A 'failure of regulation'
Consumer advocates pleaded with banking regulators to take action in 2005. They worried deeply about interest-only mortgages, "option ARMs" and other complex loans.
They were concerned that banks were ignoring borrowers' ability to repay "stated income" and "liar" loans that didn't require documentation.
Don't worry, said Washington.
"We don't want to stifle financial innovation," Steve Fritts, associate director for risk management policy at the Federal Deposit Insurance Corp., told The New York Times.