The subprime mortgage lending mess just got a little more interesting.
Turns out that the FDIC, the federal government's insurance agency for banks, has done its part in the current subprime mess, contributing to the number of loans that are in foreclosure right now. It's a result of continuing subprime lending practices of a bank, Superior Bank FSB, that the FDIC took over in 2001.
Indeed, the FDIC did what many subprime lenders were doing at the time: giving out subprime mortgage loans (some of them to borrowers that were obviously unqualified), and then selling them to other mortgage lenders. The Wall Street Journal reports on FDIC subprime mortgage loans:
Hundreds of borrowers who took out Superior subprime loans on the FDIC's watch -- some with initial interest rates higher than 12% -- have lost their homes to foreclosure, data on the loans indicate.
While there haven't been any major revelations about how the FDIC was running other banks it took over, one has to wonder whether or not this sort of subprime lending was going on in other institutions as well.
So it's not just the fault of greedy lenders and homebuyers as regulators claim; the government was involved in the subprime mortgage lending mess just as much.
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