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Congress shares blame for subprime mess

April 12, 2010
The Daily Mining Gazette

Members of a special commission established by Congress to investigate the mountain of bad mortgage debt that helped drive the nation into recession were to question representatives of Citigroup Inc. last week. They also planned to discuss "subprime" lending with federal regulators.

At some point the panel will have to put members of Congress on the hot seat, so to speak, if it wants to get to the full truth of the matter.

While mismanagement certainly was a contributing factor in the mortgage lending meltdown, many of those involved were simply following orders - from Congress.

The Financial Crisis Inquiry Commission was created last year to look into the causes of the recession. It is a bipartisan panel with sweeping authority, including subpoena power.

Among those to testify this week were Citigroup executives, former officials from mortgage giant Fannie Mae, and regulators such as former Federal Reserve Chairman Alan Greenspan.

Several major lenders got caught up in the gold rush mentality involved in the subprime crisis. So eager were they to write mortgages that they failed to worry about loans so shaky there was little likelihood of them being repaid.

But, again, that was the whole idea in Washington. Congress and federal regulators established rules virtually demanding that risky loans be approved by some banks.

The idea, of course, was - and still is - to please voters by providing them with a wide-open mortgage loan market.

Members of the FCIC are right to look into mismanagement by companies involved in the meltdown. At the same time, they should be grilling members of Congress who bear part of the blame.



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