The administration is the problem

Obstructions

Cooperation between SEC and Wall Street
SEC, the Securities and Exchange Commission, is there to regulate the securities industry. It does not succeed and that's no wonder. SEC and Wall Street intermingle; at a conference, the entire staff of the SEC was thanked for "the really amazing things they have done ... to the country, to the financial community, and not to mention a lot of [Wall Street] law practices." SEC's director of enforcement answered with an offer to Wall Street; presumptive wrongdoers could use the SEC as a negotiator, should they need to talk with the Department of Justice.
Many former SEC regulators now make a million dollar or more working for the firms they used to police; serious investigators get fired. There is much interaction between Wall Street and the different branches of the Government, with people going in both directions.

Treasury obstructing SIGTARP
Agencies trying to monitor federal spending were actively obstructed. The story of the Office of the Special Inspector General for TARP (SIGTARP), a watchdog agency supposed to prevent waste of federal Troubled Asset Relief Program (TARP) money, is a story of frustration, with the Fed all the time putting obstacles in the way. From the beginning, Treasury made it very clear it did not want SIGTARP.
TARP distributed hundreds of billions of dollars to the banks, money meant to stimulate the economy. When SIGTARP wanted the TARP recipients to explicitly acknowledge SIGTARP's right to access their documents, the Treasure would not permit it. Soon it was clear that the banks did not increase lending, as they were expected to do; instead they bought securities, bought other banks, saved for a rainy day.

OCC forbids banks to submit data
The Office of the Comptroller of the Currency (OCC) is an independent bureau within the Treasury. Like SEC, it is supposed to supervise banks. Like SEC, it fails miserably. Like SEC, it actively works against investigations.
A twelve state working group sought solutions to the subprime crisis problems; they gathered data from the largest subprime servicers and published five reports. Unfortunately, the OCC forbade the banks to provide data on defaulting loans. Maybe they wanted to hide how the banks acted. For example, loan modifications did not always work the way they were supposed to; instead of lowering the costs, the banks could raise them.
Predatory lending, with undisclosed charges and fees, misrepresentings, deceptive "teaser" rates later ballooning astronomically, even illegal kickbacks, became a big problem several years ago. Attorneys general from 50 states tried to put an end to this but the OCC explicitly forbade states to enforce laws against banks. The reason given was that forbidding predatory lending would deny credit to those the states were trying to protect. Of course, somebody has to speak up for all those who want loans with undisclosed charges, fees and ballooning rates.

Congress to cut SEC founding
Under Arthur Levitt (1993-2001), the SEC was keen to go after certain issues; to force him to curb his efforts, the Congress repeatedly threatened to cut the already insufficient budget. The result was too many cases spread over too few people. The pressure was to wrap up things quickly and move on. Or you get the other syndrome: extreme multitasking, with nothing done very well and everything taking too long.
The SEC is doing more to make investigations difficult. For two decades, they have been systematically destroying records of preliminary investigations once they are closed, leaving an entire generation of federal investigators in the dark about past inquiries. This conduct goes back at least to 1993; it looks like Levitt had a double role.

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