The Bush administration ignored numerous warnings that a financial crisis would be in the near future if action was not taken to more closely regulate the subprime mortgage industry, according to CNNMoney.com
"Expect fallout, expect foreclosures, expect horror stories," California mortgage lender Paris Welch wrote to U.S. regulators in January 2006.
Regulators had warned that the exotic mortgage products should not be given to customers with bad credit, proposed caps on subprime mortgages and called for more disclosure of terms - all of which were ignored by the administration.
"In hindsight, it was spot on," said Jeffrey Brown, a former top official at the Office of Comptroller of the Currency, one of the first agencies to raise concerns about risky lending.
The administration’s free-market fundamentalism prevented the government from intervening in the crisis before it was too late. Now, the government has become thede facto emergency lender for troubled banks and other financial institutions.
"We expect to see a huge increase in defaults, delinquencies and foreclosures as a result of the over selling of these products," Kevin Stein, associate director of the California Reinvestment Coalition, wrote to regulators in 2006.
Source CNNMoney.com:
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The Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed, buckling to pressure from some of the same banks that have now failed. It ignored remarkably prescient warnings that foretold the financial meltdown, according to an Associated Press review of regulatory documents. |