Top Obama administration officials are close to recommending that Congress create a single regulator to oversee the entire banking sector, people familiar with the matter said, a departure from the hodgepodge of federal agencies that failed to contain the financial crisis as it ballooned out of control last year.
A single federal regulator still leaves unresolved the regulation and supervision of state chartered and state licensed institutions. The states and not the federal government supervise insurance companies. Likewise, mortgage brokers and mortgage bankers are state licensed and regulated and not under the supervision of the federal government.
State mortgage entities are not federally charted or federally supervised institutions. They sourced most of the mortgages that went into early foreclosures and defaults at the beginning of our financial crisis. State chartered mortgage institutions originated most of the mortgages with affordability problems, i.e. subprime mortgages, no-documentation mortgages, no down payment mortgages, interest only and negative amortization mortgages.
The FDIC, the Federal Reserve and the OCC had warned the financial institutions under their supervision prior to the current financial crisis to limit their holdings and originations of these types of mortgages. For example, see the 1999 OCC examination guidelines for subprime mortgages.
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