“At a March 2007 hearing, the Banking Committee documented the regulatory foot-dragging by the Federal Reserve Board (FRB) and other federal regulators in addressing predatory practices in the subprime market.  Indeed, at that hearing, the Federal Reserve acknowledged that not enough had been done.  Earlier this week, we learned that the former Chairman of the FRB explicitly rejected a proposal in 2000 from Edward Gramlich, one of his Board colleagues, that would have extended oversight of the Federal Reserve to a significant segment of the subprime market. 

“It is important to note that this regrettable decision was made prior to the run-up of the current crisis, in which 2.2 million families may face foreclosure at a cost of $164 billion in lost home equity.  We will never know how many of these problems might have been avoided had the FRB acted on Governor Gramlich’s proposal.

“Now, the current Chairman and his colleagues have a new opportunity to confront the epidemic of predatory lending.  They must not repeat the mistakes of their predecessors.  The Federal Reserve has a clear duty under the Home Ownership and Equity Protection Act to extend substantive protections to subprime borrowers, as my colleagues and I have outlined numerous times.  I urge the Board to fulfill its duty as quickly as is reasonably possible.”

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