by Marian Wang
While they may be conducting their own investigations, federal prosecutors and national bank regulators for the most part aren’t the ones leading the investigation into the foreclosure mess. At least that's the perception—one that's reinforced when Elizabeth Warren, Obama's head of consumer financial protection, says her money is on a 50-state investigation by the states' attorneys general. The New York Times’ Joe Nocera, for instance, has said that the handful of federal investigations into the subject are “not going to amount to a hill of beans."
Why such low expectations for the feds? A piece in the Washington Post last week may shed some light (emphasis added):
As foreclosures began to mount across the country three years ago, a group of state bank regulators suspected that some borrowers might be losing their homes unnecessarily. So the state officials asked the biggest national banks for details about their foreclosure operations.
When two banks—J.P. Morgan Chase and Wells Fargo—declined to cooperate, the state officials asked the banks' federal regulator for help, according to a letter they sent. But the Office of the Comptroller of the Currency, which oversees national banks, denied the states' request, saying the firms should answer only to inquiries from federal officials. In a response to state officials, John Dugan, comptroller at the time, wrote that his agency was already planning to collect foreclosure information and that any additional monitoring risked "confusing matters."
But even as it closed the door on state oversight, the OCC chose itself not to scrutinize the foreclosure operations of the largest national banks, forgoing any examination of their procedures and paperwork. Instead, the agency relied on the banks' in-house assessments. These provided no hint of the problems to come until they had tripped the nation's housing market, agency officials later acknowledged.
In other words, state bank regulators—unable to get cooperation from the banks—warned federal regulators of problems with the banks’ foreclosure operations, and they were told to let the feds handle it.