While the financial media has covered the Federal Reserve's role in abetting and combating the woes afflicting our housing, mortgage and credit markets, I always get a kick out of following my favorite banking regulator, the
Office of the Comptroller of the Currency (OCC).
What, you may ask, is the rationale behind my fascination with the OCC?
Not only is the agency our nation's oldest financial regulator, but it also oversees the safety and soundness of about 1,700 federally chartered commercial banks, which comprise nearly two-thirds of the assets of the commercial banking system. As an added bonus, our current Comptroller of the Currency is a fellow English major, stoking hope and aspiration in the hearts of many a downtrodden liberal arts major.
In a recent
speech, Comptroller Dugan noted, "national banks, which hold about half of all home equity loans, sustained as much loss from this type of credit in the first quarter of this year than they did in all of 2007." He then went on to explain the factors that precipitated the downturn in a business line that has traditionally been regarded as relatively low risk, while forecasting higher losses from home equity loans and emphasizing the importance of maintaining adequate capital reserves.
But the Comptroller's words were not all doom and gloom; bank examiners have seen evidence of higher quality in recent home equity loan originations. After all, nothing cures lax underwriting standards and apathetic due diligence better than a financial crisis.
And what did we learn from the S&L crisis of the 1980s?
The "
lessons learned from the last downturn will help the OCC deal with problems in the current environment."
Between the financial services sector and its regulators, I'm glad somebody somewhere learned something.
