SUBPRIME CRITIC SILENCED

Here’s something for conspiracy theorists to chew on: The biggest thorn in the side of the Bush administration and its hands-off banking policies, which arguably led to the subprime mortgage crisis, was Eliot Spitzer, the now-disgraced New York governor who resigned last week after allegedly paying for the services of a prostitute.

Mr. Spitzer’s alleged liaison was at a Washington, D.C., hotel on Feb. 13. On Feb. 14, the Washington Post published an OpEd column written by Gov. Spitzer in which he recounted how in 2003, as New York’s attorney general, he worked to stop banks from dangling low-interest mortgages in front of families that could not afford the monthly payments that kicked in after the low teaser rate expired.

Mr. Spitzer wrote: “Even though predatory lending was becoming a national problem, the Bush administration looked the other way and did nothing to protect American homeowners. In fact, the government chose instead to align itself with the banks that were victimizing consumers.” He explained that in the absence of federal regulatory action, he and attorneys general from the 49 other states “brought litigation or entered into settlements with many subprime lenders. … What did the Bush administration do in response? … Not only did [it] do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye,” Mr. Spitzer charged.

He wrote that the Bush administration tapped an obscure federal agency created during the Civil War called the Office of the Comptroller of the Currency. “In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act … preempting all state predatory lending laws, thereby rendering them inoperative,” Mr. Spitzer wrote. “The federal government’s actions were so egregious … that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules.”

When Attorney General Spitzer began investigating banks for discrimination in mortgage lending, “the OCC filed a federal lawsuit to stop [it],” he wrote.

Just days after Mr. Spitzer’s sexual liaisons were disclosed, Ben Bernanke, the Bush-appointed chairman of the Federal Reserve, unveiled a plan to help shore up banks wobbling from too many bad mortgages by offering to swap $200 billion in treasury securities for the bad debt. While the unprecedented plan may represent sound fiscal policy, critics note it will do little to help consumers burned by the deceptive subprime loans. And some political analysts suggest the person who would have protested this move most loudly is the now sidelined Mr. Spitzer.

He alone is responsible for his behavior, but those inclined to see conspiracies might suspect his enemies in the Bush administration saw the opportunity to take Mr. Spitzer out of the game. The more skeptical might conclude the governor took himself out with his imprudent behavior. Either way, long after the late night TV talk show jokes fade away, the U.S. economy – and real people who lost their homes – will still be reeling from the subprime come-on.