<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN">
<HTML><HEAD>
<META content="text/html; charset=iso-8859-1" http-equiv=Content-Type>
<META name=GENERATOR content="MSHTML 8.00.6001.19046">
<STYLE></STYLE>
</HEAD>
<BODY bgColor=#ffffff>
<DIV><FONT size=2>
<DIV id=fb-root></DIV>
<DIV class=header>
<DIV class=left><A href="http://www.nytimes.com/"><IMG border=0 hspace=0
alt="The New York Times" align=left
src="http://graphics8.nytimes.com/images/misc/nytlogo153x23.gif"></A> <A
href="http://www.nytimes.com/adx/bin/adx_click.html?type=goto&opzn&page=www.nytimes.com/printer-friendly&pos=Position1&sn2=336c557e/4f3dd5d2&sn1=6776ead1/90517ded&camp=foxsearch2011_emailtools_1629900e_nyt5&ad=sf_120x60_mar29&goto=http%3A%2F%2Fwww%2Efoxsearchlight%2Ecom%2Fsnowflowerandthesecretfan"
target=_blank></A> </DIV></DIV><BR clear=all>
<HR align=left SIZE=1>
<DIV class=timestamp>April 18, 2011</DIV>
<DIV class=kicker></DIV>
<H1><NYT_HEADLINE type=" " version="1.0">Letting the Banks Off the
Hook</NYT_HEADLINE></H1><NYT_BYLINE>
<H6 class=byline>By <A class=meta-per title="More Articles by Joe Nocera"
href="http://topics.nytimes.com/top/news/business/columns/josephnocera/?inline=nyt-per">JOE
NOCERA</A></H6></NYT_BYLINE><NYT_TEXT>
<DIV id=articleBody><NYT_CORRECTION_TOP></NYT_CORRECTION_TOP>
<P>Judging by last week’s performance, it sure looks as though the country’s top
bank regulator is back to its old tricks. </P>
<P>Though, to be honest, calling the Office of the Comptroller of the Currency a
“regulator” is almost laughable. The Environmental Protection Agency is a
regulator. The O.C.C. is a coddler, a protector, an outright enabler of the
institutions it oversees. </P>
<P>Back during the subprime bubble, for instance, it was so eager to please its
“clients” — yes, that’s how O.C.C. executives used to describe the banks — that
it steamrolled anyone who tried to stop lending abuses. States and cities around
the country would pass laws requiring consumer-friendly measures such as
mandatory counseling for subprime borrowers, or the listing of the fees the
banks were going to charge for the loan. The O.C.C. would then use its power to
either block or roll back the legislation. </P>
<P>It relied on the doctrine of pre-emption, which holds, in essence, that
federal rules pre-empt state laws. More than 20 times, states and municipalities
passed laws aimed at making subprime loans less predatory; every time, the
O.C.C. ruled that national banks were exempt. Which, of course, rendered the new
laws moot. </P>
<P>You’d think the financial crisis would have knocked some sense into the
agency, exposing the awful consequences of its regulatory negligence. But you
would be wrong. Like the banks themselves, the O.C.C. seems to have forgotten
that the financial crisis ever took place. </P>
<P>It has consistently defended the Too Big to Fail banks. It opposes lowering
hidden interchange fees for debit cards, even though such a move is mandated by
law, because the banks don’t want to take the financial hit. Its foot-dragging
in implementing the new Dodd-Frank laws stands in sharp contrast to, say, the
Commodity Futures Trading Commission, which is working diligently to create a
regulatory framework for derivatives, despite Republican opposition. Like the
banks, it views the new Consumer Financial Protection Bureau as the enemy. </P>
<P>And, as we learned last week, it is doing its darndest to make sure the banks
escape the foreclosure crisis — a crisis they created with their sloppy, callous
and often illegal practices — with no serious consequences. There is really no
other way to explain the “settlement” it announced last week with 14 of the
biggest mortgage servicers (which includes all the big banks). </P>
<P>The proposed terms call on servicers to have a single point of contact for
homeowners with troubled mortgages. They would have to stop the odious practice
of secretly beginning foreclosure proceedings while supposedly working on a
mortgage modification. They would have to hire consultants to do spot-checks to
see if people were foreclosed on improperly. (Gee, I wonder how that’s going to
turn out?) </P>
<P>If you’re thinking: that’s what they should have done in the first place,
you’re right. If you’re wondering what the consequences will be if the banks
don’t abide by the terms, the answer is: there aren’t any. And although the
O.C.C. says that it might add a financial penalty, I’ll believe it when I see
it. While John Walsh, the acting comptroller, called the terms “tough,” they’re
anything but. </P>
<P>No, the real reason the O.C.C. raced to come up with its weak settlement
proposal is that last month, a document surfaced that contained a rather
different set of terms with the banks. These were settlement ideas being batted
around by the states’ attorneys general, who have been investigating the
foreclosure crisis since late October. The document suggested that the attorneys
general were not only trying to fix the foreclosure process but also wanted to
penalize the banks for their illegal actions. </P>
<P>Their ideas included all the terms (and then some) included in the O.C.C.
proposal, though with more specificity. Unlike the O.C.C., the attorneys general
had devised a way to actually enforce their settlement, by deputizing the new
consumer bureau, which opens in July. And they wanted to impose a stiff fine —
possibly $20 billion — which would be used to modify mortgages. In other words,
the attorneys general were trying to help homeowners rather than banks. </P>
<P>By jumping out in front of the attorneys general, the O.C.C. has made the
likelihood of a 50-state master settlement much less likely. Any such settlement
needs bipartisan support; now, thanks to the O.C.C., there’s a good chance that
Republican attorneys general will walk away. The banks will be able to say that
they’ve already settled with the federal government, so why should they have to
settle a second time? If they wind up being sued by the states, the federal
settlement will help them in court. </P>
<P>“It’s a vintage O.C.C. move,” said Prentiss Cox, a law professor at the
University of Minnesota who was formerly an assistant attorney general. “It is
clearly an attempt to undercut the A.G.’s” </P>
<P>Old habits die hard in Washington. The O.C.C.’s historical reliance on
pre-emption should have died after the financial crisis. Instead, it’s merely
been disguised to look like a settlement.  </P>
<P>______________________________________________ </P><NYT_CORRECTION_BOTTOM>
<DIV
class=articleCorrection></DIV></NYT_CORRECTION_BOTTOM><NYT_UPDATE_BOTTOM></NYT_UPDATE_BOTTOM></DIV></NYT_TEXT>WayneA.
Fox<BR>
<CENTER></CENTER><NOSCRIPT class=noscript-show></NOSCRIPT>
<DIV id=upNextWrapper>
<DIV style="RIGHT: -410px" id=upNext>
<DIV class="wrapper opposingFloatControl"></FONT><FONT size=2>1009 Karen
Lane<BR>PO Box 9421<BR>Moscow, ID 83843</DIV></DIV></DIV></DIV>
<DIV> </DIV>
<DIV><A href="mailto:waf@moscow.com">waf@moscow.com</A><BR>208
882-7975<BR></FONT></DIV></BODY></HTML>