Sen. Lauch Faircloth, R-N.C., on Tuesday complained that Minneapolis-based Norwest Corp. and other bank holding companies are taking advantage of low-income individuals by making home equity loans at 125% of a property's value.
"I am greatly troubled when we see very reputable financial institutions, through their subsidiaries, getting into what I would consider very precarious, reckless, bordering-on-sleazebag lending," he said at a hearing on risky consumer lending.
Sen. Faircloth, who chairs Senate Banking's financial institutions subcommittee, also warned that many big financial firms are abusing the thrift charter.
"They have no obligation to make one single home mortgage," he said. A 1996 law allows credit card loans to be counted toward a thrift's residential lending requirements.
"The number of new applications is rising dramatically," Sen. Faircloth noted. "I am concerned about the intentions of those getting into the thrift industry now."
Witnesses from the Federal Deposit Insurance Corp. and the Office of Thrift Supervision said they would continue to monitor consumer lending trends.