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Bill Shipp - The bankers' tale

Gov. Roy Barnes drove one of the last nails into his political coffin in 2002. He forced passage of a law to rein in predatory lenders gone wild. Lobbyists for lenders were stunned at the way they were run over by Barnes, but they swore to get even.

The law didn't remain intact but a year. Gov. Sonny Perdue and his Republicans trashed it as one of their premier acts after taking over. A goodly number of turncoat Democrats, elected on pro-consumer platforms, joined in the crusade to restore predatory lending to its former unregulated vigor. After all, it had been one of the state's most profitable industries.

A lot has happened since Barnes took a poke at the predators.

In the legislative session of 2003, banking lobbyists warned that the Barnes law was so restrictive that it would shut down the mortgage business in Georgia. No one (meaning Wall Street) would buy such encumbered loans, moaned Georgia's alarmed lenders.

Sen. Bill Stephens, Perdue's Senate floor leader, announced that his boss, the governor, was about to receive a letter from mortgage giant Freddie Mac saying that Barnes' effort to curb predatory lending would strike a damaging and perhaps fatal blow at Georgia moneylenders. Such a warning never arrived, yet news that it was on the way was enough to do the job.

The Barnes law was amended to death. Team Perdue killed provisions cracking down on lending rip-offs and high-fee mortgages made to people who could not afford them. Happy days returned to the lenders' boardrooms. The building boom continued. Just about anybody could get a loan.

By the end of 2003, the number of foreclosures in Georgia shot up about 60 percent, from 8,416 in 2002 to 14,043.

In the same year in Georgia, the FBI reported a potential loss of $15.4 million in fraudulent mortgages. By 2004, the estimated mortgage damages jumped nearly threefold, to a whopping $44.2 million.

Also in 2004, Fulton and DeKalb became the first- and third-ranked counties in the nation with the highest rates of mortgage fraud, according to the Mortgage Asset Research Institute.

By 2007, Georgia had the seventh-highest foreclosure rate and one of the highest bankruptcy rates in the nation. In addition, delinquent borrowers trying to avoid going under discovered that Georgia had perhaps the weakest consumer protection laws in the country. Borrowers' attorneys reported difficulty even in tracing loans that had been sold and resold (and resold).

The few months in which Georgia could boast of having a model consumer protection law was mostly forgotten.

Wall Street banks, which allegedly had warned Georgia of being overly regulated, were on the ropes, hemorrhaging billions of dollars in paper that had become virtually worthless. The stock market reeled.

Georgia's elected leaders appeared oblivious to the growing crisis, partly triggered by the imprudent lending practices in their own backyards. Several prominent lawmakers, led by Speaker Glenn Richardson, continued to pound the table in favor of massive tax cuts even as state revenues sagged and a recession appeared inevitable.

While the Legislature remains in session and on the verge of chaos, Gov. Sonny Perdue packs his bags for an extended trip to China.

And state Rep. Ron Sailor, who had played a key role in torpedoing the lending regulations, waves goodbye to the cameras as he departs the Capitol. Sailor had resigned his House seat after pleading guilty to federal money-laundering charges. He also had set a new record for truancy in the General Assembly, having missed more than 90 percent of the votes in that body.

Ironically, Sailor will be remembered most for a single committee vote he cast in 2003. Sailor, a Democrat, cast the deciding vote on the House Banking Committee to gut Barnes' law restricting predatory lenders.

One might wonder whether some old-timers had lost their voices and their memories as they watched in silence while Perdue and his allies ripped apart regulations to protect consumers. The governor had traveled this route before.

In the 1990s, then-state Sen. Perdue led the legislative charge to deregulate the sale of natural gas. As the bill sailed to passage, he promised that coming lower gas prices would be a boon to Georgia consumers. Observers at the time said Perdue enjoyed his finest days as the pied piper for gas deregulation. And look what happened. Consumers were forced to become expert in natural gas-price speculation to avoid being swamped by the ensuing high prices.

You can reach Bill Shipp at P.O. Box 2520, Kennesaw, GA 30156, e-mail: shipp1@bellsouth.net, or Web address: billshipponline.com.