Executives from finance companies testify on Capitol Hill yesterday, (from left) WMC Mortgage CEO Laurent Bossard, Countrywide Financial executive managing director Sandy Samuels, HSBC Finance Corp. CEO Brendan McDonagh, and First Franklin Financial Corp. president L. Andrew Pollock.
(Dennis Cook/Associated Press)
Fingers pointing in subprime lending collapse
WASHINGTON -- Charges of blame were flying yesterday for the meltdown of the high-risk mortgage market as pressure mounted for Congress to do something about rising foreclosures among homeowners unable to meet high payments.
Under fire from lawmakers, federal regulators said they lacked full authority to prevent the crisis spawned during the soaring housing boom of 2003-2005.
Senator Christopher Dodd, Democrat of Connecticut, chairman of the Senate Banking Committee, laid out what he called a "chronology of regulatory neglect" as lenders loosened their standards for making riskier mortgage loans during the boom.
"Our nation's financial regulators were supposed to be the cops on the beat, protecting hardworking Americans from unscrupulous financial actors," Dodd said. "Yet they were spectators for far too long."
Many mortgage lenders haven't come under the Federal Reserve's supervision because their primary regulators are state banking authorities. However, Dodd and others maintain, the central bank does have authority under federal law to exert jurisdiction over those companies.
Some of the biggest companies in the so-called subprime mortgage market were called to account before the banking panel.
Company executives said they have tightened their lending practices and eliminated some higher-risk types of mortgages and urged Congress not to rush in and overreact.
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