A change in mindset on bank rules


Banks have notched some big settlements this week.

Bank of America settled with Fannie Mae for $10.3 billion. Ten banks again settled with federal regulators over shoddy mortgage practices. And many big banks cheered when global regulators offered a reprieve on the Basel III on the liquidity coverage ratio (LCR). They'll now have four more years to meet key targets, and they'll be able to use a longer list of assets that will satisfy the requirement, including mortgage-backed securities.  

So once again, the pundits are saying that the worst of the post-financial crisis malaise is behind us. This isn't anything new. Analsysts said the same thing last February, when the top five mortgage banks and servicers inked a deal with state attorneys general. Perhaps the better way to view all this is as a rolling process to recover from the near-death experiences in 2008.

The mindset from the regulatory side has morphed quite a bit over the past few years. The goal has moved from outright retribution and punishment to a more conciliatory approach that aims to prod banks to become economic engines at a time when the country needs them most. Some might see this as a sign of regulatory and enforcement capitulation, merely slapping banks on the wrist for significant crimes. But others would argue the economy takes precedent.

A Washington Post editorial reflects this new attitude: "With the five-year anniversary of the financial crisis approaching and large chunks of the world economy still in dismal shape, the banks are winning. Now we just have to hope that they use those victories to support growth."

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- here's the article