Michael Hiltzik: Heart of darkness, regulatory division
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Regulatory capture is a well-known phenomenon in which a government overseer begins to see himself as more an agent of the regulated industry than of the public. Think of the guys at the federal Minerals Management Service giving BP the green light to drill into the seabed of the Gulf of Mexico without taking adequate precautions, and you get the idea.
As my Wednesday column reports, the Office of Thrift Supervision embraced regulatory capture with indecent enthusiasm, advertising itself as the most flexible banking regulator on the block. The result is the bizarre inclination to take E-Trade Bank at its word when a complaint about the company came in from UCLA professor emeritus Daniel J.B. Mitchell.
OTS will probably be extinguished as part of the financial regulatory reform now before Congress. It couldn’t happen soon enough ... but who’s going to keep the other banking regulators on the straight and narrow?
The column starts below.
Over the years, Daniel J. B. Mitchell has consulted for many economic institutions at the national level, including the Congressional Budget Office and the Federal Reserve. So you’d think that when he tried to sic the nation’s banking regulators on E-Trade Bank over what he regarded as a deceptive policy, he’d be taken seriously. You’d be wrong. What E-Trade pulled on Mitchell, 67, was bad enough. But what government regulators have pulled on him is even worse. As evidenced by the voluminous file of e-mails and faxes assembled by the professor emeritus of management and public policy at UCLA — a veritable logbook of his journey into the dark heart of federal banking regulation — regulators passed the case to one another like a cheap juggling act, willfully misconstrued his complaint, groused about him behind his back, and (here’s the bottom line) failed to take any action. Unless you think doing nothing is a form of action.
-- Michael Hiltzik
