Some politicians want to blame the Federal Reserve for the current subrpime mess. Do they have a point? I think not. On May 17, 2005 the Washington Post ran a story where Federal regulators had issued warnings to mortgage lenders. According to this Realty Times article, regulators followed up with loan guidelines.
But you might say the Federal Reserve didn’t do anything. Well, they may not have the authority to be regulators. After all they monitor the overall monetary policy of the country and are not banking regulators. I’m going to look into this a bit further and see what role, if any, the Federal Reserve could have played.
Politicians will be politicians:
Daily Herald Suburban Living: “The Federal Reserve failed to act on early signs of trouble in the subprime mortgage market that has put 2.2 million borrowers at risk of losing their homes, Senate Banking Committee Chairman Christopher Dodd charged Thursday. The Fed shrugged off an increase in fraudulent lending starting in 2003 and in 2004 encouraged the spread of adjustable-rate and other “alternative mortgages,†Dodd said at a hearing on the subprime crisis. Those actions set the conditions for a “perfect storm†that is sweeping over millions of U.S. homeowners, he said.”