This had to be an easy call- no one suspected the Butler.  Toxic loans have been found to be the cause of death for many banks: [Hat tip Freedom's Phoenix!]

The coroner’s report left no doubt as to the cause of death: toxic loans.

That was the conclusion of a financial autopsy that federal officials performed on Haven Trust Bank, a small bank in Duluth, Ga., that collapsed last December.

In what sounds like an episode of “CSI: Wall Street,” dozens of government investigators — the coroners of the financial crisis — are conducting post-mortems on failed lenders across the nation. Their findings paint a striking portrait of management missteps and regulatory lapses.

At bank after bank, the examiners are discovering that state and federal regulators knew lenders were engaging in hazardous business practices but failed to act until it was too late. At Haven Trust, for instance, regulators raised alarms about lax lending standards, poor risk controls and a buildup of potentially dangerous loans to the boom-and-bust building industry. Despite the warnings — made as far back as 2002 — neither the bank’s management nor the regulators took action. Similar stories played out at small and midsize lenders from Maryland to California.

How’s this for understatement of the year?

“We all could have done a better job,” said Sheila C. Bair, the chairwoman of the Federal Deposit Insurance Corporation.

The New York Times indicated that one of the dangers now is that banks will be held to a too rigorous standard.  Not everyone agrees:

The Obama Administration is prepared to do anything, including dramatically lowering mortgage lending standards, to keep real estate prices inflated, as demonstrated by statements, reports and events in the month of October.

First came the Federal Housing Authority inspector general’s report on the FHA’s lender approval process, which found that FHA was missing or ignoring relevant information, failing to document loans, not preventing convicted financial criminals from participating in its lending program, and in most other ways failing to "ensure that lenders met all applicable requirements." The IG’s spot check revealed, for example, that just one out of 22 approved applications contained all the documentation needed to meet the FHA’s own standard for guaranteeing a loan.

So which way will the wind blow then?  Will banks be too strict, or too lenient?

My best guess is that private money will be strict.  The future of the housing market is still a big question mark, and lenders will want to be careful.  Profit will continue to be their main concern. Anything backed by the government is a different story.

More homes were produced during the boom than there were qualified buyers.  There are fewer qualified buyers today and a lot more vacant houses.  The government is more concerned with filling empty houses than it is with lending risk.  Moral hazard is out the window as different plans are rolled out to keep people- any people in homes.

The lending coroners are liable to be busy for some time to come.