Scrutiny of banks may intensify

Treasury Secretary Henry M. Paulson Jr., Federal Reserve Chairman Ben S. Bernanke and other U.S. regulators will propose tougher scrutiny of banks’ capital in a report on lessons from the mortgage crisis, a government official said Wednesday.

The results of the review by the President’s Working Group on Financial Markets may be released as soon as today, two officials said on condition of anonymity. Paulson was scheduled to speak on financial markets at the National Press Club in Washington at 10 a.m.

Policymakers have said they aim to address deficiencies in how lenders make loans to home buyers, then package the mortgages into bonds rated by credit ratings firms and sold by securities firms.

Consumer advocates and legislators argue that the system failed to ensure that borrowers could repay loans, and helped deepen a slump that has led to record foreclosures.

“There definitely needs to be broader oversight of the mortgage lending process,” Paulson said last week.

One official who read drafts of the report said it would include proposals to strengthen supervision of banks’ capital, amid concern that they failed to protect against the risks they took investing in sub-prime securities.

Banks and securities firms posted more than $188 billion of credit losses since the start of last year as the mortgage meltdown rippled through financial markets. Delinquencies climbed as lenders made it tougher to get loans and home values slid.

Blame for the debacle will be spread among bank supervisors, ratings companies and large banks and securities companies, the official said.