[Rhodes22-list] Economics

[DCLewis1 at aol.com]

Wally,
 
While there are times I’m tempted to agree with your assessment that both  
political parties suck, I  think it’s worthwhile to try  to identify the problem 
- and from my perspective, that leads straight to  Bush.
 
I think there are at least 2 offices in the Dept of Treasury that have  
cognizance over mortgage lending practices: the Office of Thrift Supervision  
(OTS), and the Office of the Comptroller of the Currency (OCC).   Additionally, 
there may be offices in HUD and the Federal Reserve that are  supposed to 
regulate/oversee banks, lending,  and especially mortgage  lending ( I think the Fed 
has an Office of Bank Regulation).  I believe OTS  and OCC issue bank and 
credit union  lending guidelines, renew charters,  request legislation, inspect as 
needed, and act as a bully pulpit to be sure the  financial institutions don’
t get too far out of line as they try to make a  buck.  Either office could 
have called a conference with lending  institutions and made it clear that if 
lending practices weren’t tightened  bank/credit union renewal charters were at 
risk - it’s that simple.    The public (you and I), and hence I assume OTS and 
OCC,  have known of  NoDoc, NINA, negative amortization, etc  loans for a 
long time.  The  OTS and OCC choose to do nothing about the sub-prime lending 
abuses - this is  not why they get paid.  I think Dept of Treasury screwed up - 
surely they  saw the problem evolving, to my knowledge they did nothing to stop 
it.  The  Directors of the OTS and OCC, and the Sec of the Treasury are 
political  appointees.
 
Also, if the current sub-prime/ARM mortgage issue came out of nowhere, you  
might excuse the current administration and it’s appointees for being  
blind-sided by it, but that’s not the case.  The NoDoc/NINA issue has  developed in an 
industry that is prone to problems.  You may recall the  S&L mortgage mess (I 
think in the 80s?) - that cost the taxpayer many  billions of dollars.  Given 
the history of problems in the mortgage  industry, I’d expect a competent 
administration to be alert and actively  monitoring the mortgage industry to be 
sure it was following sound lending  practices - but clearly that is not the 
case. The current mortgage mess is  different from the S&L mess, but it is about 
mortgages, mortgage companies  that are chasing profits as hard as they can 
with “innovative” products, and  oversight agencies that are asleep at the 
wheel.  There’s really no excuse  for the Bush administration not to have been 
aware of the developing problem,  the issues were well publicized and the 
industry has a history of  problems.
 
I think the Bush administration should have been aware of the evolving  
problem and taken clear positive action to prevent excesses - that’s part of  what 
the OTS and OCC directors get paid to do and it's what Sec Treas gets paid  to 
do.  I think this is just another example highlighting the lack of core  
competency in the Bush administration.
 
As I recall, the S&L bail out cost we taxpayers many 10's of billions  of 
dollars.  Let’s see what the sub-prime/ARM fiasco is going to cost us -  it may 
cost us nothing from the Treasury, it may just tank our net worth and  trigger 
a recession. 
 
JMO
 
Dave
 





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