Paulson Wants Stronger Oversight of Mortgage Industry
The Treasury secretary recommends that regulators keep a closer eye on lenders.
March 13, 2008— -- WASHINGTON (AP) -- Treasury Secretary Henry Paulson said Thursday that a presidential working group wants stronger regulatory oversight of mortgage lenders to avert the kind of credit crisis that is dragging the economy down.
In a new Bush administration initiative that Paulson said is not about "finding excuses and scapegoats," a presidential working group set up in the wake of the 1987 stock market crash is calling for a series of actions designed to avert the kind of chilling housing and credit crunches that are threatening to throw the nation into recession -- if it isn't there already.
"The objective here is to get the balance right -- regulation needs to catch up with innovation and help restore investor confidence but not go so far as to create new problems, make our markets less efficient or cut off credit to those who need it," said Paulson, who heads the working group.
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One recommendation calls for federal and state regulators to strengthen oversight of mortgage lenders and another urges state financial regulators to implement strong nationwide licensing standards for mortgage brokers, according to the group's report, released Thursday.
On Wall Street, Paulson's comments and the working group's recommendations failed to give solace to skittish investors. The Dow Jones industrials plunged more than 190 points in morning trading.
The group also called for improvements by credit rating agencies that have been criticized for not accurately assessing risk on complex mortgage investments. These kinds of business transactions eventually soured, driving markets into chaos. The working group also is calling for better disclosures and assessments of risks on investments.
The recommendations come as the meltdown in the housing and credit markets has unhinged Wall Street, catapulted home foreclosures to record highs and forced financial companies to rack up multibillion losses on bad investments in mortgage backed securities.
