The House was drawing up new banking regulation this week, which included the new agency to protect consumers from abusive and deceptive lenders. So would Congress stand up for the voters or the industry?
Bowing to political pressure from community bankers, the House Financial Services Committee approved an exemption on Thursday for more than 98 percent of the nation’s banks from oversight by a new agency created to protect consumers from abusive or deceptive credit cards, mortgages and other loans.
The carve-out in legislation overhauling the regulatory system would prevent the new consumer financial protection agency from conducting annual examinations of the lending practices at more than 8,000 of the nation’s 8,200 banks, leaving only the largest banks and other lenders subject to the agency’s examiners.
The exemption for the banks was endorsed by the chairman, Representative Barney Frank of Massachusetts, who saw it as necessary to win support for the overall bill from the committee’s moderate and conservative Democrats. Their support is particularly important because the Republicans are unified against the legislation.
Obviously this new agency will do nothing except soak up more taxpayer money. The ownership of Congress by the financial industry is complete and in your face.
But it doesn't end there. The very next day there was a little noticed report out of the FHA.
It concluded that the Federal Housing Administration had insufficient controls to make sure lenders meet the agency's standards.
The agency approved nearly 3,300 lender applications in fiscal 2008, more than triple the year before. But the number of workers evaluating applications remained the same. In a review of 22 approved applications, the audit found that only one contained all the necessary documents.
The agency's ability to manage its participating lenders is a big concern because there are growing fears that the agency will need a taxpayer bailout. Last month the FHA said its financial reserves had sunk below mandatory levels for the first time in its 75-year history.
To be fair, the problems at the FHA is strictly a matter of manpower. They've been tasked with saving the entire real estate market, but not given the money to do proper oversight.