Wrecking Our Economy, One Deregulator At a Time

The villain of the day is the Office of Thrift Supervision. These are the comatose regulators whose job is to "oversee" the savings and loan industry.

It was a job that they, with malicious intent, failed to do. After Superior Bank, a S&L, failed in 2001, there were a lot of lessons that the OTS could have learned. But the OTS was led by James Gilleran, an ardent foe of regulation and oversight. In an era of expanding activity by S&Ls (they were making over twice as many loans), Gillerand cut the regulation force by a quarter. The S&Ls were qualifying people for mortgages based on their ability to pay the "teaser rates" of adjustable-rate mortgages, with no regard for their ability to pay once the ARMs reset.

Gilleran was succeeded by John Reich in 2005, who continued the policy of ignoring what the S&Ls were doing. The S&Ls were pushers of "liar loans" and engaged in predatory lending in poor and minority neighborhoods, all with the active connivance of OTS and the Bush Administration.

It was all a huge financial house of cards. The "deregulate everything, the market will control bad behavior" attitude pushed by Phil Gramm, Alan Greenspan, George Bush and their tools in the OTS and the Federal Reserve largely is responsible for the current financial mess.

Recessions happen, nobody has yet repealed the business cycle. But the Republicans, with their ideology derived from reading the fiction of people like Ayn Rand, put in place the factors that led to a dizzying climb in real estate values and then to a fully-foreseeable crash.

The names of those gentlemen will go down in history right alongside that of Herbert Hoover.