Connie Bruck has a profile of Angelo Mozilo in the latest New Yorker, which annoyingly isn’t freely available online. There’s lots of interesting material in it, but I was particularly struck with Countrywide’s regulator-shopping:
Mozilo called some of the regulators’ concerns “much ado about nothing.” He decided that Countrywide should try to switch regulators, leaving the Fed and the O.C.C. for the weaker Oﬃce of Thrift Supervision (O.T.S.)…
Under the existing system, banks may choose their own regulators, which in turn are funded by the fees that the banks pay; the O.T.S. had lobbied Countrywide to make the switch.
Call me naive, but while I knew that companies would try to get themselves regulated by the toothless OTS, I had no idea that the OTS itself would lobby them to make the switch. Of course in hindsight it makes perfect sense — I’m sure that the likes of Countrywide and AIG (AIG) accounted for a large chunk of the OTS’s income. But the idea that the OTS and the OCC were competing with each other, in a regulatory race to the bottom — well, let’s just say it explains quite a lot. And it’s one reason why I’m uncomfortable that even after the OTS and the OCC merge to become the National Bank Supervisor, there’s still going to be some measure of competition between the NBS and the FDIC to see who gets to regulate whom.