Acting on a recommendation from four Fed staffers including representatives of the Philadelphia, St. Louis and Kansas City regional reserve banks, the Fed’s Board of Governors unanimously decided to formalize a long-standing practice, “to not conduct consumer compliance examinations of, nor to investigate consumer complaints regarding, nonbank subsidiaries of bank holding companies.”
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The Fed Board decided that even when a nonbank was purchased by a bank holding company, the Fed still lacked authority to police its operations.
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After the Fed’s decision, several of the largest bank holding companies added finance arms, expanding into the regulatory vacuum.
[The full article is worth a read.]
It’s perversely fitting that the Fed was the agency that refused to regulate subprime lenders. The Fed is supposed to be responsible for maintaining a healthy economy, but instead its failure to regulate helped to suck us into a housing bubble, the collapse of which triggered this recession. Alan Greenspan, as the Fed Chairman at the time, strenuously denied that there was a housing bubble for years.
It was the Fed’s lack of action on several fronts that allowed the housing bubble to build up steam, and thus allowed the housing crisis years later. Subprime lending was not all abusive, and for some consumers it opened up opportunities for home ownership. Without oversight, though, subprime loans were taken too far, to the point where they undercut the health of our entire financial system. Just think how much economic damage could have been spared with a bit of oversight.
What!!!?? I thought it was brown people that caused the housing crisis?
Why go after multi-national plutocratic banks when you can misdirect attention to minorities?
It is probably Acorns fault too. We have to destroy those anti-poverty groups that take millions from us in order to direct more to the war profiteers who take billions and kill our soldiers.
Oh yeah, most likely it is also an illegal immigrant problem too. I am sure there is an undocumented person who defaulted on a mortgage or two.
Can't wait for the Republican onslaught of going after the weak to protect the strong and corrupt.
I don't think it is news that 3 parties were ignoring some obvious problems. The fed, the Bush administration and congress.
You are arguing here that we need more regulation. I think that could be arguing that we need to regulate the regulation. I guess I would say that action was required by all of these parties, and perhaps regulation was the answer. Most importantly congress needs to get more visibility into the fed; and this continues to be a problem today.
This subject reminds me of an article I read the other day. It argues that the housing bubble is still being propped up by the fed. http://www.thebigmoney.com/articles/judgments/200...
And finally for your entertainment, I found this '05 article convincing you that there is no housing bubble
http://www.businessandmedia.org/specialreports/20...
Execution of the laws is 100% the responsibility of the executive branch. The congress has oversight responsibility, which they abdicated, but it is the executives job to make sure laws are carried out, and they (Bush admin) obviously made a conscious decision not to execute the law. The congress can only make laws. With the executive refusing to execute, and the right-wing activist judicial refusing to enforce the law, what do you expect!
If that was in response to my comment…
I bring up congress for 2 specific reasons.
1. It is not as clear as the impression you give. Congress needs to provide some clarity by modifying or adding legislation. The linked article even states "The Fed could balk because Congress had allowed the laws governing the financial industry to become outdated." The regulatory scope of the fed is not clear; there are many opinions. Bernanke's current opinion is just one and could change at any time. But congress will not want to act because the issue is very controversial. This starts to border on the fed regulating risk.
2. Not specifically tied to the fed, but given the title of the post, I think it is in play. Legislation has contributed to the housing crisis. This could include CRA and Glass-Steagall (repeal).
It's way more complicated than simply "the fed screwed up" or "Bush did it".
I found the article you have linked to very fair in it's assessment. We can only hope that the Govt. has learned its lesson and that it regulates.. sooner rather than later. I have heard reports that the banks will go back to their crazy lending ways when the recession recovers - I think it's in everybodies best interests for that not to happen!