09/04/2011 04:16 pm ET Updated Nov 04, 2011

Isn't It a Little Bizarre That the Government Is Suing the Banks?

Let me see if I've got this straight. Yesterday the government gave the banks about a trillion dollars to keep them from failing and wrecking the country's economy because they had encouraged and approved mortgages that they knew could not be repaid and then bundled, misrepresented and sold those toxic mortgages to unsuspecting investors. Today the government is planning to sue the banks because they encouraged and approved mortgages that they knew could not be repaid and then bundled, misrepresented and sold those mortgages to unsuspecting investors.

The proposed suit by the Federal Housing Finance Agency being filed on behalf of Fannie Mae and Freddie Mac may be the most classic example of the "pot calling the kettle black" in history. Both were warned as early as 2006 that these investments were risky. There may be many out there with the right to sue the banks, but the Fannies are certainly way down on the list. I have no quarrel with holding the banks responsible; rather it is the inconsistency of the government's position that troubles me. How can we give them scads of money one day to remedy their wrongdoing, and then sue them the next for the same wrongdoing?

Just think what might have been. If rather than giving the bail-out monies directly to the banks those same monies had been used to pay-off, reduce and modify the subprime mortgages, there would not be millions of foreclosures. Families would have been able to stay in their homes and not live in their cars. The banks would have received the same monies, and their and the economy's failure avoided. The mortgages now being foreclosed would be re-instated and payments resumed. Property values would improve. The value of the mortgage-based securities would increase, because they would all be current and income producing. But alas, the money went directly to the banks without strings, and the government having done so to save the banks and the economy, now seems intent upon wrecking it by suing the banks.

Those who should be sued are those who benefited from this boondoggle: the brokers who made commissions convincing customers to take out mortgages they could not afford; those who sold and assigned the mortgages; those who misrepresented their value; those who bundled and sold them as securities; those who received huge salaries and bonuses without thought to the homes that would be lost, the savings that would vanish and the lives that would be wrecked.

Maybe the individuals do not provide the deep pockets that the institutions do, but holding them responsible and throwing in a few criminal indictments might serve to end this corrupt and indifferent banking regime. Individuals and companies who have been harmed by what has occurred may have no place to look other than the banks for compensation for their losses, but the government would serve the country better by pursuing those truly responsible and not endangering the country's economy which it (and we) paid so dearly to protect.