The banking industry, struggling to contain the fallout from the mortgage debacle, is urgently shopping proposals to Congress and the Bush administration that could shift some of the risk for troubled loans to the federal government.
One proposal, advanced by officials at Credit Suisse Group, would expand the scope of loans guaranteed by the Federal Housing Administration. The proposal would let the FHA guarantee mortgage refinancings by some delinquent borrowers.
Credit Suisse officials have met with senior officials from the Department of Housing and Urban Development, which runs the FHA, and other policy makers to discuss the proposal.
The risk: If delinquent borrowers default on their refinanced loans, the federal government would have to absorb the loss.
Can I get a Federal Slot Machine Administration to absorb the losses if I have a bad trip to Vegas? That analogy is actually far too kind. Slot machines stand a much greater chance of paying off than the no-doc, no-down, cash-back, inflated-appraisal loans that these idiots made.