This story just smacks you in the face. What is amazing is how each of the people responsible for ensuring the loans for the house would be repaid had no interest in making sure that happened. And apparently they still have little interest. It’s clear that everyone expects to pass these bad loans to Uncle Sam. It’s just a question of how and when. There’s no other explanation for how there was a complete loss of responsibility then and continuing apathy now.
The private lenders never figured on holding the loans permanently. Buy-and-hold buyers like FNMA and Freddie Mac and the foreign central banks figured that the US govt would step in if it all fell apart – and they were correct. Why be careful if someone else will bail you out?
I know we are all desperate to avoid the Great Depression II, but methinks the lessons that are being learned from what’s being done now to minimize the short-term pain of this recession are going to cost us a lot for a very long time. Some really nasty pain needs to have been delivered to a very large number of people, and that ain’t gonna happen.
