No money? No problem!

W hat a blast!

The mortgage industry is a disaster now, but it sure was a party while it lasted. You don't have to dig too deeply for evidence of the we-don't-need-no-stinking-standards mentality that prevailed in the industry as recently as a few months ago, but the internal JPMorgan Chase memo that found its way to The Oregonian is a great place to start.

As reporter Jeff Manning described Thursday, a JPMorgan Chase employee distributed a memo called "Zippy Cheats & Tricks," which reads like a tipsheet for beating a video game. It advises employees at the banking company how they can help mortgage brokers jigger the in-house system, called "Zippy," that evaluates loan applications. Overstate the borrower's income, it suggests. Don't mention that some borrowers are relying on gifts to repay their loans. Inflate assets. "Never fear," the memo reads. "Zippy can be adjusted . . ."

There's plenty of blame to go around in this debacle. But it's not overstating things to say that a set of financial sophisticates figured out some ingenious ways to profit from the desires of would-be homebuyers. Along the way, the system of incentives and accountability that used to characterize mortgage lending was unmoored and sent floating away, never to be missed until it crashed into the dock at the U.S. Treasury.

The JPMorgan Chase memo emerged from an environment in which wealth was generated from the size -- not the substance -- of the transaction. If a bank could sell a $600 million bundle of mortgage-based securities, instead of just $400 million; if a homebuyer could be delivered into a $550,000 house, instead of just $255,000; if there was always a willing lender somewhere in the chain; why should anyone worry about the risks?

The answer to the why-worry question lies in the extraordinary steps the Treasury and the Federal Reserve Bank took to save the banking house of Bear Stearns when it nearly went out of business this month. The federal government put its own credit on the line when it jumped with both feet into the disaster by helping JPMorgan Chase take over Bear Stearns. The disaster threatened to infect the entire banking system in this country and elsewhere, which is why the Treasury and Fed are generally applauded for their handling of the crisis. But taxpayers are now at risk because of some of the foolish choices made earlier by financial insiders, whether from greed or ignorance.

Borrowers aren't innocent of all this, because many of them surely understood the nature of the contracts they were signing.

But the whole mortgage system was driven by the willingness of people who controlled the money to move it around on sometimes-dubious pretexts. And if anybody should have understood what they were doing, it was they.

The sad fact is that the bankers, the traders, the brokers, the ratings agencies, the accountants have demonstrated again why they should operate in businesses that are regulated with consistency, by a government that operates in the interest of its citizenry -- not just the few that know how to game the system.