A public reckoning by Congress is needed before taxpayers are put on the hook.
Like a subprime mortgage, Congress may soon put taxpayers on a risky hook for mortgages gone bad. The Bush administration wants authority to spend up to $700 billion, or about the cost of the Iraq war, to buy up troubled loans. A federal rescue effort may stem a financial market meltdown. But it shouldn't be done without a reckoning.
Americans need to hear a full-throated debate by lawmakers about the range of players in this mortgage maelstrom who either lied, took on too much debt, or failed to check creditworthiness as these loans were issued and then sold up the financial food chain to the point where it has become nearly impossible to determine their value.
They also need to hear about the government's role in encouraging a housing bubble – and that will mean Congress needs to look at itself. No longer should federal support for owning a home be based on the false premise that housing prices will always go up or that taxpayers are the final backstop for mortgage holders.
The reason for such a public accounting isn't vindictive. And Congress may not even be able to accurately apportion blame or determine the price to be paid for past mistakes. Rather, it is to help make sure that lessons are learned and that better safeguards will be put in place to prevent another cycle of bad debts.
America is in the midst of a morality tale. From the Wall Street titans who failed to assess risk to the home buyers who lied about their income on mortgage applications, the message must now be one of zero tolerance for such misdeeds.