Post-Mortems Reveal Obvious Risk at Banks - regulators knew

[groovedaddy]

The coroner’s report left no doubt as to the cause of death: toxic loans.

That was the conclusion of a financial autopsy that federal officials performed on Haven Trust Bank, a small bank in Duluth, Ga., that collapsed last December.

In what sounds like an episode of “CSI: Wall Street,” dozens of government investigators — the coroners of the financial crisis — are conducting post-mortems on failed lenders across the nation. Their findings paint a striking portrait of management missteps and regulatory lapses.

At bank after bank, the examiners are discovering that state and federal regulators knew lenders were engaging in hazardous business practices but failed to act until it was too late. At Haven Trust, for instance, regulators raised alarms about lax lending standards, poor risk controls and a buildup of potentially dangerous loans to the boom-and-bust building industry. Despite the warnings — made as far back as 2002 — neither the bank’s management nor the regulators took action. Similar stories played out at small and midsize lenders from Maryland to California.

What went wrong? In many instances, the financial overseers failed to act quickly and forcefully to rein in runaway banks, according to reports compiled by the inspectors general of the four major federal banking regulators. Together, they have completed 41 inquests and have 75 more in the works.

http://www.nytimes.com/2009/11/19/business/19risk.html?th&emc=th

[dixiegrrrrl]

1. ILLEGALLY failed to act, at that.

By law, regulators and FDIC are supposed to step in the minute a bank is in trouble.
And banks are supposed to report and act upon missed mortgage payment within 30 days, not wait for months to move the non-performing asset from "good" to "bad".
Instead all we have is another version of Enron accounting...going on for years.

[D-Lee]

2. Yup, and Repug regulators are SO good at their jobs (sarcasm) nt

[TexasObserver]

3. Recommend

[Soylent Brice]

4. K&R

[Demeter]

5. 2002--Who Was In Charge Then?

Oh yeah. Nobody.

The lunatics were running the asylum and pirates were manning the Treasury, the banks and the markets. War criminals ran the White House and Justice Dept. while Faith Healing was all over.