Bush to freeze some subprimes, bail out irresponsible homebuyers

[Paddy]

The lenders were every bit as 'irresponsible' as the homebuyers, so there's plenty of ignorance to go around.  In fact, the burden for properly qualifying these buyers is and was on the lenders.  But they were more interested in a fast buck than on long term solvency, and as a result, have to deal with massive foreclosures and defaulted loans.

So, the adults have to step in an make some rules.  That's where government regulation comes from.

[Waitone]

Back in the days of banks holding the loans they make there was a built in check and balance.  A bank would not make a loan to someone who couldn't document income, etc.  Why?  Because the cost of failure fell on those making the loan.

Shift to today with the marvels on collateralized mortgage instruments.  Brokers broke, bankers agree, money centers gather and collateralize groups of loans then sell said loans on the open market to investors who count on higher rates of return because said loans are "risky".  Brokers cash their checks, banks get their commissions and fees.  Everyone in the delivery of loans gets paid but no one has to pay the cost of failure.  Collateralized mortgage instruments were marketed as reduced risk.  Over time as the enthusiasm built because of a bubble mentality reduced changed to no risk.  The cost of failure was spread out.

Not all regulation is a bad thang.  The market imposed its own regulation when the cost of failure was born by those who made the decisions.  The nature of the market has changed (for good or ill is not the issue at this point) and effectively eliminated the cost of failure from the equation.  I think it entire appropriate for government to step in impose a regulation which would hinder the felons amongst us. 

[The Rabbi]

The lenders were every bit as 'irresponsible' as the homebuyers, so there's plenty of ignorance to go around.  In fact, the burden for properly qualifying these buyers is and was on the lenders.  But they were more interested in a fast buck than on long term solvency, and as a result, have to deal with massive foreclosures and defaulted loans.

So, the adults have to step in an make some rules.  That's where government regulation comes from.

Calling gov't regulation "adult supervision" is a sad joke.  It will not help.  It will make it worse.
The lenders took risks and they have lost.  Let them lose money.  Borrowers took risk and they lost.  Let them lose money too.
I don't see any need for gov't supervision or regulation.  I don't see any problem at all.  This is part of business and part of capitalism, that you have winners and losers.  If you take away the losers then you will take away the winners as well.  And do that, and you take away any incentive to work.