A grotesque deception from Dugan’s opening statement:
“The rapid increase in market share by these unregulated brokers and originators put pressure on regulated banks to lower their underwriting standards, which they did, though not to the same extent as was true for unregulated mortgage lenders.”
Dugan is correct to note that many subprime lenders like Ameriquest and New Century were virtually unregulated, but he’s spinning their role in the crisis to protect the banks he used to lobby for. Since the Ameriquests of the world didn’t accept consumer deposits, they weren’t subject to traditional bank regulations.
But banks, including OCC-regulated banks, directly supported mortgage brokers and Ameriquest-type companies. Banks providing them with direct funding, and banks bought up all of the mortgages these companies issued, creating artificial demand for their predatory loans. Bankers even went into these Ameriquest-type companies and told their employees exactly how to issue as many subprime mortgages as possible. Subprime mortgages could be packaged into pricey securities that the big banks could sell to investors, and the banks were hungry for as many of them as they could get their hands on.
In other words, these “non-bank” lenders were working directly with the banks every step of the way. Wall Street was in fact pressuring the “unregulated brokers and originators” to issued terrible loans, not the other way around.