For those who took umbrage with my last post regarding the lack of attention paid to Main Street by the Obama administration, I would point you to the front page of Friday’s New York Times. In her piece, “Bank Deal Ends Flawed Reviews of Foreclosures,” Jessica Silver-Greenberg details the disastrous federal review of the destructive foreclosure process used by the big banks against homeowners.
Seal of the United States Federal Reserve System. (Photo credit: Wikipedia)
The entire review process, as dictated by the OCC and Federal Reserve, was a disaster waiting to happen. Weaknesses included high fees to the auditors for no actual work performed, the reviewers clearly favoring the banks paying for their efforts, low-level, inexperienced personnel reviewing the documents, and even ignoring homeowners who were supposed to be able to bring their cases to the regulators attention. Complex rules were set out, followed up by a lack of oversight by the feds.
Rather than face the continued embarrassment of the failed audit process and face proof that homeowners were once again being left to hang out to dry, the regulators hastily came up with a settlement whose main beneficiaries were the big mortgage banks.
Read the link below to see how the big banks were let off the hook for their bad behavior in return for miniscule fines:
Thanks for sharing. I think they needed to act, but they should have also thought about those impacted on the housing side. Giving money without strings attached was not good. They should have imposed more lending requirements. However, not acting would have a had a greater echo effect felt globally.
Interestingly, there were strings attached. The administration believed, rightly so, that spending was the way to get the economy started back up, and lending to business’ was the way to go. In return for the bailout money, the big banks were to encourage lending in the US. At the time, interest rates on european bonds were higher by a few percentage points than the US, thus they invested a great deal of the money overseas for greater returns. As usual, the administration did nothing about it. I agree that there may have been a greater echo effect, but I always believed that had the institutions been allowed to fail, the impact would be long over by now, and we would be on the road to recovery. Instead, 4+ years later, we are still nursing Bank America, AIG, and others.
Thanks for your comments. Alway insightful.
I still think Iceland had the right approach: let the banks go under and bail out the ordinary folks!
I have always believed that we made a major strategical mistake by bailing out the banks and allowing Main Street to essentially close down. Had we let the natural progression occur, the few well run banks would have survived, the masses of disaster banks like Bank America, Citi, and insurer AIG would be gone. All this would have been behind us by now, and the economy would not have tanked as badly as it did.
Thanks for writing