Predatory lenders, beware: Paul Sarbanes is here! Democrat Sarbanes, the new head of the Senate Banking Committee, is instilling fear as well in borderline predatory lenders, such as banks whose subprime affiliates depend on third-party brokers to do their dirty work.
Though Sarbanes stresses there are "legitimate" subprime lenders, he warns that his goal is to crack down on lenders that are engaging in "outrageous practices." This, says Sarbanes, "is an area that cries out for attention and remedy."
In other words, commercial banks that own subprime firms such as Citigroup (Associates), Bank of America (Equicredit), National City (First Franklin) could find themselves on the defensive.
On the other hand, Sarbanes is expected to be sympathetic to Fannie Mae and Freddie Mac, the two Congressionally chartered mortgage giants that are under attack by big banks and mortgage companies. Unlike his predecessor on the banking committee, Phil Gramm, who agreed with many bankers that Fannie and Fredie are encroaching on the private markets, Sarbanes is pro-housing and believes Fannie and Freddie play an essential role in ensuring liquidity to the mortgage market. He sees no need to tamper with them.