Subprime Lenders (and Wall Street Players) Facing Increased Federal Scrutiny
The meltdown in the subprime market is slowly rapping up as 100 percent loans and loans to those with damaged credit have dried up in the marketplace. So what next, it is time for the Federal bureaucrats to come charging in and start their investigations. The SEC announced yesterday they are commencing on a broad look at the Subprime sector including the big Wall Street firms that have been active in securitizing these loans.
Isn’t it amazing that the government has decided to investigate these issues now, after the free market has already recognized the issue and is rapidly correcting itself? The government could have launched these investigations a year or two ago and they would have been very effective.
Instead, they will just create a media storm, go after a couple of parties to make an example of (and to justify the cost of their investigation), and issue some new guidelines that will adversely impact the marketplace that has self corrected already.
That is why I am such a big fan of big government.
It has been known that the SEC was examining accounting practices at New Century Financial Corp., the nation’s second-largest maker of subprime mortgages – higher-priced home loans for people with tarnished credit or low incomes.
But comments by SEC Enforcement Director Linda Thomsen on Monday were the first public acknowledgment that the agency was involved in a broad examination of the subprime sector within the mortgage industry.
“We’re looking at subprime,” Thomsen told reporters following an address to an investment conference. “. . . As with anything, we’re going to look at all the actors and their roles.”
She declined to provide further details. The SEC as a rule does not comment publicly on current investigations.
The role of major Wall Street investment firms in the subprime market debacle also is under scrutiny. In Massachusetts, the state’s top securities regulator said last week that he had issued subpoenas to two major firms – UBS Securities LLC and Bear Stearns & Co. Inc. – as part of an investigation into whether their analysts’ research ignored subprime lenders’ mounting financial problems.
The Bush administration’s housing secretary, Alphonso Jackson, disclosed last week that the government was preparing to punish some subprime mortgage lenders that have been under investigation for discriminatory practices. He did not name the companies. HUD’s Office of Fair Housing has brought several cases against mortgage lenders and insurers for predatory practices, and those enforcement efforts are continuing, the department said. via Bradenton Herald