The Feds Take Action

The front page story in the New York Times today takes aim squarely at the Feds for allowing the subprime mortgage scandal to unfold, especially after it had been warned about it for years. It is hard to see why lenders were permitted to carry on the way they did, when the fixes now seem so obvious and necessary, as they were back then. 

From the Times:

On Tuesday, under a new chairman, the Federal Reserve will try to make up for lost ground by proposing new restrictions on subprime mortgages, invoking its authority under the 13-year-old Home Ownership Equity and Protection Act. Fed officials are expected to demand that lenders document a person’s income and ability to repay the loan, and they may well restrict practices that make it hard for borrowers to see hidden fees or refinance with cheaper mortgages.

It is an action that people like Mr. Gramlich and Ms. Bair advocated for years with little success. But it will have little impact on many existing subprime lenders, because most have either gone out of business or stopped making subprime loans months ago.

Unfortunately the economy may already be spiraling into a recession, so these fixes come to little and too late. It's a shame.