This article seems to have set off a wave of criticism against regulators. I think people missed the point.
The primary bank regulator is the Office of the Comptroller of the Currency. The OCC as this agency is known, was charged with the duty of oversight to assure both the “safety and soundness” of the U.S. banking system. Not only did they catastrophically fail in that duty, but in a way that Ben Bernanke said was worse than the state of banks in the Great Depression.
First of all the U.S. government never told banks to write toxic loans. In fact, 47 state Attorney Generals, plus the Attorney Generals of D.C. and Puerto Rico, sent a blistering letter to the head of the OCC, John Dugan complaining in 2005 that the banks were out of control making bad loans and hurting consumers (to push share growth and dividends by preying on the poor and middle class).
Moreover in a letter to that same John Dugan, the Congressional House Financial Committee sent a letter that opened in alarm that banks were “operating without any meaningful law or enforcement”.
Still, they were allowed to operate with impunity. I have stated that one reason may have been the active role the U.S. Chamber took in intervening on the banks behalf in litigation trying to control the reckless lending. Another, and by far most critical, is the influence the bankers were using to strong arm the credit rating agencies into labeling purely rotten loans as quality, thereby defrauding Fannie Mae, Freddie Mac, and the other investors.
By the time all this illegality began coming to light, the Government and the markets primary hysteria was trying to find out where had all the mess landed so they could determine who the bagholders were that had been stiffed, and secondly, exactly how much c.r.a.p. had they produced?
Meanwhile the C.E.O.’s that became thoroughly stinking rich from the esoteric scams, smirked as they held a nation economic hostage. That if they went to jail, they would only go after bankrupting the nation and taking the entire economy down with them.
I believe the point of Mr. Doorn’s article is that America’s middle class lost not only their credit ratings in the banker induced economic crisis, and 40% of their wealth as reported*, but again we are being told they could serve that market and keep housing from going bust but only if regulators back off and let them off the hook for the sins they committed before by selling c.r.a.p. as quality.
It is a threat. Again, and it seems to be none too veiled. America fell once, almost to our knees before kow towing to their threats. To do so again, so soon, when not even a century has passed since they last got us, would be the height of stupidity. But then again, maybe you really “can’t fix stupid” as they say. Let’s hope they are merely extremely sly crooks, and we are not as cognitively impaired as they hope.
– Barbara Cochlin
*Read how Inequality is hurting our economy, and Americans lost 40% of wealth in a 3 yr period. A link to the Wall Street Journal article was posted on this blog August 7th, 2014.