The Office of Thrift Supervision
For millions of US citizens the image of the ‘American Dream’ includes a home of their own, and in the past eighteen months or so that has become a thing of the past for many who owned homes, and a seemingly unreachable goal for would-be homeowners. One of the agencies charged with regulating financial institutions who offer US citizens the possibility of owning a home, is the Office of Thrift Supervision. Stated on its website: “The OTS supervises a national thrift industry that is built on the bedrock of the American dream of homeownership – supplying affordable home financing for Americans from all walks of life.” While this sounds great in theory, is it working?
As is the case with other US federal bank regulators, the OTS is paid by the banks it regulates. Similar regulatory agencies include the Federal Deposit Insurance Corporation (FDIC) the Federal Reserve System, the Office of the Comptroller of the Currency (OCC) and the National Credit Union Administration. History reveals that, although the OTS started out adhering to stringent regulations, shutting down hundreds of troubled S&L agencies, it later became lax. To increase declining revenues, caused in part by the reduced number of operating S&L agencies, and to counteract competition, the OTS began to market itself to companies as a regulator that was somewhat flexible. One marketing campaign reportedly featured a garden shears poised to cut through a stack of federal regulations – and everyone got the message. It also expanded its scope to include companies that were not banks, and when the financial crisis of 2007-2010 manifested itself, some of the OTS regulated companies that failed included American International Group (AIG), IndyMac, and Washington Mutual.
Although the Office of Thrift Supervision continues to function in its regulatory role, calls for reform which started in 2008 with Treasury Secretary Henry Paulson proposing a merger with the OCC, continued with President Obama announcing on June 17, 2009 that he would ask the US Congress to merge the OTS with the OCC, and this was later reinforced by House and Senate proposals along the same lines. As the primary regulator of federal savings associations, or federal thrifts, the days of the OTS may be numbered – but only time will tell if that the proposals will be carried through.