The corrupt leading the blind

(H/t to Mr. Chittum again)

A "devastating story" out of the AP concerning the current administration's blind eye to the mortgage crisis.

The Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed, buckling to pressure from some of the same banks that have now failed. It ignored remarkably prescient warnings that foretold the financial meltdown, according to an Associated Press review of regulatory documents.

Sure, sure...there are always warnings about every scenario - so this is hardly-

Except, these weren't just pundits theorizing - these were regulators spelling out a list of recommendations that would have met this mess head on.

• Regulators told bankers exotic mortgages were often inappropriate for buyers with bad credit.
• Banks would have been required to increase efforts to verify that buyers actually had jobs and could afford houses.
• Regulators proposed a cap on risky mortgages so a string of defaults wouldn't be crippling.
• Banks that bundled and sold mortgages were told to be sure investors knew exactly what they were buying.
• Regulators urged banks to help buyers make responsible decisions and clearly advise them that interest rates might skyrocket and huge payments might be due sooner than expected.

Federal regulators were especially concerned about mortgages known as "option ARMs," which allow borrowers to make payments so low that mortgage debt actually increases every month. But banking executives accused the government of overreacting.

Naturally, there were people asking the government not to enact these regulations. Any of these names sound familiar?

"An open market will mean that different institutions will develop different methodologies for achieving this goal," Joseph Polizzotto, counsel to now-bankrupt Lehman Brothers, told U.S. regulators in March 2006.

...

The proposal "appears excessive and will inhibit future innovation in the marketplace," said Mary Jane Seebach, [Countrywide Financial Corp.'s] managing director of public affairs.

...

"It is not our role to be the regulator for the third-party lenders," wrote Ruthann Melbourne, chief risk officer of IndyMac Bank.

Nice.