Warnings of Mortgage Meltdown Were Ignored
According to a review of regulatory documents by the Associated Press, the Bush administration ignored multiple warnings of impending financial meltdown during the last five years and didn’t follow through on federal regulator’s proposals for tighter regulations.
In 2005, federal bank regulators proposed new guidelines for banks writing risky loans. They proposed a cap on the number of exotic mortgages and sought to make banks that bundled and sold mortgages inform buyers about their risks. The proposal also would have required banks to better vet potential borrowers and clearly inform them of the potential for skyrocketing interest rates.
The proposals didn’t require congressional action or a presidential signature, but the banking industry lobbied heavily against the proposals and administration urged regulators to drop them.
Diane Casey-Landry, of the American Bankers Association, said industry opposition was based on the banks’ best information. “You’re looking at a decline in real estate values that was never contemplated,” she said.
Source: The Associated Press, Matt Apuzzo (12/01/2008.)