More Financial Debacles

The Wall Street Journal reports on a long-predicted problem finally coming to fruition. The Federal Housing Administration is a government-owned company that guarantees mortgages, and during 2007 and 2008, the government wanted the FHA to guarantee more mortgages for those who couldn't otherwise qualify for a mortgage.

If a borrower can't get financing on the open market, there is usually a good reason - they are a bad credit risk. So when the FHA took on guaranteeing such debt, it was stepping into a minefield.

Well, the mines are now bursting. The FHA expects 24% of the loans insured in 2007 and 20% of the 2008 loans to default, wracking up huge losses for the American taxpayer.