The economy collapsed in 2008.
Since then, the financial industry got billions, the auto industry was rescued, and the rest of us got the bills and not much else.
The financial industry is now strong enough to run the country for the rich. The auto industry is no longer on its last wheels.
But even the most obvious and urgently needed reforms remain undone.
Take the mortgage industry. Please.
Remember all the mortgage documentation problems that were revealed after the flood of foreclosures started drowning homeowners? Turns out the a lot of banks had screwed-up documentation for the properties they were taking “back.” Their work was so bad and fraudulent that sometimes they wrongly kicked people out of their houses. (Matt Taibbi had a great piece on this in Rolling Stone.) The mess screamed for a regulatory fix.
But it didn’t happen.
The Government Accountability Office provided testimony before the Senate Subcommittee on Housing, Transportation and Community Development last month that just goes to show that it takes a whole government to ensure that nothing gets done.
In the beginning, before the crash, regulators ignored the problems that were going to push the economy to the edge of the cliff. From the GAO testimony:
Until the problems with foreclosure documentation came to light, federal regulatory oversight of mortgage servicers had been limited, because regulators regarded servicers’ activities as low risk for banking safety and soundness.
That means it wasn’t sexy enough.
When it became clear that something was seriously wrong with the mortgage industry, regulators finally rushed in to…examine files! Again, the GAO:
These examinations revealed severe deficiencies in the preparation of foreclosure documentation and with the oversight of internal foreclosure processes
and the activities of external third-party vendors.
And then? Silence, mostly. Some enforcement actions were issued after the file review, but that’s about it.
Regulators plan to assess compliance but have not fully developed plans for the extent of future oversight…they had not determined what changes would be made to guidance or to the extent and frequency of examinations. Moreover, regulators with whom we spoke expressed uncertainty about how their organizations would interact and share responsibility with the newly created CFPB (Consumer Financial Protection Bureau) regarding oversight of mortgage servicing activities.
CFPB staff members say that mortgage oversight will be a priority, but “as of April 2011, CFPB’s oversight plans had not been finalized.”
Some academics and industry insiders want national servicing standards established to that would require mortgage servicers to 1) sign statements that their mortgages met legal requirements and 2) commit them to try to modify loans before foreclosing, according to the GAO. But, guess what?
“The content of such standards and how they would be implemented is yet to be determined.”
The Conumer Financial Protection Bureau has until 2013 to issue mortgage servicing rules. That’s a long time to wait for something that should already be done.
Maybe next time we should do things in reverse. Don’t reward the crooked banks and financial firms who drove the country to the edge.
Work, instead, on fixing that damned cliff itself.
