Last week, Sen. Bob Corker (R-TN) explained that he doesn’t want to consolidate bank regulators as part of a regulatory reform effort, because he enjoys watching them blame each other for regulatory failures. And Corker is evidently not the only one who’s enjoying the drive to prevent meaningful regulatory reform.
John Bowman, who is the acting director of the Office of Thrift Supervision (OTS), told the Boston Globe that he “relishes the chance to defend the Office of Thrift Supervision against efforts by President Obama and Congress to shut it down”:
“It’s a lot of fun,’’ said Bowman…Bowman and the other regulators insist that they have a legitimate case, saying they have been unfairly blamed for the economic crisis. “We have very real concerns. To dismiss it as simply being turf is selling us short.’’
Bowman is just the latest in a parade of regulators marching out to claim that the regulatory status quo is fine. But he may have the most chutzpah of all, because the OTS was by far the worst of the regulatory agencies, when it came to enforcing consumer protection or bank safety and soundness.
Even the Obama administration’s proposed regulatory reform plan — which is far less ambitious than the one Sen. Chris Dodd (D-CT) is proposing in the Senate — merges the OTS with the Office of the Comptroller of the Currency. And for good reason. Consider these great moments in OTS history:
– The OTS was in charge of regulating American International Group (AIG), which required a taxpayer-funded bailout of $180 billion after it was unable to honor $45 billion in credit default swaps. Treasury Secretary Tim Geithner has said that AIG was “allowed to build up without any adult supervision,” and indeed, in the eight months prior to AIG’s collapse, the OTS held just one 45 minute meeting regarding the company’s soundness.
– The OTS was in charge of regulating IndyMac, which had to be taken into FDIC receivership, at a cost of $10.7 billion to taxpayers. The Inspector General of the Treasury Department found that the OTS “repeatedly ignored warnings…about the dangerous excesses” at IndyMac, and viewed “growth and profitability as evidence that IndyMac management was capable.” The OTS knew IndyMac was having trouble with its cash-flow in 2005, but took no formal action until 2008.
– The OTS was in charge of regulating Countrywide, which switched regulators in 2007 because the OTS “promised more flexible oversight,” and “pitched itself as a more natural, less antagonistic regulator.” Countrywide eventually blew up due to subprime mortgage investments and had to be rescued by Bank of America. Former Countrywide officials have been charged with securities fraud for “failing to disclose the firm’s relaxed [mortgage] lending standards.”
– The OTS was in charge of regulating Washington Mutual, which not only collapsed due to subprime mortgages, but also systematically charged minorities higher prices for mortgages “with fully 56.9 percent of African Americans and 42.3 percent of Hispanics paying higher prices, compared to 16.9 percent of whites.”
Does this seem like a regulatory agency worth saving?