Who Is To Blame for the Mortgage Meltdown?

One serious contender for the prize, according to the Washington Post, is the Bush-appointed director of the Office of Thrift Supervision (OTS) from 2001 to 2005, James Gilleran. The Post charges that “In the parade of regulators that missed signals or made decisions they came to regret on the road to the current financial crisis, the Office of Thrift Supervision stands out.”

The Post reports that “This year, the government has seized three of the largest institutions regulated by OTS, including IndyMac Bancorp, Washington Mutual — the largest bank in U.S. history to go bust — and on Friday evening, Downey Savings and Loan Association. The total assets of the OTS thrifts to fail this year: $355.7 billion.”

The Post reporters note that “OTS adopted an aggressively deregulatory stance toward the mortgage lenders it regulated. The agency championed the thrift industry’s growth during the housing boom and called programs that extended mortgages to previously unqualified borrowers as “innovations.” In 2004, the year that risky loans called option adjustable-rate mortgages took off, then-OTS director James Gilleran lauded the banks for their role in providing home loans. “Our goal is to allow thrifts to operate with a wide breadth of freedom from regulatory intrusion,” he said in a speech.”

Here is the image that stands at the heart of the Post’s expose: “In the summer of 2003, leaders of the four federal agencies that oversee the banking industry gathered to highlight the Bush administration’s commitment to reducing regulation. They posed for photographers behind a stack of papers wrapped in red tape. The others held garden shears. Gilleran hefted a chain saw.”

Read the entire story here.