WASHINGTON-The role of the financial regulators' and their oversight failures is coming under increasing attention by Congress and the public as the debate over financial services reform comes to a head.
During recent Senate hearings, Carl Levin, chairman of the Senate Subcommittee on Permanent Investigations, called the Office of Thrift Supervision's oversight of Washington Mutual "feeble" and "pitiful" in monitoring what would become the biggest bank failure ever. The thrift regulator, said the Michigan Democrat, "was more of a spectator on the sidelines, a watchdog with no bite, noting problems and making recommendations, but not trying to correct the flaws and failures it saw."
The scathing criticism was the latest leveled at regulators by members of Congress, the public and even internal agency watchdogs at the Federal Reserve, FDIC, Office of Comptroller of the Currency and the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac.
The hearing came the same time the Inspector General at the Securities and Exchange Commission was reported it suspected financier Allen Sanford of running a massive Ponzi scheme as far back as 1997 but took more than a decade to pursue what is alleged to have been an $8 billion fraud.
NCUA is also undergoing growing criticism by its own Inspector General and from credit union executives and volunteers for its role in the corporate credit union meltdown and in the big credit union failures of the last few years.
Numerous credit union executives have called on NCUA to investigate its own role in the corporate meltdown as part of the reform of the corporate system. NCUA's Inspector General also issued a report that found NCUA effectively asleep at the switch while the manager of a small West Virginia credit union, Center Valley FCU, stole every last dime of deposits, and then some, at a cost of more than $16 million to the NCUSIF.
Meantime, the causes of the financial crisis will continue to be explored by Congress and by a bipartisan Financial Crisis Inquiry Commission that is scheduled to issue a report later this year. So far, neither Congress or NCUA has expressed an intent to probe into the causes of the corporate credit union crisis or NCUA's role in it.
