Misplaced Blame in the Loan Crisis

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Thursday, March 6, 2008

In his Feb. 14 op-ed, "Predatory Lenders' Partner in Crime," New York Gov. Eliot Spitzer tried to blame the Office of the Comptroller of the Currency (OCC), which regulates national banks, for all the current problems caused by subprime loans. Nice try, governor. The facts tell a very different story.

The overwhelming majority of the subprime loans causing so many problems today, including the most predatory loans, were originated by state-regulated mortgage brokers and lenders. That's a fact, and here's another: The OCC doesn't regulate those brokers and lenders; that's the job of the states. The national-bank preemption that Mr. Spitzer complained about -- recently upheld by the U.S. Supreme Court -- did nothing to handcuff state efforts to prevent lenders from making loans that borrowers had no reasonable prospect of repaying.

More facts: The OCC extensively regulates national banks' activities, including mortgage lending. We established strong protections against predatory lending years ago, and we enforce them rigorously. And we have been a recognized national leader in addressing problems that can arise from such nontraditional products as "payment option" mortgages.

The results: Predatory mortgage lenders have avoided national banks like the plague. The abuses that consumers complain about most -- such as loan-flipping and equity-stripping -- are not tolerated in the national banking system; nor are the looser lending practices of the subprime market.

Effective regulation of subprime mortgage lending is a job for both federal and state agencies. But the most urgent need today is for the states to use the authority they already have to effectively regulate the institutions that caused most of the problems.

JOHN C. DUGAN

Comptroller of the Currency

Washington


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