First Comes the Denial

Case in point, the Federal Housing Administration (FHA), which is now denying that the increasing rates of defaults on the mortgages that it backs will require a bailout.

Next should come a statement of health, then a statement of robust health (or some synonym), and then comes the bailout.

Here is the statement from the FHA commissioner:

We will not comment directly on the FHA’s capital reserve ratio until we receive the annual actuarial study. However, contrary to certain misconceptions, the Congressionally-mandated capital reserve ratio, which the annual actuarial study calculates, measures EXCESS reserves above and beyond projected losses over the next 30 years. Even if that level falls below 2%, FHA continues to hold more than $30 billion in its reserves today, or more than 5% of its insurance in force. Given this reserve level, FHA will not need a congressional subsidy even if the congressional capital reserve ratio falls below 2%. Furthermore, FHA's full faith and credit insurance means that there is no risk to homeowners or bondholders independent of the congressional capital reserve requirement. New FHA loans being issued today are not only critical to our economic recovery, but in addition, FHA continues to make money for the taxpayer; in fact, we project FHA’s FY 2010 book of business will produce $1.4 billion for the U.S. Treasury.

We believe you.....