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Francine McKenna of re: The Auditors fame wrote a post on Clusterstock today that irritated at least one anonymous commenter to the post. I get a kick out of the bravery that's fostered by anonymity.

Francine wondered why the financial statements of Wells Fargo seem not to disclose much, if anything, about repurchase risk associated with mortgage banking activities. As she kindly points out with a link to a nearly four year-old post of mine, that risk was well known to those of us who represented mortgage bankers and was being blabbed about by know-nothings in the blogosphere years before the subprime meltdown turned the promised land into a waste land. It's a valid question, notwithstanding some a snarky comment or two to the contrary, and one to which I surely don't have an answer. On the other hand, so many supposedly knowledgeable people missed so many warning signs that finger-pointing is an activity that need to be pursued judiciously. Francine's got the "street cred" to ask the tough questions, so I'l leave those to her.

I guess what struck me most about that old post was the fact that in the fall of 2005, well before Sheila Bair was appointed to head the FDIC, former OTS director John Reich was warning thrifts about the dangers of exotic mortgages and warning them to "go slow" if at all. He also warned that the OTS would look at such activities critically. Popular mythology that I've read recently has it that Sheila Bair was the first regulator to warn about the dangers of subprime and its ilk, but here we have John Reich sounding the alarm bell before the public even knew that Sheila existed. Of course, the fact that Mr. Reich warned about the dangers makes it even more damning for the OTS that exotic failures like Washington Mutual, Downey, Countrywide (absorbed before it imploded), IndyMac, World Savings (also absorbed prior to melting down but dragging its white knight through the mud), Bank United, and others made their missteps on Mr, Reich's watch. Watching closely doesn't do much good if you don't actually do something about what you see.

"We'll be watching you! We won't be DOING anything, but we WILL be watching!"

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