I am from the Government - I am here to help

Yikes. Government HELP? Just what we DON'T need. What I refer to is the unfolding Mortgage meltdown. We are hearing my cries for more 'oversight' by Federal Regulators. That is the same as blaming the free market for this mess. We need just the opposite.

Let us reflect. How did we get in this mess? It was chiefly because the Feds essentially forced banks to loan money to folks that they would not otherwise have loaned to. People in 'red-lined' areas, for instance. These were areas deemed by banks to be 'high risk' areas for loans. Areas with a lot of poverty, crime, and declining property values. Well, we could not have that. Why? Because there were also a lot of minorities in those areas. So, the Feds basically said - 'Thou shalt loan to the poor and downtrodden'. This was a HUGE manipulation of the Free Market.

Now, banks did charge higher interest for these loans. But, many were made without sufficient 'documentation' (like proof that you might actually be able to pay it back). Also, appraisals were inflated to allow the loans to go through. Lastly, downpayment requirements were essentially eliminated. And, let's throw in an adjustable rate - with a low, teaser, initial rate. And, lets add the interest that you are not paying, during the teaser period, to the principle of the loan. Result? People with limited means to pay back the loan, borrowed essentially 100% of the inflated value of a house, in a bad area. Then, when the loan rate re-adjusts up after the teaser period - BOOM, you are now underwater with a loan that exceeds the real value of the house. All this happened because banks did not want to be called racists for refusing loans to people who, by any objective standard, should NEVER have qualified for a loan in the first place.

Then, they got Freddie and Fannie to buy up these ill-advised loans. These were quasi-government institutions who were exempt from normal market forces. They were run by folks who lined their own pockets and then got out before the tidal wave hit. One of them now advises the BHO campaign on Economic Policy (Franklin Raines, call your office).

Now - if you are waiting for an investigation or prosecution over all of this... Don't hold your breath. Even though the investors in Fannie Mae, for instance, lost nearly all of their money (Remember Enron and Ken Lay) - don't expect anything similar in this case. Why? Because the folks that are primarily guilty of the underlying crime sit in the House and Senate in Washington.

So, what do the geniuses in Washington propose? MORE government tinkering. Sweet.

Hey - We are the government. We caused this problem - now, we will do even more to fix it.

Why do I not feel reassured?