Washington insiders are once again casting blame on the states for failing to adequately regulate the nonbank financial industry. It's as if the federal regulators did a bang-up job of ensuring safety and soundness in big banks with federal charters and our entire financial system crashed due to mortgage brokers gone wild.

Such a notion is silly. Federally regulated financial institutions played a significant role in nontraditional mortgage lending directly and through brokers, participated in nontraditional securitizations and acted as warehouse lenders to the nonbank mortgage industry. Pointing the finger at the states is an awfully good idea if your goal is to increase federal turf and consolidation of financial services into a few megabanks. It is an awful idea if you care about consumer protection or responsible lending.

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