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Campaign 2006 - Predatory Lending as a Sleeper Issue

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Back in May, I noted how the most bought-off forces in Congress were trying to follow up their passage of the credit card industry-written bankruptcy bill with a new bill to open the door to all sorts of predatory lending practices. Specifically, the bill would invalidate state laws regulating predatory lending -- yet another move by a supposedly conservative federal government to usurp state power. That bill is being spearheaded by Ohio Rep. Bob Ney (R) -- a guy so corrupt, he's become somewhat of a household name in political circles. The conventional wisdom in Washington is that laws regulating banking practices are too esoteric to become major political themes in a campaign year. But it is becoming clear that is not the case. On the contrary, as consumer debt is hitting record levels and the middle class economic squeeze is subsequently worsening, debates over these laws are becoming flashpoints for broader debates over how much power our government has ceded to Corporate America, and how that power is being used to bleed ordinary citizens dry.

Today, the Wall Street Journal reports that "at least 10 states -- including New York, West Virginia and New Mexico -- have adopted comprehensive laws in the past few years crafted to curtail tactics commonly used by unscrupulous lenders, including excessive penalties for paying off a loan early, inflated interest rates and frequent refinancing of a mortgage that does little to improve a buyer's finances but generates fees for lenders and brokers." Meanwhile, "other states are taking it one issue at a time: Maryland has restricted prepayment penalties, for instance. And "still others are considering proposals to subject lenders to greater liability if they are found to have duped home buyers."

The issue is coming to a boil in Ohio, a state that has been ravaged by corporate-written policies like "free" trade pacts, and a state that is arguably the most politically important in the country, both in 2006 and 2008. Ohio "has the nation's highest mortgage-foreclosure rate" and "state legislators there are weighing measures that would allow the state attorney general to prosecute dubious lending practices and would establish a new legal duty for lenders and middlemen to look out for consumer's best interests, similar to the duty stock brokers have." Ohio's House of Representatives passed the bill this week, but the Senate, rejected it, and mortgage-industry lobbyists are furiously trying to prevent its passage. They claim that restricting predatory lending would mean less credit available to the poor -- a claim debunked by studies the Journal cites that show "credit availability and pricing haven't been adversely affected in areas where stringent restrictions have been enacted."

The situation presents a tremendous opportunity both in Ohio and nationally. In Ohio, you have a senior Republican Ohio Congressman Bob Ney pushing corporate-written legislation to preempt populist legislation moving through his own state legislature that would protect Ohio citizens from predatory lending. This is happening, mind you, in a year where the Democrats have Rep. Sherrod Brown (D) at the top of their ticket -- a guy who has been a strong consumer advocate, and who voted against the previous Bankruptcy Bill. And Brown just happens to be running against reliable corporate shill Sen. Mike DeWine (R), a guy who has pocketed more than $400,000 from the banking industry, and who voted for the Bankruptcy Bill. What a terrific contrast to highlight as these corporate power issues finally become more prominent in politics.

Nationally, it's the same. As I note in my upcoming book Hostile Takeover, the election is going to occur in an environment where public anger over corruption is elevated, thanks to the series of high-profile GOP corruption scandals. The issues of predatory lending and credit card/banking industry abuse in general evoke outrage from citizens of both parties -- meaning support of an aggressive crackdown could allow Democrats to actually play offense in red America -- as long as they have the guts to confront Big Money interests, and make that confrontation central to their campaign message.