Banking Law

Recent testimony before the Financial Crisis Inquiry Commission has provided listeners and readers with ample examples of finger-pointing and avoidance of responsibility. While cynics might find much to amuse themselves, and partisans with axes to grind much fodder to bolster their preconceived notions, Lita Epstein at Housing Watch espouses a view I happen to share: "everyone's to blame."

Republicans want to blame Fannie and Freddie for their risky loan practices, or federal officials for their lofty housing goals. The favored target of Democrats is Wall Street and predatory lenders.

The reality of the situation is that all three forces are to blame. The cast of characters and motivations reads like "The Bonfire of the Vanities": execs at Fannie Mae and Freddie Mac were worried about corporate profits; the government wanted to expand home ownership to low income families; and Wall Street and lenders were just looking to make an easy buck. All got what they wanted -- creating the perfect storm that ultimately led to the collapse of the U.S. housing marketplace.

Former Fannie Mae and Freddie Mac executives blamed mission creep, with the mandated goal of increasing home ownership to low income borrowers and the pressure to make tons of money for shareholders "encouraging" the GSEs to plunge headfirst into the Alt-A "liar loan" business, which, as we all know now, was an extremely bad idea. Former regulators of the GSEs, who had to battle the GSEs' management, their lobbyists, and the politicians they bought, bitterly denounced the "culture of greed and arrogance" at Freddie and Fannie.

Lita concludes:

Once again, everybody is pointing fingers at everybody else, and likely no one will take responsibility for their actions. The only thing we'll probably ever know for sure is that the taxpayers will foot the bill for corporate greed and governmental mistakes in judgment.

Truer words were never spoken.

For those readers who are bankers who deal with outside auditors, or who might even be bank auditors themselves, Francine McKenna, who routinely offers us her hot opinions on the shortcomings of auditors on her blog, re: The Auditors, is giving a one-hour webinar this Wednesday from noon to 1 pm Eastern time entitled "Selecting and Monitoring Your Audit Service Providers: A Banker's Guide."

I'd like to also remind those readers who might be interested in FDIC-assisted resolution transactions and loss-sharing agreements that there's a three-part webinar series this month on the subject, the first segment of which will be given this Wednesday by former Bracewell & Giuliani attorney and current Bieging Shapiro & Burrus partner Christian Otteson from 2 pm to 3 pm Eastern time.

For those who don't give a fig for any of this, please go back to sleep.