Is Washington Smarter Than a Third Grader?

Recently Diane Swonk a well known economist was asked what she thought about mortgage companies getting clarification on rules for making home loans.  She said something like--"Now that these companies have clear rules for making loans there should be more of them made and that will be good for the economy." 

Points that came up for me:

1. This was the day after almost $10 billion in fines were levied against the major banks--Bank of America, Wells Fargo, JP Morgan...
2. If a 3rd grader were going to do the math for a loan they could reasonably be expected to tell whether someone could likely pay it back or not.
3. Alan Greenspan was famous for having said--"Those of us who have looked to the self-interest of lending institutions to protect shareholder's equity (myself especially) are in a state of shocked disbelief." (October 2008)  Now this is popularly being referred to as "MORAL HAZARD".
4. Jeff after hearing my rant about this said--"The banks were told (by the government) to loan this money so more people could OWN houses."
5. It is interesting how so few local and regional banks got in big trouble over this and ALL of the big 7 banks have.

Summary:
     Big banks take other people's money in deposits and loan it out to other people who can't pay it back and along the way make HUGE profits.  When the loan goes bad (you know from the very beginning) the government comes in and guarantees that the bank doesn't lose money.  Simultaneously, savers interest rates on deposits go down by 80% and bank profits and bonuses are guaranteed.  That is a bit on the cynical side but sadly not far from what I see as the truth.