WASHINGTON -- Economic policymakers on Thursday recommended stricter regulation of mortgage lenders as part of a broad effort to prevent a repeat of a credit crisis threatening to drive the country into recession.
Mr Paulson said yesterday that he wants to increase the power of state and federal regulators who oversee mortgage lenders and brokers. Regulators and investors became complacent, he said. Seven months after the start of the subprime mortgage crisis, financial markets are getting the equivalent of the post-Enron treatment. Regulators are trying to rein in the financial innovators.
With problems in the credit and housing markets worsening, the Bush administration now seems to favor a larger role for government -- an approach for which Republicans generally have had little appetite. Recommendations from a presidential advisory group on financial markets cover mortgage lenders and other institutions, as well as investors, credit ratings agencies and regulators.
Federal and state regulators should strengthen oversight of mortgage lenders, according to the group's report released Thursday. Also, states should follow strong, uniform licensing standards for mortgage brokers. Legislation in Congress would create a nationwide licensing system.
It's been obvious for years now that Wall Street could not be trusted, and finally official Washington agrees. The markets need a tougher cop to make sure that money-center banks, investment banks, credit-rating agencies, hedge funds, mortgage brokers and the rest don't let their own greed and arrogance ruin it for the rest of us.
"Regulation needs to catch up with innovation," Paulson said, and he was backed up by the rest of President Bush's working group on financial markets, including Federal Reserve Chairman Ben Bernanke and Securities and Exchange Commissioner Chris Cox. Not a commie among them.
