The wages of folly get paid.

WHO SHOULD BE ENTITLED TO assistance in the current mortgage mess? The real estate speculator? The couple who overbought and opted for a 2/28 versus a 30-year fixed? The pension fund investment manager who bought CDO-backed commercial paper? An American Home Mortgage stockholder?

Forget

Whose obligation? We'll all end up paying the piper in one way or another, but to rely directly on taxpayers would be an outrage because of the huge profits thrown off from predatory and abusive mortgage lending before it collapsed. And also because not all borrowers, as noted above, were innocents led to the slaughter. Many of them went in "winking" as willing participants.

It is truly an unsavory stew of many ingredients.

As you read through our cover report (p.28) on how banks are dealing with this mess, you will notice how the circumstances and responses are often individual. In some cases banks have taken extraordinary measures--reaching out several times to noncustomers in trouble.

But as in medicine, sometimes the situation is too far gone. People are people and you cannot make them do the sensible thing. In many cases the loans were hopeless from day one. In other cases people waited too long to seek help, which means, because of the rules in place--credit scores, regulatory requirements, contractual issues, etc.--it often is impossible to do much. As the story points out, the ratio of saves to problems is well below 50% in most cases.

There are those who say, "that's not enough"; that the scale of the problem is so big it will drag down the economy, possibly severely, if more is not done. In fact, more is being done on several fronts. Large-scale loan modifications or rate adjustments on the part of some major mortgage players have already been announced. Give them credit for that. Industry/government coalitions such as Hope Now, of which the ABA is a supporter, are another key part of the response. But such multi-party endeavors will have to move quickly to do much good for the deserving casualties.

There is a moral obligation to help fund a solution on the part of any individual or company that engaged in or supported ill-advised or fraudulent transactions--whether at the front end, the middle, or the back (there was "winking" going on at all levels). Frankly, it's good as well to see some direct consequences in the executive suite. There ought to be more of that. It's called responsibility.

The folks mentioned in the opening anecdote of the cover story were fortunate to have a banker who went to so much trouble to help them. Their near miss will no doubt make a lasting impression, and should make them customers of that bank for life.

And for the many other mortgage lenders who resisted the "rush to the bottom," as one banker put it, more mortgage business may now come their way.

Put that under the heading of the wages of integrity.

WILLIAM W. STREETER

Editor-in-Chief

bstreeter@sbpub.com