That's the multi-billion dollar question and, if you believe statements made by the late Fed Governor Edward Gramlich, it didn't and that's because Alan Greenspan opposed any action. Gramlich served on the Fed board from 1997 to 2005.

Gramlich said earlier this year that in 2000 he wanted the Fed to use its authority to send examiners to audit consumer-finance lenders and look at the growing problem of predatory lending. Then chairman Alan Greenspan opposed the move. Greenspan has confirmed Gramlich's statements on this issue. Gramlich thought this new breed of lenders were "luring many people into risky mortgages they could not afford," according to a story in the New York Times.

Gramlich wasn't the only one who warned about the problem with subprime lenders. Sheila Bair, who is now Chairman of the FDIC, warned about the problem in 2001 when she was a senior Treasury official. She wanted subprime lenders to adopt a code of "best practices," but was rebuffed by the industry. While I've seen no evidence in writing that she spoke with the Fed board at the time, I'd bet she did make them aware of her efforts. Today Bair is leading the cause in the Bush Administration to help people hurt by these predatory lending practices and encouraging mortgage interest rates on these subprime loans to be frozen for at least five to seven years.

The U.S. of Representatives moved to protect borrowers and improve lending disclosure by passing the Mortgage Reform and Anti-Predatory Lending Act late yesterday. Democrats were joined by 64 Republicans to pass the much needed bill by 291 to 127. Mortgage brokers and bank loan officers will have to be licensed and will have to register to be involved in mortgage lending - something that's been needed for years - if the legislation becomes law. No longer will they be able to make deals behind the scenes that cost borrowers more money for years in higher interest payments without fully disclosing the costs.

The bill, if passed by the Senate, would bar a lender from making a loan unless the borrower has a reasonable ability to pay and would set clear federal standards that apply to all lenders. The bill would also prohibit financial incentives to sell mortgages at higher rates than the borrower qualifies for. Brokers defend these incentives, known as yield spread premiums, as worthwhile for borrowers who want to finance certain expenses to hold down closing costs. But the higher rates cost them much more money over the life of loan. Many times the yield spread premiums are not even disclosed to the borrower. The bill's chief proponent, Rep. Barney Frank, said the bill will allow these premiums provided the borrower knowingly agrees to the higher rates.

The bill would also make Wall Street banks responsible for lending practices that violate this law even if their only involvement with the mortgage was to package and sell it as a security. This provision certainly will make banks much more cautious before putting together these securitized mortgage pools. But, banks must abide by Fannie Mae or Freddie Mac standards to sell the loans to these government-chartered entities, so a similar underwriting process is already in place and practiced regularly by the banks.

Here are some of the findings from a recent report highlighting abuses in the consumer credit industry put out by Demos, a "non-partisan public policy research and advocacy organization committed to building an America that achieves its highest democratic ideals":

One-third of cardholders are paying interest rates in excess of 20 percent.

In 1990 the lowest APR reported was 11.88 percent, and the highest 22 percent. By 2004, the lowest was 0 percent while the highest jumped to 41 percent.

1/3 accounts pay interest rates that range from more than 20 percent to as high as 41 percent.

The report also found, not surprisingly, that minorities tend to pay higher interest rates than non-minorities, probably a result of income inequality and poorer credit scores resulting from that.

This is scary stuff. I would look for, and hope for, this to become a major issue in the upcoming elections. Rather than attacking Hillary Clinton for donating money to News Corp. (NYSE: NWS), a red herring issue if ever there was one, candidates from both parties should be lining up to look for solutions, education and regulation, to put a stop to the Americans whose lives are being destroyed by debt.

To learn more about the crisis of consumer debt, pick up a copy of Maxed Out.

American Express is changing its ad campaign. The new catchphrase: "Are you a cardmember?" American Express will be spending four to five hundred million dollars on the campaign, which gives you some idea of how much money these guys are making. My favorite quote from the New York Times article about the change: Mr. Hayes said that the "My life" campaign "has done a great job redefining the notion of membership" as well as reminding consumers that "American Express is a company, not just about transactions, but about relationships."

Ohh ... So credit card companies are about relationships! Well, according to Indianapolis Mental Health counselor Dawn Kozarian, financial problems cause more divorces than adultery. And in his book Maxed Out, James Scurlock tells the story of a young man who killed his entire family as a result of stress over credit card problems. So I guess that credit cards really might involve relationships in that sense. But I somehow doubt that's what Mr. Hayes was talking about. Perhaps he was referring to the relationship between the credit card company (and its bill collectors) and the consumer, in which case Scurlock could also tell you a story about a young lady who committed suicide after receiving months of harassing and threatening phone calls from a collection agency. But I don't think that's what Mr. Hayes means either.