The penny drops. Subprime mortgages were bad.

Having just made a transit that was reminiscent of crawling through the inside of a cow (wet, windy and unbelievably dark) I took my quick morning break before diving into another day of instruction by trying to catch up on what's going on in the world outside.

Perhaps I should have stayed in the dark.

This is something that should make heads explode. When the US sub-prime mortgage lending scheme first made its appearance it was panned by anybody with more than two firing synapses as little more than a corrupt ponzi scheme. The results have been economic destruction on an order not unlike the savings & loan crisis of the 1980s and the municipal junk-bond fiasco.

The Federal Reserve, acknowledging that home mortgage lenders aggressively sold deceptive loans to borrowers who had little chance of repaying them, proposed a broad set of restrictions Tuesday on exotic mortgages and high-cost loans for people with weak credit.

Jeez, you mean the marketplace didn't sort itself out? Does someone mean to tell me that all those honest business people were, you know, out to make a quick buck, despite the wreckage in their path?

How come Alan Greenspan couldn't figure that one out?

Oh right. The synapse thing.

The new regulations, expected to be approved in close to their proposed form after a three-month period for public comment, amount to a sharp reversal from the Fed’s longstanding reluctance to rein in dubious lending practices before the subprime market collapsed this summer.

And it still goes back to Greenspan.

“Reading these proposals today is almost painful,” said Dean Baker, co-director of the Center for Economic Policy Research, a liberal research group in Washington. “These are all just simple, common sense regulation. Why couldn’t Greenspan have done this seven years ago?”
If the measures had been in place earlier, they would have applied to as many as 30 percent of all mortgages made in 2006.
Some advocacy groups that had warned for years about reckless practices said the Fed’s move was too little and too late.

Mmmm, hmmm.

In other news, the Bush administration is proposing having all barns in the United States inspected for horses. If the barns, once containing horses, are empty, then all barn doors are to be shut to prevent any further loss of horses.