In 2005, then NY AG Eliot Spitzer and his staff noted that federal housing data indicated that a significantly higher percentage of high-interest mortgage loans are issued to African-American and Hispanic borrowers than to white borrowers.   Noting inaction from the relevant federal agencies (the Comptroller of the Currency (OCC) and the Federal Housing Administration (FHA)), Spitzer’s Civil Rights Division sent “letters of inquiry” to a number of national banks and their subsidiaries.

Rather than defending on the merits, the banks scurried to their friendly federal “regulators” and asked them to sue the State of New York to stop the inquiry. They also cobbled together a trade association called “The Clearing House Association” and both sued to enjoin NY and which would stop the banks from having to answer Spitzer’s letters about their potentially racially based lending practices.   Litigation ensued and the US District Court upheld the preemption in its entirety.   Today the Second Cir. upheld the OCC while remanding on the FHA.   The vote was 2-1 with the dissenting justice stating the OCC had usurped the traditional police power of the State of New York.

The banks who received the letters were HSBC (who held the Household paper), Citibank (who recently purchased the remnants of Ameriquest), JPMorgan and Chase and Wells Fargo. 

They didn’t want to sue in their own names because they didn’t want to see their names in the pleadings and because some in those fine institutions are undoubtedly ashamed of themselves. 

And well they should be.