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The factor that I'm hoping will keep Congress from enacting a "Sarbanes Oxley of mortgage lending" is the fact that, in the current subprime mess, there really isn't a single villain to blame. There's no Ken Lay, no Dennis Kozlowski, no Bernie Ebbers. According to Fortune, the blame is spread around pretty evenly among a number of faceless populations and institutions -- borrowers, mortgage brokers, appraisers, mortgage lenders, Wall Street, rating agencies, and the Federal Reserve. The strongest single blame factor -- 4-1/2 out of a possible 5 -- goes to the Fed:

The chief charge against the Fed is that former chairman Alan Greenspan kept interest rates at very low levels far longer than necessary, which in turn sparked the bubble in housing prices and mortgage lending. Looking back, the Fed's behavior does seem bizarre. It kept the key Federal funds rate at 2 percent or lower from November 2001 right through to the end of 2004.

Those rate decisions showed that Greenspan had chosen to use the housing market as his main instrument to prop up the economy after the 9/11 attacks. Using monetary policy to encourage a rise in home prices would be a highly unorthodox move for a central bank. But evidence suggests that Greenspan was overly keen to use housing for exactly that.

In 2002 he called mortgage markets a "powerful stabilizing force" because they allowed people to extract equity from their homes, and in 2004 he said that homeowners should consider using adjustable-rate mortgages to save on interest and prepayment costs. In 2005, when a record $625 billion in subprime mortgages were made, Greenspan gave a speech that blessed the creation of new loan products, including subprime home loans.

As a result, Greenspan has lost a lot of favor in Washington. In March, Senator Christopher Dodd, chairman of the Senate Banking Committee, laid much of the blame for the current crisis at the feet of Greenspan's Fed, saying that it "seemed to encourage the development and use of adjustable-rate mortgages that today are defaulting and going into foreclosure at record rates."

I'm actually surprised to see this kind of insight in Fortune. Hopefully Congress will see it the same way. Hard to imagine any legislation that is going to rein in the Fed.

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