Leaving it to consultants hired by mortgage servicers to
right the wrongs that the services inflicted on foreclosed homeowners was the unhappy consequence of bank
regulators giving ambiguous guidance and failing to install viable oversight
mechanisms. According to the Government Accounting Office, “regulators risked
not achieving the intended goals of identifying as many harmed borrowers as
possible.” Even if the reviews had been completed, there was on guarantee that
wronged mortgage borrowers would have received any compensation. On the other
side of the ledger, the banks had received billions from the U.S. Treasury with
no strings attached. Whether intentional or not, the banking regulators put too
much stock in the consultants, who, after all, had been hired by the mortgage
servicers."
The full essay is at "The Banks' Consultants: A Conflict of Interest." For other cases, see my book, Institutional Conflicts of Interest: Business & Public Policy, available at Amazon.
Sources:
Ben Hallman and Eleazar Melendez, “GAO Foreclosure Report Finds Bank
Regulators Failed to Provide ‘Key Oversight’,” The Huffington
Post, April 3, 2013.
Dan Fitzpatrick, "'A Dose of Healthy Competition' For
Banking Regulators," The Wall Street Journal, April
18, 2013.
