By Mathew Padilla
California Blogger

James Tierney, a former attorney general of Maine, is working with several current attorneys general on the subprime meltdown.  He is director of the National State Attorneys General Program at Columbia Law School.  I quizzed him on what he's doing and how state prosecutors hope to stem the tide of foreclosures and prevent bad lending practices in the future.

PADILLA:  Last year, several state attorneys general settled with the parent of Ameriquest Mortgage for $295 million over allegations that the company overcharged and defrauded consumers.  How effective was that settlement at stopping similar practices at other lenders?
TIERNEY:  The Ameriquest case, and the Household case before it, was successful in returning hundreds of million of dollars to defrauded citizens as well as eliminating some of the most egregious fraudulent practices.  Because the attorneys general and a few not-for-profit advocates were alone in this fight, the fraudulent behavior continued.  Senior members of Congress from both parties did not rally to support the attorneys general in their effort to limit fraud, and the White House successfully worked to reduce the jurisdiction of attorneys general in the lending area.  Moreover, the Wachovia v. Waters Supreme Court decision held that a federal agency, the OCC, was the exclusive enforcer of consumer laws when dealing with federally chartered institutions.

PADILLA:  If you were alone in a room with the current and past heads of all the big subprime lenders, what would you say to them?
TIERNEY:  I would say, "It is time to put the past behind us and focus on the almost 2 million hard-working Americans who are facing home foreclosure in the next 18 months.  This is not the time to point fingers at each other over past mistakes.  It is the time to roll up our sleeves and find ways to modify existing loans so that we avoid a personal and economic meltdown that will hurt the lives of all Americans."

PADILLA:  What are some ways state attorneys general will try to help borrowers avoid foreclosure and lenders restructure troubled loans?
TIERNEY:  State attorneys general have always been committed to fighting fraud and assisting the victims of fraud.  Because it is beyond question that a significant number of Americans who are now facing home foreclosure are fraud victims, state attorneys general are meeting and discussing ways to protect the consumers of their states.  Attorneys general are approaching this looming crisis in a number of ways.  Because much of the fraudulent behavior was perpetrated by individuals and companies that are no longer in business, it is difficult for the attorneys general to meet this problem solely by prosecuting fraud.  For that reason, attorneys general are focusing on meeting with various members of the lending industry and pressuring them to modify existing loan agreements with individual consumers who are facing the loss of their homes.

PADILLA:  What is the National State Attorneys General Program at Columbia Law School?
TIERNEY:  The purpose of the National State Attorneys General Program at Columbia Law School is to provide a legal education center and research-and-policy think tank for the development and dissemination of law-based approaches that attorneys general are able to use in the carrying out of their civil and criminal responsibilities.

PADILLA:  Does the federal government need to expand its oversight of lenders that don't take deposits, such as saving and checking accounts?
TIERNEY:  Yes. The insensitivity of the federal government to the fraud visited against millions of Americans cannot be understated.  The current administration fought hard on the same side of the predatory lenders in order to tie the hands of state attorneys general.  Clearly, all the federal agencies---the OCC, the FTC, the DOJ, and the Fed itself---must now put their shoulders to the wheel.  Former Fed board Chair Alan Greenspan's lame attempt at remorse in looking back and saying that he had "underestimated" the sub-prime problem should be followed by affirmative federal action on behalf of the victims of fraud.