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View Diary: Breaking! Foxes fail to guard the henhouse (86 comments)

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  •  Foreclosures shouldn't be the Focus (0+ / 0-)

    I have some direct level of familiarity with the banking industry, and the true irony here is that the mortgage foreclosure issue is a strawman. If anything, the banks have had a tendency to hold onto properties way longer then they should have because they don't want to recognize the losses as they must when they foreclose.  The foreclosure reviews have failed to turn up any substantial cases of people who were paying on their mortgage, and were erroneously foreclosed.  I'm not saying that the process didn't need to be corrected but that it is among the least of the banks' misdeeds.

     I do think there is merit to the allegtions that the bank's continue to be horribly mismanaged, and little is done about it.  Most of the career people in senior management at the banking agencies grew up in the Bush administration (and few have left since Obama was elected) and think all regulation is patently bad, and little has been done to shake things up during the Obama administration, with the OCC not getting a new Comissioner until late last year.
       For the record, third party consultants are paid by the bank and are suppose to issue reports which measure the bank's progress with respect to milestones set by the agency.  The opportunity for conflicts to arise is obvious.  However, during the Bush years, senior management at the banking agencies realized that requiring a bank to get a third-party report was an excuse to not actually do the investigative work themselves, and if the third party report said everything was ok (which they nearly always do), the agency could say no further penalties were warranted.  It is a case of true regulatory capture.
      Lastly, there are government lawyers at the banking agencies and elsewhere who would like to bring cases.  All of the agencies in charge with policing the financial sector (including DOJ, SEC and CFTC) are woefully short of the amount of lawyers to effectively prosecute these types of cases (and Congress intends to keep it that way).

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