Spitzer Loses Ruling on Banks

New York Atty. Gen. Eliot Spitzer’s efforts to quiz major banks over the fairness of their home lending practices were halted Wednesday when a U.S. District Court judge ruled this was federal jurisdiction.

The U.S. Office of the Comptroller of the Currency, part of the Treasury Department, and the Clearing House Assn., an association of banks, are suing Spitzer over his bid to probe whether banks charge minority borrowers more for mortgages.

At issue is whether federal regulators have primary oversight of lending practices, or whether states may enforce their own, stricter laws with federally chartered banks.

On Wednesday, Judge Sidney H. Stein ruled a questionnaire sent to banks by Spitzer was prohibited under the National Bank Act and enjoined the New York attorney general from starting any legal action against the federally chartered banks.

The ruling was a loss for Spitzer.

“Judge Sidney Stein ruled against our office, but we will appeal,” said Spitzer spokesman Brad Maione.

The American Bankers Assn. said Wednesday’s decisions validated the Office of the Comptroller of the Currency’s position as the primary regulator for national banks.

“Their impact will be far reaching. Not only do the decisions address whether a state attorney general can exercise its visitorial powers over national banks, they affirm the [Office of the Comptroller of the Currency’s] preemption regulation,” Edward Yingling, chief executive of the American Bankers Assn., said in a statement.

Spitzer’s clash with the comptroller’s office began in April when he contacted major banks with lending businesses in New York requesting credit scores for minority borrowers and how the banks determined mortgage rates.

The comptroller’s office claimed jurisdiction in this area and in the U.S. court challenged Spitzer.

The banks and the comptroller’s office have argued that banks should be subject to a single set of laws and regulations. Working with potentially thousands of regulators would increase the banks’ business costs and therefore boost borrowing costs for consumers, the banks have argued.

But several advocacy groups, including the NAACP, have supported Spitzer’s lawsuit.