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Bank Regulator: We Passed Too Many Bank Regulations!

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One of the nation’s top banking regulators delivered an unusually strident critique of recently passed bank reforms, saying the slew of new regulations could hit banks and mortgage services like a “tsunami.”

John Walsh, acting Comptroller of the Currency, told a group of bankers last week at the Financial Services Roundtable that they may not be prepared for the 15 to 20 new rules regarding mortgage lending requirements that are headed their way.

The new rules require a 50-state investigation by attorneys general into allegedly illegal foreclosures by mortgage servicing companies; new standards for how much cash banks must keep on hand, and how much risk they must retain when securitizing pools of mortgages; and the creation of the new Consumer Financial Protection Bureau, which will have significant power to enforce lending laws.

Walsh compared the numerous rules to drug interactions. Taking three different pills might help with different symptoms. But taken together, the medications contradict and “flatten you.”

“I suspect that even in this audience, there are many who haven’t stopped to take account of all the new requirements facing your business,” Walsh said.

His criticisms were the most pointed to date from the Office of the Comptroller of Currency, and they staked out the agency’s position as a defender of banking interests, which have largely opposed the new regulations. The OCC has endured ongoing criticism for its alleged role in enabling the financial crisis of 2008 by allowing banks to take oversized risks with mortgage lending and overriding efforts by many states to curb abusive mortgage practices.

The OCC’s preemption of tougher state laws “played a major role in the collapse of the world economy,” says Ed Mierzwinski, director of the consumer program at the U.S. Public Interest Research Group.

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