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RedEarth Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Nov-23-08 02:09 PM
Original message
Banking Regulator Played Advocate Over Enforcer
Edited on Sun Nov-23-08 02:15 PM by RedEarth
Source: WP

When Countrywide Financial felt pressured by federal agencies charged with overseeing it, executives at the giant mortgage lender simply switched regulators in the spring of 2007. The benefits were clear: Countrywide's new regulator, the Office of Thrift Supervision, promised more flexible oversight of issues related to the bank's mortgage lending. For OTS, which depends on fees paid by banks it regulates and competes with other regulators to land the largest financial firms, Countrywide was a lucrative catch.


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.


The agency championed the thrift industry's growth during the housing boom and called programs that extended mortgages to previously unqualified borrowers as "innovations." In 2004, the year that risky loans called option adjustable-rate mortgages took off, then-OTS director James Gilleran lauded the banks for their role in providing home loans. "Our goal is to allow thrifts to operate with a wide breadth of freedom from regulatory intrusion," he said in a speech.


In the summer of 2003, leaders of the four federal agencies that oversee the banking industry gathered to highlight the Bush administration's commitment to reducing regulation. They posed for photographers behind a stack of papers wrapped in red tape. The others held garden shears. Gilleran ... hefted a chain saw.

Read more:

This photo from 2003 shows two regulators: John Reich (then Vice Chairman of the FDIC and later at the OTS) and James Gilleran of the Office of Thrift Supervision (with the chainsaw) and representatives of three banker trade associations: James McLaughlin of the American Bankers Association, Harry Doherty of America's Community Bankers, and Ken Guenther of the Independent Community Bankers of America.

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Phred42 Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Nov-23-08 02:15 PM
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1. Classic republican appointee operation.
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truedelphi Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Nov-23-08 02:18 PM
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2. To understand what is going on now, being familiar with what went on with BCCI
Edited on Sun Nov-23-08 02:18 PM by truedelphi
Politics back in the 1978 to 1992 period is important.

One day a person would be a "regulator" and then a few weeks later, they would be a "broker" handling some aspect of the failing banking system.

So you as a regulator would let BCCI do what it was doing say in March of 1990 and then in January of 1991 you would be overseeing the sale of one part of BCCI's empire to another banking entity.

For which you would get a tidy sum of $ 50,000 to 100,000 dollars.

Of course, now as this new stuff is going down the pike, the broker can expect the fees to be $ 250,000 to $ 500,000.

Inflation even in these deflationary times, I expect.
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Democrats_win Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Nov-23-08 02:23 PM
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3. Corporate piracy.
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