There has already been a lot of good commentary on the Senate hearings on the misnamed Independent Foreclosure Reviews, notably by Pam Martens. I’ve finally gotten a transcript (it will be going up shortly at Corrente) which helps in reviewing it more carefully. Since Part 2 of the hearings take place this week, I’ll focus on some key issues that haven’t gotten the attention they warrant.
First is that even though Elizabeth Warren correctly has gotten a lot of praise for her pointed and persistent questioning, Sherrod Brown and Jack Reed also did exemplary jobs.
What emerged from the hearings, particularly if you have been following the story, is the remarkably poor performance of the OCC. The only open question is to what extent that resulted from pure incompetence, and how much resulted from being so completely captured by the banks that it swallowed their PR, that hardly any homeowners had been harmed by bad servicing, and accordingly botched the design and execution of a coverup. No matter which theory you subscribe to, it paint a picture of an agency that is hopelessly bad at its job, which raises the question of why it should continue to exist.
Let’s recount some of its gaffes so far. It said initially it was shutting down the process in part because it was taking too long to get money to harmed borrowers, and it had also found few borrowers were harmed. It then provided two different figures for overall borrower harm, first 6.5%, then 4.2%, but the latter was flagged as sus by the Wall Street Journal since the reviews for JP Morgan Chase had done the easiest files first (as in no Bear or WaMu) and thus come up with an error rate of 0.6%. Warren got the OCC to admit to what critics knew, that the OCC and Fed had settled while having no idea of the actual harm. Ironically, it was the Fed that wound up doing the brunt of the defense of the non-numbers; the OCC representative said later that this wasn’t his area but reviewing 100,000 file “is not valueless”: