Spitzer’s Bank Case on Lending Can Proceed

A federal judge Monday refused a request by a bank trade group to block an investigation by New York Atty. Gen. Eliot Spitzer into whether lenders charge members of minority groups higher interest rates than others.

U.S. District Judge Sidney Stein declined requests by the Clearing House Assn., which represents commercial banks, for a temporary injunction to stop Spitzer’s investigation on grounds he has no authority to regulate them. He said he would decide later whether to ban Spitzer permanently on those grounds.

The U.S. Office of the Comptroller of the Currency, which regulates banks, backed the financial institutions’ request.

“I want to decide this rather expeditiously,” Stein said at a hearing in New York. “These are serious issues.”

The currency office and the trade association contend Spitzer lacks the legal authority to investigate mortgage lending. They said in separate lawsuits that only a federal banking regulator may conduct such an inquiry. The banks said state oversight would add to their regulatory burden.

Spitzer said last week that he had evidence that banks broke state civil rights laws and called the federal agency’s lawsuit “shameful.” He told Stein in a letter Monday that he could find no evidence that the currency office had taken any enforcement action against banks because of race bias in bank lending.

Spitzer in April began investigating the mortgage lending practices of at least three banks -- JPMorgan Chase & Co., HSBC Bank USA, a unit of HSBC Holdings, and Wells Fargo & Co.’s Wells Fargo Bank unit, the Clearing House Assn. said in its suit.

Spitzer said in his letter Monday that federal mortgage data showed that black customers were three times more likely to receive high interest loan rates at Wells Fargo, two times more likely at JPMorgan and Citigroup Inc. and 1.5 times more likely at HSBC.