Tighter rules for mortgage lending?

U.S. Treasury Secretary Henry Paulson is recommending that the government impose tighter regulations on mortgage lenders. He says this is necessary to avoid another credit crisis. He says that the regulations are behind the times and we need to update them and exercise more oversight of lenders. This includes licensing for mortgage brokers and tighter guidelines for credit rating agencies.

Really? Did the lack of government oversight cause this "credit crisis"? Or was it more a combination of consumers buying properties that they couldn't afford and lenders all to eager to earn money by writing their mortgages regardless of their income or credit? Because I don't know that more oversight is really the answer. Frankly, I'd like to see the government butt out of our lives and businesses a little more.

Here's what I think: The lenders who wrote bad mortgages should suck it up and deal with it. No government money to help them out. The homeowners who overbought should also suck it up and either sell their houses or get out of them. No bail outs for the borrowers. They can fix their credit problems on their own.

Our society has moved so far away from personal responsibility that it's scary. I don't want the downfall of our economy to be a mortgage lending crisis. On the other hand, why should we taxpayers help fund these hard times for the mortgage industry?

When banks were making tons of money on these deals, did we see them handing over a bunch of money to the government just for kicks? No! They kept their profits and sat around counting the money while giggling with glee. Now that times are rough, though, they're more than happy to take a handout from the government and make those bad mortgages someone else's problem. And that's not fair.

So here's what I propose: We don't need more regulations. We just need to let consumers and businesses deal with their own messes. They have some hard lessons to learn, for sure. But if our government comes along and bails them out each time they've messed up, they're never going to change their behavior. There's no incentive to change anything when someone else will always fix your mess for you.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
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