Loan Modification

From the obvious dept - regulators incompetent

By Morgan

USA Today, playing Captain Obvious, has an article that highlights how federal regulators failed to properly oversee banking institutions and missed key warning signs of the meltdown as early as 2005.  The FDIC blames the OCC (Office of the Comptroller of the Currency) and other regulatory bodies for incompetence and indifference in the face of mounting problems at small banks that should have been the canaries in the coal mine for broader systemic issues.

In at least 6 failed banks the FDIC notes that if regulators had simply done their job and required banks to curb risky lending behavior that failures may have been averted.  Of course the FDIC is not immune to blame either as there are reports that they waived many reporting requirements during the boom for banks of all sizes.

We have a regular commetor here, Captain Ned, who repeatedly skwerers the idea of federal regulation over the rights of the states to police their own lending institutions.  These reports definitely support that agrument.

From the article:

The inspectors general at the U.S. Treasury and the Federal Deposit Insurance Corp. (FDIC) have both issued reports saying that bank failures surged because regulators in some cases didn’t step in and prevent hazardous behavior, and in others actively helped banks hide their growing problems.

…

In at least six banks examined by the Treasury’s inspector general and at seven more scrutinized by the FDIC’s inspector general, regulators were incompetent or indifferent ? willing to look the other way as bank executives took their banks down destructive paths. The Federal Reserve’s inspector general is conducting its own reviews on at least three institutions that failed under its supervision.

Full post as published by Blown Mortgage on June 16, 2009 (boomark / email).