Just in time!

Stricter mortgage rules proposed
By JEANNINE AVERSA, AP Economics Writer
13 March 2008
WASHINGTON - Economic policymakers on Thursday recommended stricter regulation of mortgage lenders as part of a broad effort to prevent a repeat of a credit crisis threatening to drive the country into recession.

Hmmm... this reminds me of something... wonder what? Oh, yeah!

"It's not useful closing the barn door after the horse has been stolen."
[Wikpedia entry, Basque proverbs... who knew?]

... and aren't these the same guys who think The Market is perfect all the time?

Oh, yeah: The Market works perfectly... except when it doesn't!

Note: the current mess was to some extent anticipated by a near-deified expert, Alan Greenspan:

The apparent froth in housing markets appears to have interacted with evolving practices in mortgage markets. The increase in the prevalence of interest-only loans and the introduction of more-exotic forms of adjustable-rate mortgages are developments of particular concern. To be sure, these financing vehicles have their appropriate uses. But some households may be employing these instruments to purchase homes that would otherwise be unaffordable, and consequently their use could be adding to pressures in the housing market. Moreover, these contracts may leave some mortgagors vulnerable to adverse events. It is important that lenders fully appreciate the risk that some households may have trouble meeting monthly payments as interest rates and the macroeconomic climate change.
[Testimony of Chairman Alan Greenspan
Federal Reserve Board's semiannual Monetary Policy Report to the Congress
Before the Committee on Financial Services, U.S. House of Representatives
July 20, 2005]

Alas, he somewhat undermined the doom-and-gloom picture in his very next paragraph

The U.S. economy has weathered such episodes before without experiencing significant declines in the national average level of home prices. Nevertheless, we certainly cannot rule out declines in home prices, especially in some local markets. If declines were to occur, they likely would be accompanied by some economic stress, though the macroeconomic implications need not be substantial. Nationwide banking and widespread securitization of mortgages make financial intermediation less likely to be impaired than it was in some previous episodes of regional house-price correction. Moreover, a decline in the national housing price level would need to be substantial to trigger a significant rise in foreclosures, because the vast majority of homeowners have built up substantial equity in their homes despite large mortgage-market-financed withdrawals of home equity in recent years.

So, although we "cannot rule out" bad things happening, it's best to pretend that they won't... after all, "a decline in the national housing price level would need to be substantial to trigger a significant rise in foreclosures", and we know that's just not going to happen!

Why do our near-deified experts never think to plan for unlikely but really bad contingencies? (I don't expect to be in a car wreck, but I still purchase auto insurance!)

Maybe a little regulation back then would have prevented today's meltdown. We'll never know.