And the new deal reached by the Fed and the comptroller of the currency provides an opportunity to get right what the 49 attorneys general got wrong.
Representative Nancy Pelosi, the House speaker, and 30 other Democratic representatives from California told the Justice Department, the Federal Reserve and the comptroller of the currency that "it is time that banks are held accountable for their practices".
Sixty percent of modifications undertaken by banks in late 2008 were in default a year later, according to the latest Mortgage Metrics Report compiled by the Office of Thrift Supervision and the comptroller of the currency.
Ms. Cantwell said, "It's critical that these agencies like the F.D.I.C. and the Comptroller of the Currency come up with appropriate standards of creditworthiness and not rely on the monopoly of the rating agencies".
Regulators at the Fed and the Comptroller of the Currency's office are likely to testify at the hearing, which is scheduled for April 11, according to the people briefed on the matter but not authorized to speak publicly.
Regulators at the Fed and the Comptroller of the Currency's office are questioning the prudence of relying on consultants so heavily, according to government officials briefed on the matter".
Regulators from the Federal Reserve and the Comptroller of the Currency identified flaws throughout the bank, citing failures in its ability to assess how big losses might swell as a result of the complex trades.
They were seated across the table from Mr. Paulson; Ben S. Bernanke, chairman of the Federal Reserve; Timothy F. Geithner, president of the Federal Reserve Bank of New York; Federal Reserve Governor Kevin M. Warsh; the chairman of the F.D.I.C., Sheila C. Bair; and the comptroller of the currency, John C. Dugan.
And the comptroller of the currency, John D. Hawke Jr., said bank regulators were worried about the practice and that 7 of the nation's 50 biggest banks had retained their outside auditors for such work.
Those agencies include the Federal Reserve, whose oversight of bank holding companies will be broadened under the new laws to include all "systemically important" financial companies; the Federal Deposit Insurance Corporation, which regulates state-chartered banks not overseen by the Fed; and the Comptroller of the Currency, which supervises national banks.
