Just say NO to wingnut welfare

Get a load of this wingnut welfare being proposed by the banking industry in today's WSJ:

The banking industry, struggling to contain the fallout from the mortgage debacle, is urgently shopping proposals to Congress and the Bush administration that could shift some of the risk for troubled loans to the federal government.

One proposal, advanced by officials at Credit Suisse Group, would expand the scope of loans guaranteed by the Federal Housing Administration. The proposal would let the FHA guarantee mortgage refinancings by some delinquent borrowers.

Credit Suisse officials have met with senior officials from the Department of Housing and Urban Development, which runs the FHA, and other policy makers to discuss the proposal.

The risk: If delinquent borrowers default on their refinanced loans, the federal government would have to absorb the loss. [emphasis mine]

Dean Baker put this nonsense into perspective when he said: "...the WSJ did not include the views of a single person who thought this was a bad idea. Isn't there anyone in the WSJ's Rolodex who thinks that raising taxes on nurses and firefighters to give money to millionaire and billionaire bankers is not a good idea?"

I think it's time the financial industry experiences a little tough love. We're at war. We don't have money to waste on foolishness like health care for children or extended unemployment benefits for workers (says the Bush administration), so why should taxpayers bail them out? After all, as Bonddad points out, they're the actors who created this mess:

Mortgage brokers: Because the person brokering the loan knew the loan would be sold to a third party the broker has no obligation to make sure the borrower would actually repay the loan over an extended period of time. In addition, some brokers were given higher commissions for selling riskier loans.

Investment Banks: These organizations were hungry for collateral and pressured brokers and originators for more loans to pool and sell. This is the type of pressure that led the mortgage bankers to stop looking at things like "credit history." In addition, investment banks were lax in their due diligence to deeply inspect collateral.

Ratings agencies: who actually said most of this paper was AAA and therefore could be purchased by practically anybody.

Our government isn't off the hook either. They saw what was happening and failed to impose any kind of oversight on the industry. Instead, they talked about all that "free market" mumbo-jumbo.

Well, now the industry is in trouble and wants the government (taxpayers) to help. I say it's time for them to suffer some consequences. They lived by the free market sword, let them die by the free market sword.

UPDATE: Gov. Eliot Sptizer has a good read related to this in today's WaPo: Predatory Lenders' Partner in Crime

His conclusion:

When history tells the story of the subprime lending crisis and recounts its devastating effects on the lives of so many innocent homeowners, the Bush administration will not be judged favorably. The tale is still unfolding, but when the dust settles, it will be judged as a willing accomplice to the lenders who went to any lengths in their quest for profits. So willing, in fact, that it used the power of the federal government in an unprecedented assault on state legislatures, as well as on state attorneys general and anyone else on the side of consumers.