I'm okay with the notion that monetary policy is directed at the capital markets and not a consumer protection agency. So it's not really the Fed's responsibility to look over every subprime borrower's shoulder to make sure they are not getting in over their heads, or robbing Peter to pay Paul. But the board has to understand that foreclosure and default trends splashed on the front pages of the nation's business sections is as impactful as Dr. Bernake's wink and nod while walking out of the monthly board meeting. So why does the Fed do nothing to improve reporting and risk management requirements for the subprime mortgage sector? Beats the hell out of me other than the mistaken belief that regulation is a bad thing, a view that is counter to actual results from well thought out regulation.

A simple fix would be to regulate risk in lendors' portfolios. This is nothing earth shattering as many of these lendors have risk management regulations in other markets. Adding mortgages to market and credit risk operations in the nation's banks would be simple enough. Plus the upside of well managed risk would represent competitive advantage to those institutions that make the investment in risk practices: i.e. better valued securitized debt, less capital charge, fewer defaults. A more complex fix might be federal loan insurance, which would force banks to manage risk.

The availability of credit for mortgages is not so different from credit cards. Yes, a mortgage is backed by an asset, but many loans exceed the current value of the property, so the borrower starts out with no or negative equity, which is analogous to credit cards. The admonishment "caveate emptor" still applies. While a mortgage may be a good deal thicker than a credit card agreement, it still is in essence a loan with payback terms. There are already plenty of truth in lending provisions that's purpose is to inform the borrower. What we need is to make predatory lending less attractive to avoid the facts and claims of bamboozlement.