U.S. Seeks to Halt Spitzer Bank Probe

New York Atty. Gen. Eliot Spitzer said Friday that his probe of national banks had shown a racial disparity in lending practices that might break laws, even as the federal government moved again to shut down the investigation.

The probe to see whether minorities are being charged higher interest rates on home mortgage loans has already shown a “significant racial disparity that could violate state civil rights laws,” Spitzer said.

He made the statement as the U.S. Treasury bureau responsible for oversight of the national banking system asked a judge Friday to block Spitzer’s probe of the lending practices of national banks.

On Thursday, the Office of the Comptroller of the Currency, an arm of the Treasury Department that oversees the banking system, and the Clearing House Assn., which represents national banks, filed lawsuits in Manhattan.

At a brief hearing Friday, lawyers on all sides were instructed to return to court Monday to argue whether Spitzer should be allowed to continue his probe while the contest over state and federal rights progressed through the courts.

“While such a move was expected from the banks, it is shameful that a federal regulator would join in an effort to shield the banks from scrutiny by state regulators,” Spitzer said.

Spitzer said the Treasury Department’s efforts to protect banks had been opposed by all 50 state attorneys general and all 50 state banking superintendents.

In court papers, the Office of the Comptroller of the Currency said a federal judge should immediately suspend Spitzer’s demands on the banks because letting his probe proceed would cause irreparable harm to the office’s supervisory powers.

The office said a series of federal court cases in California, Connecticut, Michigan and Maryland had shown that federal law prohibited state authorities such as Spitzer from exercising their powers over the banks.

Spitzer said the suggestion that his probe would interfere with federal supervision of banks “defies common sense and a century of joint state and federal oversight of the banking industry.”

Clearing House Assn. spokesman Greg Berardi said the association, made up of leading commercial banks, had worked cooperatively with Spitzer’s office for a long time and filed a lawsuit only when it became clear that Spitzer was threatening to take the industry to court.

“We believe federal regulators are doing an effective job at ensuring that antidiscrimination laws are enforced, as they are required to do under law,” Berardi said.