Dan Gelfand/The Hoya Elliot Spitzer said Tuesday that the states agree that new loan rules are “bad policy” in a speech at the Law Center.

New York State Attorney General Eliot Spitzer said that new regulations are aiming to preempt state laws that protect consumers from national banks which engage in predatory lending. The regulations are being set by the Office of Comptroller of the Currency, a federal agency that supervises national banks. Spitzer addressed an audience of law school students and faculty at Georgetown Law Center Tuesday afternoon.

Spitzer called access to capital “a prerequisite to success.” He said predatory lending has become “pervasive” and he defined a predatory loan as “leaving the customer worse off than if they did not borrow at all.”

Spitzer criticized the Bush administration for “[first] pretending that they want [the states] to enforce the law, then putting hand-cuffs on state entities.” He said the administration preaches new federalism, but when the states enforce the law, the administration starts to “speak another language.”

Spitzer said this time the administration’s preemption attempt will not succeed.

“Public opinion sees [that] if you don’t enforce the law, we will,” he said.

Spitzer said when 50 states agreed that “predatory loans should not be permitted,” the investment bankers decided to “go to Washington and get somebody to preempt states.”

He said OCC is financed with the fees generated by the banking industry. According to Spitzer, OCC and the states have dual jurisdiction over federally chartered banks. “Even though OCC has the power [to ensure the banks’ fiscal stability], states can enforce consumer protection laws,” he said.

Spitzer said 50 states and 50 bank superintendents call the new regulations “bad policy and misinterpretation of law.” He said the banks gave a clear message that they “don’t want the states to get into [their] business against predatory lending.”

Spitzer gave the example of another consumer, whose bank, after 30 years, still kept deducting money from his checking account for a 25-year mortgage. He said he “did what lawyers do, went to court.” He said they are not planning to settle with this consumer’s bank without severe penalties.

“If we were removed, nobody would be there to protect consumers,” he said.

Spitzer said the administration “refused to enforce the law” not only in the predatory loan case, but also in other cases since he took office.

The first case was the Clean Air Act, he said. He said the pollution caused by the Midwestern power companies was responsible for acid rain on the East Coast. He said he formed a coalition with other East Coast states, and the coalition sued the power companies and won victories in Ohio. Meanwhile, he said, the administration tried to “destroy and eliminate the obligation of power utilities” to clean their emissions.

The second case was the Wall Street securities case, Spitzer said. Ten brokerages signed a $ 1.4 billion settlement with Spitzer in April 2003. The brokerages were accused of doing “faulty stock research,” according to a Time Magazine report.

Dr. Robert Cumby from the economics department says that a number of analysts in the financial industry were “more optimistic about the prospects of a number of companies than they themselves probably believed.”

Spitzer said the administration tried to “shackle them” in this case, too. “Is this new federalism?” Spitzer asked.

Spitzer said the law enforcement agencies should be “reasonable but tough, not kind and gentle.” When asked why he preferred to settle with the brokerages rather than taking the case to trial, Spitzer said such a trial would shock the capital system.

His “first mission [was] to resurrect some core ethics in equity research,” Spitzer said. In order to reach this goal, he said, they had to bring all the brokerages together. He said now they have “changed the rules [of equity research] and set up new rules.”

Spitzer said he was skeptical of new federalism when he was in law school, but when he took office in Jan. 1, 1999, he decided to accept power from “anybody who is willing to give power.”

“I’m a convert for three more years,” he said when asked whether he was still a skeptic of new federalism. “The role we can play is to fill the void … and step in,” he said.

He said states cannot efficiently regulate the securities market, so there should be a “healthy dynamism between state and federal agencies” to enforce the law.

“Competition works,” he said. “When they see us doing it, they ask, `why are we not doing it?'” He said he is expecting to see a “revitalized federal regulatory effort as a result.”

“Going into government service is the best way to practice law,” he said, adding that he tries to “creatively use law as a tool for social change.”