Trump's Bank Regulators: More Swamp Creatures

Following his appointment of Steven Mnuchin as Treasury Secretary, the President has nominated Joseph Otting, former CEO of OneWest Bank, to be the chief federal bank regulator as head of the Office of the Comptroller of the Currency. The OCC is the bank cop for the nation's largest banks. The OCC determines whether banks are taking too many risks with depositor and taxpayer money, and is charged with preventing failures of banks that are too big too fail, in other words, with preventing the next financial crisis.

OneWest Bank was founded by Treasury Secretary Mnuchin in 2009  primarily to acquire, and foreclose, thousands of troubled mortgage loans made by the failed subprime lender IndyMac. Otting served as CEO of OneWest from 2010 until 2015. The President's two leading bank regulators made considerable fortunes by running this very unusual bank, relying on some big-time government funding.

IndyMac had specialized in "nonprime" mortgages, including no-doc interest-only loans and other toxic products, that failed massively in the foreclosure crisis. IndyMac was the first large federally-regulated bank to fail and be bailed out by the FDIC in 2008.

The California Reinvestment Coalition determined from several Freedom of Information Act requests that the FDIC will pay OneWest $2.4 billion for foreclosure losses on the IndyMac loans. Housing counselors in California identified OneWest as one of the most ruthless and difficult banks to deal with in trying to negotiate foreclosure alternatives on behalf of homeowners. In 2011 OneWest signed a consent decree with the federal banking agencies, neither admitting nor denying the agency's findings that OneWest had routinely falsified court documents in foreclosure cases, the practice known as robosigning. In his Senate confirmation hearing last week, Otting insisted that the regulators' findings of OneWest misconduct were a "false narrative." False or not, OneWest foreclosures, and its deal with the FDIC, do seem to have proven very profitable. Bloomberg estimates that Mnuchin made $200 million from the sale of OneWest in 2015, and Otting earned about $25 million in compensation and severance in his final year at OneWest.

OneWest was acquired by CIT group, one of the few banks that did not repay the taxpayers for their 2008 TARP bailout--the bank filed bankruptcy in 2009, stiffing the taxpayers for $2.3 billion. The bankruptcy reorganization and the shedding of CIT's debt allowed CIT to return to profitability and eventually fund its purchase of OneWest from Mnuchin and his partners.

photo credit Walt Mancin Pasadena Star-News

Comments

[Knute Rife]

I'm shocked SHOCKED to find that crony capitalism is going on here. Move along, citizens, nothing to see here.

[OnlineLoanService]

I once considered capitalism to be a good thing for the country’s development. We all want to be wealthy enough to support our families. In order to earn more you have to work more, that sounds like a good plan. But you realize that the system has failed when they have forgotten about the needs of ordinary people. These are the people who have worked hard all their lives to contribute to the country’s well-being. They don’t deserve their money to be frozen and their homes to be taken away.