Reading Newsweek's profile of Eliot Spitzer's efforts to edge back into public life is a sort of dizzying experience: It is the thing it's about. On the one hand, Newsweek is talking to Spitzer about whether he can ever reenter the political conversation. On the other hand, by talking to Newsweek and getting a cover story, Spitzer is reentering the political conversation. It's all a bit weird.But Spitzer deserves to be heard. In 2004, he wrote a cover story for The New Republic entitled Bull Run. Like a lot of article from that era, it was an entry in the "How Can Democrats Win?" genre. Spitzer's answer was to rediscover regulation as a pro-market value. To make his point he gave three examples: The conflicts of interests that riddled investment banks amidst the tech boom, the costs of pollution, and the scourge of, yes, subprime loans. The article doesn't appear to be online, but here's a quote from Nexis:Unfortunately, our belief in the importance of equal opportunity and nondiscrimination is too often forgotten when it comes to the debate over whether and how to police the market for home mortgages. In poor and working-class communities across the nation, predatory mortgage lending has become a new scourge. Predatory lending is the practice of imposing inflated interest rates, fees, charges, and other onerous terms on home mortgage loans--not because the imperatives of the market require them, but because the lender has found a way to get away with them. These loans (which are often sold as refinance or home improvement mechanisms) are foisted on borrowers who have no realistic ability to repay them and who face the loss of their hard-won home equity when the all-but-inevitable default and foreclosure occurs. When lenders systematically target certain low-income communities for loans of this sort, as they often do, the result is more insidious. Costs are imposed and burdens inflicted in a manner and to a degree that is discriminatory by race.On the surface, predatory lenders are doing nothing more than seizing a "market opportunity" for refinancing or home-improvement loans in lower-income communities. To be sure, such communities desperately need credit. And it stands to reason that the prices and terms will be less favorable to borrowers whose financial circumstances are troubled or limited. In this sense, predatory loans are the natural outcome of a competitive market.[...][But] it is difficult to imagine a less rational, less efficient economic practice than lending of this sort. At the micro-level, it results in a gross misallocation of costs-- imposing higher costs than the market requires on those least able to bear them. At the macro-level, it denies lower-cost capital to whole classes of persons who would otherwise qualify for it and to neighborhoods whose economic vitality depends on it.In these circumstances, government must step in to curb predatory lending and encourage the flow of fairly priced capital to sectors where it is needed and will be well-used. Filling a gap left by federal inaction, state enforcement efforts in this arena have centered on identifying the valid economic criteria considered in mortgage underwriting and compelling lenders to focus on those factors--not on preconceptions, prejudices, or predatory instincts--in determining how to price home mortgage loans. The point is not to protect people from their own bad decisions or, conversely, to guarantee that mortgages be granted to specific persons or groups on specific terms--that would violate the principle of market freedom. The point is to support equal opportunity and to ensure that borrowers are charged rates and fees based upon their status and qualifications as economic actors in the mortgage market, not upon their diminished access or market savvy or their race.
It's pretty prescient stuff. I agree, of course, that governors shouldn't patronize prostitutes. But there are bigger things to worry about. And New York, currently, doesn't have particularly impressive people worrying about them. Andrew Cuomo's done a good job taking advantage of the crisis but not a terribly good job predicting it. Indeed, there's fairly persuasive evidence that he worsened the housing market when he was Secretary of HUD under Clinton. Paterson is, of course, proving a disaster. Meanwhile, Silda Spitzer, who was most directly endangered by her husband's prostitution, seems to have decided that she prefers life with Eliot Spitzer to life without him. Maybe it's time New York asked itself the same question.
