Government Accountability Office report to Senate scathing
US regulators failed to control banks and securities firms and too often relied on companies’ assessments of their financial health, according to a Government Accountability Office report, Bloomberg reports.
A Government Accountability Office review of the watchdogs, including the Federal Reserve and the Securities and Exchange Commission, said the agencies found “numerous weaknesses” in the management of risks. But regulators shunned “forceful actions” because the firms reported “strong” finances and pledged to change their practices.
“Regulators acknowledged that in some cases they had not fully appreciated the extent of these weaknesses until the financial crisis occurred,” the report said. “Regulators also acknowledged that they relied heavily on management representations of risks.”
The 35-page report was requested by Democratic Senator Jack Reed of Rhode Island. He leads a Senate subcommittee on securities, insurance and investment and will hold a hearing today to examine oversight of risk management by the Fed, SEC, the Office of Thrift Supervision and the Office of the Comptroller of the Currency, Bloomberg said.
