That would seem to be the implication of the views attributed to Brian Montgomery, the FHA commissioner, in a Washington Post article: "At his FHA office, Montgomery said that the mortgage crisis could have been averted had Congress heeded his pleas to overhaul the FHA in 2006 so his agency could better compete with subprime rivals. 'I'm back here now trying to pick up the pieces, and they're telling me you're just not doing enough,' he said. 'It's a little disingenuous.'" In reality, by 2006 millions of homeowners had already bought homes at prices that were hugely inflated by the housing bubble, many with subprime mortgages that were rescheduled to reset to much higher rates. These homeowners were certain to lose large amounts of money on their homes and in many cases destined to default on mortgages that they could not afford. While the damage could have been reduced if the Fed, Congress, the FHA and other agencies took steps to stem the growth of the bubble at the time, it was already too late to avoid most of the pain from the housing crash. The fact that Mr. Montgomery and others in positions of authority did not recognize the housing bubble at the time was due to extraordinary negligence. If the FHA commissioner cannot recognize the bubble, even in retrospect after it has begun to deflate, it really calls into question his fitness for this sort of job. The Post should have sought to determine the extent to which he is in fact uninformed about developments in the housing market.
--Dean Baker
