[Rhodes22-list] Economics

[DCLewis1 at aol.com]

Hank, 
 
I suspect the evolving mortgage mess is going to be a bi-partisan issue -  
forget Democrats criticizing.  I think the Congress is going to be asking  
representatives from Treasury and the Fed a lot of hard questions about their  lack 
of attention to the evolving mess, and I think the questions will be coming  
from both political parties. The Dems will get center stage because they are 
the  majority, but there will be unhappy Republicans because the people and  
institutions holding the bad loans are going to start voicing their  
unhappiness.   
 
I don’t think we need another law, there are tools are in place; we  need 
competent, alert, involved, regulators who will use the tools they have  
available - as opposed to political loyalists.  Reasonable people saw this  problem 
coming more than a year ago.  What should have happened could have  been very 
apolitical - for example, raise reserve requirements as a function of  NoDoc 
loans underwritten or owned -  I really don’t think the Dems  would have objected 
at all to what would be a technical adjustments from  Treasury or The Fed 
focused on lending and thrift institutions that have  underwritten or own the 
riskiest loans.
 
Again, this is not 20/20 hindsight - the current situation was predictable,  
and it was predicted. The country has been through a previous major mortgage  
meltdown in our lifetime (remember the S&L debacle?), the people paid to  
regulate components of the mortgage industry should have been on guard - and  
serious issues with "innovative mortgage products" including NoDoc, NINA,  and 
negative amortization loans were well known more than a year ago.   I see the 
current mortgage mess as another manifestation of the FEMA  syndrome.
 
JMO
 
Dave




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