Give the FHA a bailout?

It's the same as the banks. They all knew the housing crash was coming. Hell I saw it coming as early as 2005 because of the crap they were pulling, and they have people working on this that get paid to know a whole lot more about it than I did. The thing is they didn't care. If the banking industry fails we ALL fail. It's not the same as bailing out an auto manufacturer, there are literally no funds in this country that aren't dependent upon the success of the banking industry, so the (major) banks are literally TOO BIG TO FAIL. This never leaves thier mind when they are doing business. They arent as interested in the long term performance of loans as they are in realizing a profit for the specific period that they are operating in.. so they literally lend money like there is no tomorrow. Banking deregulation meant to stimulate a slow economy and expand housing to more Americans allowed them to lend money on equity that wasn't there, basically they loaned anything to anyone who asked for a loan without significant attention to the security (for purposes of conversation, the house) which ensured repayment of the loan. Rampant abuses of this situation led to some regulation being imposesd on lending related industries which made it necessary to account forr the value of the property on which the loan was made. The banks answer to this was to manipulate the industry to arrive at inflated values. The inflated values were then further inflated by value estimates that incorporated the average rate of the (spurious) increase in value to "project the present value using historical data, basically compare sales from six months ago adjusted at 5% per month (for instance) until the date of the estimate. So the artificial rate of the initial overvaluation was increased exponentially. The American consumer, saw the increase in the market and said "It only makes sense to buy property" People would speculate on this increase (and didn't realize it was totally unsustainable from the beginning) and they would extend thier credit as far as it would possibly go to invest in this "gold mine". The banks would GLADLY give them any loan they wanted because the banks primary business is selling todays money at tomorrows prices. The easy availabilty of capital made home values continue to skyrocket, or at least appear to.High LTV (120%+) and undoccumented loans What came about was loans being made at 120% on houses that were overvalued by as much 2 and 3 times thier actual marketable value. During this time the banks were also in the business of selling mortgage securities, because the world market, either through myopathy or just pure unchecked greed saw the gold mine of the US housing economy and likewise wanted a ride on the gravy train. So the Banks were making money on BOTH ends of the mortgage. These mortgages were sold many times all around the world and one of the more recent manifestations of this crisis is the banks inability to track down some of these mortgages because nobody knows who owns them at this point. I (obviously could go on and on about this forever there are so many levels of this crisis and the blame is mostly going to the wrong people but....i think i might write an article on it.

Anyway, the banks didn't care that they failed because there were no consequences for failure. They knew the government had to bail them out.
We need to re-think the way we look at the whole lending industry. Since the entire country depends on it's success the entire country will have to pay for thier failure. If it is the entire country that pays for it, it's the entire countries concern and the legislation guiding the banks processes needs to ensure that they are doing business in a way that will allow long term success. The banks need to be regulated quite vigorously. That being said although many of the articles within Dodd Frank ensure that the banks don't make loans as haphazardly as in the past, but they go too far and the lending industry is now far too restricted to the point where they can't adequately do business. The purpose for the bailout was to allow the banks to continue operating and have enough liquidity to make sufficient loans to keep the economy afloat. Although rates are as low as imaginable (too low actually) the banks aren't able to keep lending to the people that need it the most. If the banks can't lend the people can't spend (nothing promotes spending more, than having money).

They need to fix the problem before they can hope for any significant growth within the economy. And they CERTAINLY need to address the roots of the problem before they go throwing any more money at it.