Wednesday, December 9, 2009

IL Attorney General Lisa Madigan: Don't Preempt State Regulatory Power

Two amendments were re-introduced in the U.S. House Rules Committee on Monday that will seriously undermine needed finance reform. Amendment #88, sponsored by Walter Minnick (ID) and others, would completely do away with the proposed Consumer Finance Protection Agency (CFPA); Amendment #141, sponsored by Melissa Bean (IL) and others, would hamstring regulatory efforts at the state level.

Background: You will find an update on the overall financial reform package, the Wall Street Reform and Consumer Protection Act (H.R. 4173), here: In the Public Interest: Rein in the Financial System That Failed. The toxic amendments are discussed here: Rep. Minnick Proposes Scrapping CFPA, Embraces Chamber’s Consumer Protection Model. Elizabeth Warren, head of the Congressional Oversight Panel, explains why American needs a Consumer Financial Protection Agency in the video at this page: Reining In Wall Street.

Yesterday, on a conference call hosted by Americans for Financial Reform, Illinois Attorney General Lisa Madigan explained why financial reform is so important and why the amendment re-introduced by Illinois Representative Melissa Bean should be withdrawn a second time. The main part of Attorney General Madigan's remarks appear below:
Let me give you the perspective of a state Attorney General. I have been Illinois State Attorney general for nearly seven years. Since taking office on January 1, 2003, I have had to focus on protecting people, borrowers and homeowners, from unfair, deceptive and discriminatory mortgage lending practices.
Since I have been the Attorney General, we have investigated some of the largest sub-prime lenders in the country: in 2003 Household Finance, in 2006 Ameriquest, in 2007 and 2008 it was Countrywide, and in 2009 Wells Fargo. After uncovering and documenting their predatory lending practices, we have either settled with or sued all those companies just mentioned, for putting people into loans that they didn't understand and they couldn't afford. In many ways we have had to out of my office do all that we possibly can to keep people in Illinois in their homes.
To give you just a quick perspective on that, I set up a homeowners'  help line about a year and a half ago and we have had approximately 19,000 Illinois homeowners call us about problems with their loans, trying to stay in their homes and trying to get modifications. We're looking at right now, and I think these numbers are only through October, 140,000 foreclosure filings in the state; like every other state, the highest number in years.
So I don't think that anyone at this point disputes that the practices of sub-prime lenders led to the foreclosure crisis, which ultimately was at the heart of our country's financial collapse. As an Attorney General I also am able to put in perspective that over the last 15 years, as we have seen state enforcement authority preempted, we have seen a rise of these predatory lending practices. I also don't think that anybody who knows the history would dispute that the only people bringing enforcement actions to hold lenders accountable and to try to save people's homes were state Attorneys General. We repeatedly tried to warn the feds about what was going on in our home states, in our communities, but regulators were blocking our efforts. And then, in addition to that, they did nothing to prevent the economic disaster that ensued.
We responded, and by "we" I mean not just the Illinois Attorney General's office but, we as state Attorneys General, and state banking regulators, and state legislatures across the country. We've responded not just with lawsuits but also with laws to protect and prevent the situation from happening again. Because the fed's didn't recognize or didn't want to respond, ultimately, as we all are painfully aware, American taxpayers, so the same people who are losing their jobs and are losing their homes, have had to bail out the financial services industry to the tune of 700 billion dollars last year.
I give that as background because it makes it very clear that the need for a CFPA has never been more apparent. The consumers need their interests considered and protected. It cannot just be a situation where banking regulators get to determine what is best for all of us because their priority is, what is best for a bank. And far too often we have seen that what is best for a bank may not be and has not been what is best for consumers and what is best for our economy.
Ed also mentioned as we all know many of those entities whose actions perpetrated this economic meltdown are fighting the creation of the CFPA and they are fighting the critical role that state Attorneys General and state banking regulators play in protecting their residents from abusive lending practices. Some of the amendments that are being proposed would limit state Attorney General authority and ability to bring lawsuits as well as to pass tougher laws in response to clearly abusive practices.
So, two points I want to leave you with:
1. Don't preempt state Attorneys General. There needs to be state level enforcement, particularly when the feds don't act. And it's a situation that the feds shouldn't be the ones intermediating what states decide to do vis-a-vis banks and lenders.
2. States need the ability to legislate to protect their residents when they see a clear problem. That goes the point about how the federal rules and the federal laws need to be a floor and not a ceiling, so we can legislate above if necessary as has been the case during this lending crisis.
What's going on now with some of these amendments is an attempt to prevent us from doing that. As others have said, there is no question that the current system of consumer protection failed. And in the end, financial reform is about restoring responsibility and accountability to our financial system. And it is about making sure that our financial system serves the interests of hard-working families and individuals and not just those of the big banks.

Support our Attorneys General and give some muscle to state regulators. Support H.R.4173. Call for defeat or withdrawal of Minnick and Bean amendments. Call your congressperson today and tomorrow and every day until the debate is over.

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