Banks Have Been Operating With Impunity Causing the Start and Continuation of the Foreclosure Crisis

Posted on November 26, 2009
Filed Under Foreclosure Crisis | Leave a Comment

National banks have been operating with impunity causing the start and continuation of the foreclosure crisis sans proper regulation. After regulations were relaxed the housing market soared and roared to unprecedented peaks. This was followed by the rocketing down from the precipice at heady speed.
The national banks were successful in forestalling lawsuits charging them for violating state laws and banking rules. If required the banks switched their charters conveniently.
Illinois started making in-depth enquiries from 2008 spring, the operations of the branches of Wells Fargo Financial Illinois in the state for fraudulent lending operations. They were operating covered by a state charter. In the beginning the bank responded to subpoena. But in 2008 July Wells Fargo took over the branches and they now came under national charter. Immediately after this the bank refused to cooperate with the state. With such master strokes it was easy for the banking sector or any financial body to cover up their wrong actions.

Armed with the new power given by the Supreme Court, the Attorney Generals of many states are poised to launch legal war against the big banks. They contend that if they had previously had this weapon then although the crisis would not have been prevented they would have been able to contain its continuation and intensity to a great extent.

Richard Cordray the Attorney General of Ohio said, “For the better part of eight years, the federal regulators were not being aggressive, and at the same time we were disabled. There was nothing holding back irrational and irresponsible practices.”
However as yet it cannot be said that the states have won a clear victory. There are limits on subpoena powers. It is now easier to bring in cases but might be more difficult to initially build these up. If the banking lobby manages to have its say then the victory will only be short lived and not permanent.
Washington is the scene of hectic lobbying by the banking sector to try and contain the aggressiveness of the states. Legislators are being pressurized to pre-empt the rules of the state that are stricter than the federal ones. The Obama government till now has been opposing these changes.

Recently the House Financial Services Committee gave its vote in favour of allowing the federal government from blocking state powers regarding regulating the national banks under some circumstances.

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• Banks Have Been Operating With Impunity Causing the Start and Continuation of the Foreclosure Crisis
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