OCC and Model Validation Part 2
“The securities industry is an economic powerhouse that continues to strengthen the U.S. economy,” said Securities Industry Association President Marc Lackritz. “SIA data shows that last year alone, we raised a record $3.2 trillion of capital for American business and nearly $14 trillion over the past five, underscoring our substantial contribution to overall growth in the U.S. economy.”
Also fatbear in comments earlier offers this link by Paul Krugman on the OCC and Office for Thrift Supervision.
Just go read Krugman from right before Xmas last year:
Consider the press conference held on June 3, 2003 — just about the time subprime lending was starting to go wild — to announce a new initiative aimed at reducing the regulatory burden on banks. Representatives of four of the five government agencies responsible for financial supervision used tree shears to attack a stack of paper representing bank regulations. The fifth representative, James Gilleran of the Office of Thrift Supervision, wielded a chainsaw.
Also in attendance were representatives of financial industry trade associations, which had been lobbying for deregulation. As far as I can tell from press reports, there were no representatives of consumer interests on the scene.
Two months after that event the Office of the Comptroller of the Currency, one of the tree-shears-wielding agencies, moved to exempt national banks from state regulations that protect consumers against predatory lending. If, say, New York State wanted to protect its own residents — well, sorry, that wasn’t allowed.
One thing to remember is the the state subsidiaries of the national banks, many of the them state based mortgage companies, were also exempt from state regulation.
Another thing to remember is the lack of resources to even monitor the new market, as Consumers Union points out.
Even if the OCC had a desire to effectively regulate the consumer practices of national banks, it lacks the resources to do so. According to the OCC’s own statistics, there are about 2,200 nationally chartered banks, with total assets of $3.5 trillion. The entire staff of the OCC is less than 3,000, which is less than one person per $1 billion in bank assets. Even if the OCC did vigorously develop new consumer protection regulations, which it does not, the OCC does not have enough staff to detect and prevent problems for consumers at big and small nationally chartered banks throughout the U.S. is the resources of the agency as they took on added responsibilities…”
The GAO weighed in rather obliquely on the issue.
We shall see how it all shakes out, but remember, do not exclude externalities, which our economic models exclude from serious price adjusting. But that is a different story for 19th century philosophy. It just means we do not even try to validate the model in the 21st century. Whatever happened to innovation in economic philosophy?