The high cost of giving banks too much slack
By Karen Petrou

After the 2008 financial crisis, I spent a good deal of time serving as an expert on who was to blame when banking organizations failed.

What struck me most was how well examiners spotted trouble and then how little they did to correct it. One might have thought that the great financial crisis and its cost — $3.5 trillion worldwide just for taxpayers — would suffice to give examiners more gumption now. However, details of Citigroup Inc.’s enforcement actions released last week by the Federal Reserve Board and the Office of the Comptroller of the Currency make it clear that, in at least one very big case, problems seen were still problems that only got worse.

The discretion the Fed and OCC still have to decide when and how to sanction big banks remains only after pitched battles in 2010 with members of Congress who didn’t trust regulators they thought were unduly captive. Many of these lawmakers are still sore losers. If they gain power in 2021, they’ll stop scolding and start legislating.