You – the Massachusetts taxpayer – cannot know all the disciplinary actions your banking regulators take against brokers and lenders. They are secret. Hundreds of them over the past few years.
That’s what NECIR-BU and its media partners reported Monday in our multi-media stories about Massachusetts banking regulators. Our investigation shows Massachusetts ranks last among New England states when it comes to taking public punitive action against brokers and lenders during the current housing crisis.
The Division of Banks claims that having the ability to privately sanction a broker or lender who isn’t following the law actually makesthe process work better for the public. It is less “adversarial” and the licensed entity might be more willing to modify its behavior if it isn’t going to be publicly named, according to the Division’s Chief Operating Officer David J. Cotney.
But Massachusetts is the only state in New England which has such a two-tiered system – public sanctions and “secret” – or as the division calls them – “informal” sanctions.
Not only are the actual steps taken by regulators to encourage the broker and lender to straighten up secret, but even the names of those licensees are not made public, even if they are repeat offenders.
This is true despite the fact that taxpayers fund the probes resulting in the “informal” actions. The entire agency – which just got a legislative budget increase to do more enforcement – costs taxpayers about $12 million each year.
If it is so effective and is good public policy, as Massachusetts regulators claim, to keep informal actions secret, then why aren’t our neighboring regulators following suit?
Especially now as banking regulators acknowledge bad practices by brokers and lenders contributed to the current foreclosure crisis, it seems it’s time to lift the veil of secrecy. We have the right to know – really a responsibility as taxpayers footing the massive mortgage crisis bill – to know what brokers and lenders were cited for – and why it isn’t public.
