William G. Gothorpe, president and chief executive officer of Dedham Institution for Savings in Dedham, Mass., says the federal government is going after the wrong folks in its crusade against predatory lending.

He warns that the saber-rattling could have the unintended result of driving banks from the subprime loan market.

"The point I have tried to make is that you can regulate the banking industry to death, but you are really missing the target in doing so," he says in an interview. "Very few banks are doing predatory lending."

While $655 million-asset Dedham does not make subprime loans, Mr. Gothorpe says banks that do serve this market are already scrutinized by their federal or state regulators, who are attuned to violations of consumer protection laws. More regulations will only make bankers less willing to make subprime loans, he says.

"All you are doing is opening the door to really, really disreputable people," he says, "and you'll wind up with more predatory lending, not less."

Last week Mr. Gothorpe took his views to the Federal Reserve Board, testifying on behalf of America's Community Bankers at a Fed-sponsored hearing in Boston. He urged regulators to "take steps to make sure that unsupervised, nonbank lenders undergo more supervision."

Many observers claim the Fed can reduce predatory lending by acting on the authority it has under the Home Ownership and Equity Protection Act to require more disclosures from lenders that charge high rates or fees.

But Mr. Gothorpe calls that idea "ludicrous" and argues that the Federal Trade Commission is actually in the best position to address these lending abuses.

"The FTC is one of the few organizations that have the likelihood of expanding a regulatory umbrella to cover these people," he says.

The hearing was the second in a series of four being held by the central bank to explore whether Truth in Lending Act provisions give consumers adequate protection in the home equity loan market. The Fed's first hearing was held in Charlotte, N.C., last month. The third will be in Chicago on Aug. 16 and the final one will be in San Francisco on Sept. 7.

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