But outraged state regulators and consumer advocates say the OCC has little experience in protecting consumers, and they accuse the OCC of being soft on banks at the expense of consumers. The OCC’s move, left unchallenged, would mean “the already vulnerable consumer has lost the only protection he had and national banks will now run roughshod over the rights of the individual consumer,” says Donna Heinrichs, Mr. Hall’s attorney.

And there is the usual back and forth:

“We’re prepared to take this to the U.S. Supreme Court,” Mr. Spitzer says.


Mr. Hawke, meanwhile, accuses Mr. Spitzer of “grandstanding.”


“We’re just happy that we were able to work things out with the customer to his satisfaction,” said a spokeswoman for First Tennessee. (5)

The New York Times wrote a good profile of Hawke, pointing out that his agency had allowed Riggs National Corporation to become a money-laundering center for corrupt foreign dictators, a fact embarrassingly uncovered by the Justice Department (6).

As the lenders turned frenzied in 2005 and set up boiler rooms to feed Wall Street’s escalating demand for product to turn into mortgage-backed securities and their lucrative derivatives, Spitzer continued to direct attention to the problem.

In the spring of 2005, he sent letters to nationally chartered banks demanding information about alleged discriminatory lending practices, suspecting what would turn out to be precisely the case—that subprime lenders were steering minority borrowers who qualified for prime loans into subprime products that were more onerous for them and more lucrative for lenders and Wall Street.

Again, the OCC, then led by the justly forgotten Julie Williams, stepped in on the side of big lenders and sued to stop Spitzer. The Wall Street Journal weighed in with a series of now-embarrassing editorials that took the lenders’ side in language approaching hysteria. From June 2005:

New York Attorney General Eliot Spitzer dislikes people who won’t bow to his command, so perhaps Julie Williams should invest in body armor.

That was out of bounds, even for that page. Spitzer kept at it even as he was about to leave office (7) and reminded everyone of the fact in this Washington Post opinion piece in February of this year, probably around the time federal investigators, tipped off by the financial services industry (Hmm. I wonder if…nah), found he was shuffling money around to pay for prostitution.

If you think, by the way, that his prostitution bust means Spitzer was wrong about predatory lending, my advice would be to check your 401(k).

But obviously the point isn’t whether the federal government should regulate nationally chartered banks alone or whether states should, too—I personally don’t care, just as long as somebody does—or whether the preemption doctrine should apply to banking law, or even what percentage of the current crisis is attributable to problems with the national banks (probably about a quarter).

No, the point is that the lending industry’s dangerous practices were openly discussed by public officials, including a nationally prominent one, for many years—way, way before the practices led to the international problem that hangs over us today.

What happened to these mortgages in the aftermarket—Wall Street’s creation of what George Soros calls “the superbubble”—is another matter and should be the subject of a separate inquiry. But without the mortgages, there are no securities, and there is no crisis.

But let’s be clear: reporting on problems in the mortgage industry itself did not require any special forecasting abilities or even particular insight. Any honest discussion of the press’s performance during the run-up to the mortgage crisis must take this into account.

1. “Spitzer attacks plans that may protect banks from state laws.”

12 December 2003

Financial Times

2. “STATES VS. THE FEDS: A FRAGILE TRUCE; In policing money pros, a tug-of-war over who’s in charge.”

29 September 2003

3. “A new case tests who regulates America’s banks”

The Economist

24 January 2004

4. “The Enforcer: As His Ambitions Expand, Spitzer Draws More Controversy —- In Latest Move, He Pushes Fund Giant to Cut Fees; New Clash With the SEC —- Eyeing Drugs and Annuities”

The Wall Street Journal

11 December 2003

5.”Bank-Cop Fight: Spitzer Takes On U.S. Regulator,”

The Wall Street Journal

22 March 2004

6.”Tough Washington Insider to Face His Critics on Bank Regulation”

The New York Times
2 June 2004

7. “Countrywide Settles with NY Official”

Origination News
1 January 2007

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Dean Starkman Dean Starkman runs The Audit, CJR's business section, and is the author of The Watchdog That Didn't Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014). Follow Dean on Twitter: @deanstarkman.