Okay, maybe I’m the one who is insane, but did you catch this one, in which (still?!) President Bush cautioned against regulation of the free market? The financial crisis–he said–”was not a failure of the free market system.” Huh?! So the free market works fine? So that $700 billion bailout was not necessary? Or it wasn’t because of the failures of the free market? Riiiight.

My 13-year old daughter is a smart kid, but she’s not exactly schooled in the fine details of the constitutional law. So when she heard the President on the radio utter the above wisdom, she asked if he couldn’t just be through yet. I explained that the new president can’t take office until January 20. (For those who like text citations, or if you want to impress your friends: U.S. Const. Amend. XX, Sec. 1.) She didn’t miss a beat. “Okay, so could it just be January yet?”

I guess he’s got to believe that the free market works, and that regulation is bad. But of course, that raises more questions. If it’s not a problem of inadequate regulation, exactly how did we get into this mess? That’s to say, if it’s not a lack of regulation that allowed the sale of bad mortgages, what exactly was it?

This matters to consumers for the simple reason that we’re left with this mess. We’re paying for it, and last I checked no one provided us with a sweet golden parachute. So since we get the tab, I tend to think that we should write the rules. Because there’s no way we’re going to repeat this train wreck.

If I had the ability to talk to President Bush about all this, I could cover it in four words.  “Man up, Mr. President,” would adequately convey my thoughts on the subject.

David Sugerman

At first glance, this prediction bodes well for consumers. As reported here in the Seattle Post-Intelligencer, Congress will move to add Wall Street financiers to the list of those who will be held accountable for funding predatory mortgages.

The technical term is assignee liability. It’s important to understand the underlying concept because it plays a big part of what’s gotten us to the present crisis.  Banks were writing ridiculous and nasty mortgages and lending money to borrowers who had no business taking on mortgage commitments.

The banks and lenders would then group and package the bad loans into large pools, and through a series of sales and transactions, parts of these large groups of stinking bad loans wound up being traded like baseball cards on Wall Street. Actually, that’s a little unfair because for reasons beyond my comprehension, baseball trading cards actually have “value.” But I digress.

For years, the Bush Administration and the Free Marketeers (AKA “The Smartest People in the Room”) opposed rules that would allow asignee liability. To their way of thinking, buyers of the stinking bad loans should never, never, never have to answer to the borrower who may have been duped or otherwise wronged by the predatory loans.

The new rules would allow the borrower to chase the assignee, the Wall Street purchaser of the stinking horrible loans. It makes sense for a number of reasons, not the least of which is that our Wall Street purchasers are the recipients of socialist handouts.  Yes, Senator McCain and Senator Martinez, I used that very word to describe the Wall Street bailout…if you want to accuse your rivals of importing socialism into American life, you best go back and explain that whole bailout thing. Ugh, better have more coffee–or less–as I’m digressing again.

But here’s the real disappointment of the Seattle PI report. This is all about the future and prevention. Not a bad thing to be sure, but it’s a deafening silence about THIS round of problems. The Bush Administration declared class warfare on the middle class when they tried to limit the bailout to Wall Street and banking failures. Consumers were left in the drink without a boat, without a paddle, and without a life jacket.  So you’re talking about assignee liability in the future.  And in the meantime, consumers are supposed to ???

David Sugerman