walkitout (walkitout) wrote,

What Precisely _IS_ the job of a regulator?

Tanta over at Calculated Risk actually _liked_ some news coverage over at the WSJ. Wonders will never cease.

Here's the article in question (and I fully agree with Tanta: it's good):


Short form: FDIC back in 2001 takes over Superior Bank with the goal of selling it off, piecemeal if necessary. It never does successfully sell Superior's subprime mortgage operation (which was a wholesale mortgage business, i.e. relied heavily on brokers for origination). FDIC relied on existing workers for the transitional period BUT in order to sell the resulting loans, offered higher levels of guarantees than might have been typical of either Superior Before the End Came or the FDIC in general. Not unexpectedly, there were bad loans. Antics ensue.

QOTD: "But in a deposition in May for the Beal Bank litigation, a senior FDIC official suggested that fixing the bank wasn't the agency's top priority. "Our job was to go in and sell the assets of the institution, and not try to clean up the operations, per se, to make this a better bank," said the official, Gail Patelunas"

So. The question in my mind is: what precisely _is_ the job of a regulator, if not to "make this a better bank"? Have the folks in charge over at the FDIC under the current administration all along taken the stance that they don't give the tiniest flying fuck how good a job the banks are doing -- so long as they keep doing it or can be sold to someone else who will keep doing it?


It's gotten _that bad_? Buyer beware is totally inadequate in this scenario. And the band played on, is more like. It's truly a sign of my idealism and optimism that reading that quote still had the capacity to shock me. I'm _not_ surprised that some bad loans slipped through a transitional period. I would have forgiven that in a heartbeat, filed under, dude, we all screw up and we can't expect forgiveness if we aren't prepared to offer it up ourselves. But to have thought it wasn't even their responsibility? That's not a forgive-you-for-an-error, thing. That's fantasize about clubbing someone time. And not in a good way.

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