Members of Congress fight for bank transparency

In a letter to Federal Reserve Chairman Ben Bernanke and Comptroller of the Currency Thomas Curry, Sen. Elizabeth Warren, D-Mass. and Rep. Elijah Cummings challenged the agencies’ decision to withhold all documents that Congressional members requested on mortgage servicers. 

At a meeting Tuesday, Warren and Cummings, along with Rep. Maxine Waters, D-Calif., were told by staff from the Federal Reserve and the Office of the Comptroller of the Currency that no documents would be produced regarding  specific mortgage servicers investigated as part of the national foreclosure review, which was abruptly ended earlier this year.

Staff from the agencies called these documents the “trade secrets” of mortgage servicers and believes they should not be shared with Members of Congress for fear it could be interpreted as a waiver of their authority to withhold proprietary business information from the public.

The Members responded, “We strongly believe that documents should not be withheld from any Member of Congress based on the flawed argument that illegal activity by banks is somehow their proprietary business information. Breaking the law is not a corporate trade secret.”

“As regulators, you identified systemic and widespread abuses two years ago, and concealing important information about these violations limits our ability to fulfill our responsibility to conduct oversight over the actions of mortgage servicing companies and to develop legislation to protect our constituents from further abuse,” added the Members.

It was two years ago this week that a public report was issued by the regulators announcing that 14 mortgage servicers were taking part in “violations of applicable federal and state law,” identifying illegal foreclosures against Americans protected by the Servicemembers Civil Relief Act.

Fourteen servicers were forced to hire independent consultants to review and identify as many harmed borrowers as they could. However, in February, the required reviews were terminated and settlements were made with 13 of the 14 servicers.

In January, Warren and Cummings launched a joint investigation, seeking details about the results of the reviews done by the independent contractors. On Tuesday, the regulators’ staff refused to provide the documents that could spotlight wrongdoing by any specific bank.

The letter written by Warren and Cummings on Wednesday called the decisions “a mistake.”

The Members wrote, “Obviously, this definition does not encompass illegal activity. It would be very surprising indeed if mortgage servicing companies argued that their ability to engage in illegal foreclosures and charge inflated fees is a commercially viable plan derived from corporate ‘innovation.'”

According to the letter, agencies have clear regulatory discretion to provide Members of Congress with the documents. It says that agencies could protect against a potential waiver by sending a simple cover letter like other agencies have done.

The letter concludes, “For these reasons, we hope that you will reconsider your staff’s positions and work with us to achieve a mutually agreeable accommodation that serves both of our interests.”

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