Story summarized from American Banker
NY’s
Spitzer talks tough on OCC preemption of his lending probe
WASHINGTON
- May 19, 2005 – Officials at the federal
Office of the Comptroller of the Currency have apparently initiated a
confrontation with New York’s Attorney General Eliot Spitzer over his
investigation of practices in the mortgage lending field.
The
OCC hasn’t yet taken any official action but. In a speech here Wednesday
(5/18/05) Spitzer said that an official at the OCC had called his office to say
his investigation was intruding on their jurisdiction.
That
call could be the opening salvo of a turf battle over who gets to say what about
regulating banks in the states. The OCC had previously been mum on the
preemption issue.
In
a speech at the Center for American Progress Spitzer took the gloves off:
"Our investigation of whether or not banks are properly lending to
minorities and women, they're trying to intercede on behalf of the banks,
keeping us from getting the data we need. As recently as two days ago I got a
phone call from the very top of the OCC saying, ‘We think you're preempting.'
Well, I don't think we are, and we're going to find out in court someday."
As reported in American
Banker (5/16/05), officials of nationally-chartered banks
were nervous over the OCC’s reticence on the question of whether their banks
should go along with Spitzer's investigation.
Mounting
numbers of fair-lending complaints are apparently the motivation for Spitzer’s
probe. Since March 31, when more detailed lending data became available under
new Home Mortgage Disclosure Act rules, Spitzer's office has sent requests to
several banks for information, including the newly reported details on mortgage
lending.
"We're
asking a whole bunch of different entities, who have different regulatory
status, but there are certainly many that we've asked that we believe to be
fairly within our regulatory purview," Spitzer said to reporters.
No
one at the OCC directed a response specifically to Spitzer's comments, but a
spokespersonn did say that after the Federal Reserve Board finishes checking the
HMDA data, "we fully expect to look carefully at the data for the
institutions we supervise to see if there are any trends or actions we need to
take."
Spitzer
criticized the OCC, and other executive branch agencies, for not taking a
stronger stand on consumer protection and for interfering with state officials'
actions on consumers’ behalf.
"They
are not out there ensuring there's fairness, equity, integrity in the
marketplace. They're preempting us so that we can't do what is reasonable,"
Spitzer said.
The
preemption issue may widen to include other regulatory agencies.
On
Monday (May 16), Spitzer along with six other states’ attorneys generals sent
a letter to the Federal Deposit Insurance Corp. which plans to hold a hearing
the week of May 23rd on preemption for state-chartered banks.
Spitzer
wrote: "Not only does the FDIC lack authority to adopt the rules requested
… [but] any such rules would undermine the states' sovereign authority to
police their borders and protect their citizens."
Some
of the national banks contacted by Spitzer are apparently complying with his
mortgage investigation without argument— regardless of who has jurisdiction.
A
spokesperson for Spitzer's office said that at least one national bank has
provided the information requested, and she expects others will follow.
"This
is an early, early stage inquiry," Spitzer said; his office was asking
lenders for "just enough data [to analyze].”
The
HMDA data that banks are required to disclose this year for the first time—
borrowers’ race, sex, and income range—show minorities as more likely than
whites to receive relatively high-rate loans by a significant margin.
In
his speech Spitzer discussed the appropriate role of government in the market
and the intervention that is necessary to make sure the market gets the
information it needs
in order to function properly.
Over
the past 20 years, he said, "the federal agencies have essentially been so
beaten down and neutered, they've been rendered incapable of fulfilling their
fundamental mandate. They have not only been rendered incapable, but they have
been sapped of the desire."
Spitzer
referred to First Horizon National’s response to a consumer complaint his
office received in late 2003: their voicemail message said, “Go away. You're a
state agency. You have been preempted by the OCC.”
"This
is now the world we're living in, when we simply call up a federal agency to say
help, or call a bank to say stop trying to foreclose on this guy's house. …
They invoke a federal agency as protection against us, because we've been
preempted by a federal agency that doesn't want us to protect consumers,"
Spitzer said.
Original
story for American Banker by Hannah Bergman