This post was written by whistleblower attorney Tony Munter
You wonder why people want to regulate the banking industry?
On the inside of the New York Times you can read a report that notes the industry is doing just fine lately. It quotes, Dick Bove, an industry analyst who estimates that FDIC insured banks will earn $39 Billion in the first quarter of this year. Mr. Bove notes "no one can argue that banks were hurt from a profit standpoint."
Meantime on the front page they run an article about checks that bounced. Not just any checks, but checks that were supposed to provide some relief to mortgage holders harmed by banking practices in a big settlement. The Times seems to have gotten the front page story from a fun new website 4closurefraud.org It's a good place to follow the foibles of the Mortgage industry.
While the front page story has a nice people-foreclose-on-bank or man-bites-dog feel to it the serious story is on the inside of the paper. In that article, Sheila C. Blair the former head of the FDIC provides the money quote, "As far as the banks are concerned there is never a good time to raise capital or increase regulation."
Ms. Blair should know. She tried to regulate them. What goes unsaid is that the big banks are enjoying steady profits and even reduced competition, because we bailed them out. Now they are making a lot of money. There is nothing wrong per se with banks making money. It is a lot better than when banks lose money.
Still, the point of the article is that big banks have been enjoying steady growth in earnings since the financial crisis, and now regulators and lawmakers are feeling a little more comfortable confronting the bankers with long term regulatory fixes.
Blair says "I hope the regulators move forward with tougher regulations...this wouldn't endanger the economic recovery."
We have a few regulatory suggestions for the banking industry. We would like to see the regulations which protect mortgagors and the government insurers strengthened.
In particular the Federal Home Association (FHA) and Housing and Urban Development (HUD) regulations, should be made much tougher on mortgage servicers. These regulations are supposed to protect people with FHA insured loans and are supposed to protect the government funds used to support the banking industry, they need tightening.
We will get into specific regulations which need tightening in a few future blogs, but the important thing to remember, as Washington gears up for a new regulatory battle is to be sure they improve the government and the mortgagor's position. Millions have been won and banks have been put on notice as a result of False Claims Cases brought for improper mortgage servicing practices. We don't want any new regulations weakening the ability of whistleblwoers to fight mortgage fraud. On the contrary, any new regulations should address and strengthen the government's position especially since now there is more government money shoring up the Mortgage industry through Fannie Mae and Freddie Mac. The times story indicates this is the beginning of a new round of regulatory proposals. We will have to watch this very closely to see how it works.