Sunday's Washington Post includes a huge expose blaming the Office of Thrift Supervision for under-regulating, and thus contributing to the mortgage crisis:
In the parade of regulators that missed signals or made decisions they came to regret on the road to the current financial crisis, the Office of Thrift Supervision stands out.I've no clue whether the Post is right; I await reactions from MaxedOutMama and Carpe Diem.
OTS is responsible for regulating thrifts, also known as savings and loans, which focus on mortgage lending. As the banks under OTS supervision expanded high-risk lending, the agency failed to rein in their destructive excesses despite clear evidence of mounting problems, according to banking officials and a review of financial documents.
Instead, OTS adopted an aggressively deregulatory stance toward the mortgage lenders it regulated. It allowed the reserves the banks held as a buffer against losses to dwindle to a historic low. When the housing market turned downward, the thrifts were left vulnerable. As borrowers defaulted on loans, the companies were unable to replace the money they had expected to collect.
6 comments:
The OTS truly has covered itself with shame. Seriously.
Yeah, but are they different from OFHEO, the group that was warning Congress in 2004 about irregularities in the accounting acts of the FMs?
And whether they are or not, if Congress tells one oversight group, essentially "Oh, just STFU, 'We want to roll the dice some more'" (exact words, pretty much) -- PLEASE, PLEASE, PLEASE tell me why the HELL should ANY oversight group stick their necks out?
Sorry, you pound any head that sticks into the hole you're digging for yourself, don't be surprised if no one wants to stick their heads in and warn you that you're about to be unable to get out of the pit you're digging.
I haven't the economic expertise to venture a knowledgeable opinion as to the OTS culpability in this crises.
Economic expertise isn't needed however to know that bureaucrats do not buck Congress or the President.
They go along to get along and ALWAYS cover their ass.
If Congress and the President wanted prudent oversight...they'd have gotten it.
> If Congress and the President wanted prudent oversight...they'd have gotten it.
The problem lies in how much are you willing to fight for it.
And when the people aren't calling for it, gee, what a surprise that the pols aren't willing to fight for it, either?
The people *should* have been made aware of the problems long before they reached a crisis, but the Media were too busy headline reporting the Iraq Body Count to be bothered with such "unimportant frippery".
The article makes clear that the Treasury Department--which oversees National Banks--regulated appropriately (which is why Countrywide switched to a thrift). Question: Since State and Federally chartered banks now offer mortgages, why not end the problem by making the thrifts become banks and shutting down the OTS?
Carl that is actually one of the suggestions in the scheme earlier put forth for revising regulation.
In all fairness, the current round of banking US disaster began back in the 1990s. I am looking for a Harvard paper I remember reading just so I can beat up on the Ivies. A lot of stuck-up do gooders combined with politicians to create a nightmare.
One of the points not covered in the article is that funding for all regulators was cut. OBH is correct.
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