The 20/20 hindsight afforded members of Congress when judging the alleged failures of the independent foreclosure reviews that we discussed last night also graces the peepers of the Government Accountability Office.
The independent foreclosure reviews abruptly ended by regulators in January failed from a lack of objectivity, oversight and consistency in the loan sampling process, said Lawrance Evans, director of financial markets and community investment for the Government Accountability Office.
Despite having a large portion of the funds already in the mail to homeowners, Evans says GAO’s probe into how the IFR was handled is far from complete.
He told lawmakers GAO plans to conduct more studies on how regulators came up with the $8.5 billion settlement figure when there is no data to show how that number was chosen or exact calculations on how many homeowners were, in fact, harmed by foreclosures.
He pointed out that "regulators’ statistical sampling approach did not include mechanisms to allow the regulators to monitor consultants’ progress toward finding as many harmed borrowers as possible."
Without data on how many borrowers were actually harmed, the GAO representative says his office wants answers on how the compensation figures were determined by the OCC and Federal Reserve.
In other words, the beat(ing) will go on.
While that's going on, the regulators are going all passive-aggressive by asking Congress to clarify that the regulators have the power to take enforcement action directly against independent contractors for banks. Because, you know, if the regulators require banks, as part of related enforcement orders, to hire independent consultants to perform very expensive services in order to comply with the enforcement orders, and the lack of clear, or even consistent, instructions on what the criteria and processes should be to perform those services leads to later criticism of the regulators over those services, well, then, regulators must be able to blame somebody, and looking in the mirror is simply out of the question (vampires cannot see their own reflections). Thus, the regulators must be able to blame the independent contractors and pursue them via enforcement processes that give the regulators a leg up on the object of their (lack of ) affection. Just like banks.
The independent contractors are reacting badly to the regulators' reaction (paid subscription required).
"I'm not sure having the regulators regulate consultants would make them more independent," said Jon Winick, president of bank advisory firm Clark Street Capital. "A better idea is to have the regulators hire the consultant then."
That would be a good alternative, except then the regulators would be responsible for the consultants' performance (or lack thereof), and we can't have that. They must be able to blame either the banks, the consultants, or both. That's not possible if the regulators are in a position to bear any responsibility.
"To me, the whole thing about the consultants is just more scapegoating," said Walter Moeling 4th, a partner at the Bryan Cave law office.
Man, I'm glad I'm not as cynical as Walt. Personally, I think this is all just a legitimate disagreement among well-intentioned people who are not worried about covering their own backsides, deflecting blame, or promoting themselves at the expense of others, but only about trying to "do the right thing."