The Corporate Observer Blog : Consumer Protection, Corporate Abuse : Class Action Lawyer & Attorney : Steven Berk Law Firm

The OCC’s decision to protect the banks and their burgeoning sub-prime mortgage portfolios from scrutiny was a major cause – yes cause – of the 2008 meltdown and Great Recession that followed.

The Corporate Observer has not named a person of the week award for several months so this is kind of special…  Drum roll please.  New York Times columnist Joe Nocera is our Person of the Week.  He joins an illustrious crew including early Madoff reporter Harry Markopolos, Supreme Court Justice Elena Kagan, pharmaceutical whistleblower Cheryl Eckard, and numerous others.  Mr. Nocera is the new op ed columnist at the Times, ostensibly replacing the venerable Frank Rich.  He comes to the column from the business pages where he distilled complicated stories into readable and at times compelling theater.

Mr. Nocera snags the award this week because his column on the continued failure of the Office of the Comptroller of the Currency to objectively regulate the banking industry exposes new levels of absurdity.  Yes absurdity.  Save the rating agencies (and of course good old greed on Wall Street), the OCC’s decision to protect the banks and their burgeoning sub-prime mortgage portfolios from scrutiny was a major cause – yes cause – of the 2008 meltdown and Great Recession that followed.

Based on his street smarts and years of experience, Mr. Nocera does not mince words in his appraisal of the OCC.  The following quote alone earns him the Person of the Week award:

“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.”

Go Joe.  He continues to call out the OCC for brandishing legal preemption ("federal law trumps state law") like King Arthur’s Excalibur, in an effort to defeat hard-working, earnest state attorney generals from designing reforms and bringing fairness to foreclosures.  He reminds his Times readers that the OCC remains steadfast in its defense of “sloppy, callous and often illegal practices” of an unapologetic banking industry.

The CO can’t get enough of his hard-hitting, take-no-prisoners approach.  Charge on Joe.  Keep using that prestigious column to challenge conventional wisdom.

For your efforts to date, we name you our Person of the Week.

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Sheila Blair and the FDIC are right. The banking industry must step up and take part in finding a solution to a problem that they were responsible for creating in the first place.

Struggling to stay afloat as the federal deposit insurance fund dwindles, The Federal Deposit Insurance Corporation (FDIC) issued a proposal yesterday requiring banks to prepay $45 billion in insurance premiums. FDIC Chairman Sheila Blair said it was time for the banking industry “to step up” and get involved in industry solutions.

The problem facing the FDIC is money; there simply is not enough of it. The FDIC has already closed 95 banks this year (compared to 25 total in 2008) and 416 more are classified at high risk of failure. The solution to increase reserves proposed yesterday would require banks to prepay their premiums for 2010-2012. This would generate money upfront and prevent FDIC funds from drying up. 

Critics of this pre-pay solution (largely led by the banks themselves) have offered two perilous alternatives:

The first alternative proposed by critics is to use taxpayer dollars by dipping into the FDIC’s credit line with the Treasury and borrowing from the government. Use taxpayer dollars??? Haven’t Main Street taxpayers’ bank accounts been damaged enough by Wall Street’s blunders? A solution that “fixes” the problem by penalizing Main Street is shameful and inexcusable.

The second alternative proposes that the FDIC borrow from the banks themselves. In effect, the FDIC would regulate the very banks that it is borrowing from. That scenario creates a dangerous conflict of interest. Banks will have one up on the regulators that owe them money. (Surely, you would take it easy on your lender.)

Sheila Blair and the FDIC are right. The banking industry must step up and take part in finding a solution to a problem that they were responsible for creating in the first place.

Assisted by Jess Begen and Zach Kady.

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