We’ve noted in prior posts that the federal government appears to have ignored clear warning signals during the past few years that banks were not following proper foreclosure procedures. By doing so, the feds helped contribute to the current mess, including the widespread freezing of foreclosures which threatens to undermine the housing market.
Now comes word, via the Washington Post, that the feds affirmatively interfered with state regulators who were trying to deal with the situation. State bank regulators, it seems, suspected irregularities and thus asked the biggest national banks for details about their foreclosure operations. When two banks — J.P. Morgan Chase and Wells Fargo — declined to cooperate, the state officials asked the banks’ federal regulator for help, a letter shows.
However, the Office of the Comptroller of the Currency (OCC), which oversees national banks, denied the states’ request, saying the firms should answer only to inquiries from federal officials. The federal Comptroller, John Dugan, explained that his agency was already planning to collect foreclosure information and that any additional monitoring risked “confusing matters.”
But, says the Post, even as it closed the door on state oversight, the OCC chose not to scrutinize the foreclosure operations of the largest national banks, forgoing any examination of their procedures and paperwork. Instead, it relied on the banks’ in-house assessments, which provided no hint of the problems to come.
This situation reminds me of what has happened in the area of immigration enforcement. There too the feds fail effectively to fulfill their enforcement responsibilities, and pull rank when states try to pick up the slack. This combination of arrogance and irresponsibility is plainly inimical to the credibility of the federal government, without which it will be unable to function effectively even when it wants to to.
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