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Praise be to state regulators

It is imperative that state regulators remain unleashed to protect the citizens of their states from predatory behavior of national firms.

The New York Times has an excellent article today about the willingness of states Attorney Generals to litigate against the national banks over mortgage fraud.

I say “get out the subpoenas boys“…

The residents of every state and especially California, Nevada, Florida, Michigan, and Ohio have been “sold” products which were inappropriate and often lead to the owner losing their home and the investor of the securitized mortgage losing their investment…

This ground level prosecution is needed to demonstrate to national institutions that they will be fought at every turn… that their predatory behavior towards consumers has consequences. Thank goodness rulewriting authority will be consolidated in the new Consumer Financial Protection Agency… state regulators could use those new rules as a roadmap to police activities in their states….

From the New York Times:

~~~”… With such maneuvers, Ms. [Lisa] Madigan [Illinois attorney general] said, “it was much easier for people in the banking industry or any other industry to hide their misconduct.”

While the attorneys general do not say they could have prevented all the shady deals that characterized the housing market at its worst, they believe they might have been able to stop enough of them to limit the scale of the crash.

“For the better part of eight years, the federal regulators were not being aggressive, and at the same time we were disabled,” said the Ohio attorney general, Richard Cordray. “There was nothing holding back irrational and irresponsible practices.”

The Clearing House decision was not a full-fledged victory for the states. The decision limits their subpoena power. While it is now easier to bring cases in court, it might be harder to develop them in the first place.

If the banking industry has its way, the victory will not be a permanent one.

In Washington, the banks are lobbying hard to try to block the states from becoming more aggressive. Lobbyists have urged lawmakers to pre-empt state rules that are more restrictive than federal laws. The Obama administration has opposed those changes.

Two weeks ago, the House Financial Services Committee voted to give the federal government the power to block states from regulating large national banks in some circumstances. Under the compromise, the Comptroller of the Currency would be able to override the states, but only after finding that the state law significantly interfered with federal regulatory policies.

In an interview in his offices here, Mr. Goddard and his top aides spoke repeatedly of their frustrations in dealing with the banks.

After the Clearing House decision, he said, there was “a virtual parade of national officers of national banks” coming through, ostensibly eager to find a common ground to help stanch foreclosures that are running as high as 7,000 a month in Arizona.

But Mr. Goddard, a former mayor of Phoenix, said the lenders were often unable or unwilling to provide him with elementary information, including how many and what kind of loans they have in the state.

The banks have been imploring Mr. Goddard to tell homeowners in default to get in touch with them, opening a dialogue. So he has. But the homeowners say they call and get no response.

“People call and get a runaround,” Mr. Goddard said. “The paperwork gets lost. It’s time to stop this absurd dance.”

He would rather have a solution to the foreclosure problem today than a court victory in three years. But since he is not getting a prompt solution, that leaves only the hope of legal action, in his view. Any case will most likely be a major effort involving multiple states.

“Maybe the banks think we don’t have the gumption to pull the trigger,” Mr. Goddard said.”~~~

See mortgage modification and Consumer Financial Protection Agency at Riski for more background…