Sheila Bair, the head of the FDIC, has been busy rewarding irresponsibility and punishing thrift by giving special breaks to deadbeat mortgage borrowers from failed banks taken over by the FDIC, like Indymac.
Delinquent borrowers have received reductions in the interest and principal on their mortgages, resulting in interest rates of 3 percent or less, way below the rates available to responsible people who pay their bills on time. Bair's excuse for this has been that borrowers won't default if their mortgages are made less onerous. But she's wrong. Delinquent borrowers who have received new, easier-to-pay mortgages are defaulting in large numbers on the new mortgages, too, at enormous expense to taxpayers.
All the coddling in the world can't make a deadbeat financially responsible, especially when the deadbeat lives in a State like California that allows a borrower to just walk away from a mortgage without facing any consequences other than the loss of the house (which is no loss at all when the house is worth less than the mortgage).
Sheila Bair should be fired. And federal bank regulators should preempt state no-recourse laws that allow deadbeats at failed banks taken over by the FDIC to just walk away from their loans without any consequences.
Amazingly, Fed Chairman Ben Bernanke, whose "solution" to every problem is a multibillion dollar bailout or "stimulus" plan, has suggested that the federal government sweeten the pot for mortgage deadbeats even further by reducing their mortgage payments from a maximum of 38 percent of their income (under current FDIC standards) to a mere 31 percent of income, less than many people who are current on their mortgages pay.