In larger remarks about the need for risk-based pricing at the Federal Housing Adminstration, FHA commissioner Brian Montgomery peppered a speech yesterday on lending for low and moderate-income households with the suggestion that the current housing mess could have been avoided had Congress acted on Bush administration suggestions earlier. In his remarks at the FDIC-sponsored forum, Montgomery said that Congress' failure to modernize the FHA contributed to the subprime problem, implying that had Congress acted earlier, the mess might have been avoided. "We were marginalized during the boom, unable to compete because of low loan limits and higher downpayment requirements," he said. "Well, we know the outcome, a subprime crisis that has now evolved into a worldwide credit crisis." "Frankly, at FHA we saw the problem coming." The strong stance taken by Montgomery surprised more than a few market participants, who said that anyone claiming the current mess could have been avoided is grossly mistaken. "Montgomery is usually pretty level-headed," said one source, a senior bank executive that asked not the be named, "but this sort of grandstanding does little to help matters." The FHA Commissioner said that the Bush administration has pushed for FHA modernization since 2006, and that Congress has repeatedly stymied efforts to make the government insurance program "more competitive and responsive to market conditions." "I feel like a character in Samuel Beckett’s 'Waiting for Godot,'" he said, "constantly, patiently, persistently waiting. "[T]he institution itself, Congress as a legislative body, has been unable to pass one housing bill that could be sent to the President. And we could have avoided some of this mess, maybe most of it, if Congress had been prompt and responsive." That the FHA could have pre-empted the market woes now facing most financial institutions seems a little hard to believe. After all, even if the FHA had risk-based pricing, and even if that pricing had made it competitive with the private-party market, the result would merely have been that the billions in bad loans made by Wall Street would now be a direct taxpayer liability and likely would have already forced the FHA into insolvency -- something that HW's sources suggest may yet take place anyway. "Frankly, the idea that the FHA could have prevented this mess is right up there with the misplaced belief that suggests Fannie and Freddie can shoulder the entire housing market," said one source.