household International, and other rogue lenders. Not only state attorneys general but also state legislatures were important actors during these years, with North Carolina adopting the first state predatory lending law in 1999 and a wave of other states following its lead.
But 2004 marked the beginning of a lapse in attention to the issue by the national press that came at exactly the wrong time. The ascendancy of a pro-industry, deregulatory ideology crushed the anti-predatory-lending efforts, and also cleared the way for “subprime” to win the rhetorical day. Crucially, this is the year that the OCC implemented rules exempting national banks from state consumer protection laws. When it mattered most, the press took its cues from
those in power.
What did the run-up to the domination of “subprime” look like in the press? Here is a sample of some typical stories from The Wall Street Journal during those crucial years, 2004 through 2006. Keep in mind that this is when the worst predatory loans were flourishing.