Today’s editorial on sub-prime lending is dead-on. I’d add that House Banking Chairman Barney Frank was quoted in CongressDaily last week saying that he wants

to place “some kind of liability” on the originator of the loans — a provision both mortgage brokers and the banking industry oppose — and “some liability” for those who purchase loans and later sell them off into the secondary market.

But there already is a liability to risky lending and investments in risky lending — that’s why it’s called “risky.” Financial institutions and their shareholders can lose money, which many of them are doing now. To add some new legal liability for what is often irresponsible borrowing would cripple the industry, potentially shutting millions of low-income earners out of the credit market permanently. Frank’s suggestion should scare the pants off of every homeowner in the country worried about his property value.

Banks are already required to provide lengthy disclosure statements to borrowers. You can’t exactly say you weren’t warned about the possible consequences of that negative-amortized three-year ARM.