Editorial: Fox in the henhouse

Friday, Sept. 7, 2007 | 7:29 a.m.

Only in Gov. Jim Gibbons' administration would it make sense to appoint an executive of a disgraced subprime lending company to regulate the state's mortgage industry.

As Las Vegas Sun columnist Jon Ralston first reported Tuesday in "Flash," his daily e-mail briefing, Business and Industry Director Mendy Elliott named Joe Waltuch the new commissioner of mortgage lending and to be the state's chief industry regulator. Ralston noted that a news release announcing Waltuch's appointment left out his previous employer, a deceitful omission. Waltuch was senior counsel and vice president of New Century Financial, the poster child of the subprime lending fiasco.

The company, which this year filed for bankruptcy, is being investigated for security violations and illegal accounting practices. Several states have barred the company.

Elliott, however, said she is "absolutely impressed" with Waltuch and said his work at the company, which was in regulatory and government affairs, had nothing to do with the company's collapse.

Is this a cruel joke? Subprime lenders fueled the crash of the housing market, and New Century was one of the leaders. New Century and others exploited lax standards to write loans for people with poor credit. Now it is estimated more than 1.2 million American families are in jeopardy of losing their homes because they were sold loans they could not afford.

It should go without saying that anyone involved in this mess should not be regulating mortgage lending in Nevada, yet Ralston reported Wednesday that he was told the governor has faith in Elliott's judgment.

We find this offensive. Nevadans cannot have any confidence in industry regulation or compliance when the fox is guarding the henhouse.