Judge blocks Spitzer probe of mortgage loans
INFRINGED ON FEDERAL AGENCY
NEW YORK •
A U.S. judge has stopped New York Attorney General Eliot Spitzer from investigating whether residential lending practices are discriminatory at national banks, including Citigroup Inc., JPMorgan Chase & Co. and HSBC Bank USA.
U. S. District Judge Sidney Stein issued an order yesterday blocking Mr. Spitzer from demanding information from the banks and from suing them to enforce state fair lending laws.
The decision comes in a suit filed by the Office of the Comptroller of the Currency, which claims it has exclusive authority to regulate nationally chartered banks.
“ This is a big legal victory for Citigroup, Wells Fargo, HSBC and JPMorgan Chase,” Jaret Seiberg, an analyst with Stanford Washington Research Group, wrote in a note to clients today. “These four banks no longer must worry that Spitzer will try to force them into fair-lending settlements.”
The decision stops Mr. Spitzer’s investigation, which began earlier this year, and may discourage other attorneys general from trying to enforce their own states’ laws against national banks.
“The law authorizes this office to protect New Yorkers against discrimination by all lenders that do business here,” Mr. Spitzer’s office said in a statement.
“ We urge the banks not to hide behind today’s rulings, but instead to stand up and voluntarily give this office the information necessary to answer the critical question: Is there ongoing discrimination?”
Mr. Spitzer will appeal the ruling, according to the statement from his office.
Bob Garsson, a spokesman for the OCC, didn’t return telephone messages seeking comment on the decision.
“The New York State attorney general may not exercise visitorial powers over national banks in connection with an investigation into the banks’ residential lending practices,” Judge Stein wrote. “ This opinion says nothing about whether it is better public policy to vest visitorial powers over national banks in state attorneys general as well as in the OCC. That is a matter for the legislative and executive branches of government to determine.”
Mr. Spitzer began his investigation, with the support of several consumer and civil rights groups, after analyzing 2004 loan data that he said showed differences in loan prices that may have been based on the race of borrowers.
He sent inquiry letters in April to Citigroup, JPMorgan Chase, HSBC, Wells Fargo & Co. and other national banks, telling them that racial disparities in the loan rates “might indicate a violation of state and federal laws prohibiting discrimination in lending,” Judge Stein said.
The OCC sued in June to block the probe and a one-day trial was held in September.
Judge Stein also ruled yesterday in a related suit filed by the Clearing House Association, which represents commercial banks, that the federal Fair Housing Act does not give Mr. Spitzer the authority to enforce alleged violations of its fairlending provisions.