“The liars win.”

That’s how Glenn Mueller, a professor at the Burns School of Real Estate and Construction Management at the University of Denver, sees the Bush administration plan to clean up the subprime-mortgage mess.

“They were actually called ‘liar loans,’ ” he said. “And now, the liars have won.”

Foreclosures have so ravaged the nation that Treasury Secretary Henry Paulson pulled together the biggest players in the mortgage industry. He got them to extend their teaser rates on certain sub prime loans for up to five years.

“Just a few years ago, the government was encouraging lenders to make loans to borrowers with poor credit,” said Wil Armstrong, an owner of Cherry Creek Mortgage and a Republican candidate for Colorado’s open 6th Congressional District seat. “Now, they are saying we don’t want you to make those kind of loans anymore? When the government intervenes, it typically makes matters worse.”

Bush claims his move does not constitute federal intervention into the allegedly free market that his administration pretends to cherish and champion. It’s just a “voluntary” deal to help out a few folks.

Peter Schiff, a private money manager in Darien, Conn., who has been predicting this looming crisis for years, put it best: “The authorities point out that if their ‘suggestions’ are not adopted by lenders, much more draconian legislation will surely follow. Let freedom ring!”

Oh, say, can you see? Our economy must be nearing a total collapse if a Republican administration is meddling with private capital. Either that, or there’s another election year coming up.

Hillary Clinton wants to crack down even harder — putting a moratorium on foreclosures. A bunch of liars bought homes; now they can’t pay their bills, so the solution is to protect them?

I talked to a guy named Michael Sichenzia, who spent four years in prison for mortgage fraud in New York. He claims that in many cases, the liars weren’t the homebuyers but the brokers who filled out the loan applications for them.

He says he got in trouble because he did it himself. A borrower would submit tax returns and income statements, and he’d see that the application was not so much true but accepted. He says it was a widespread practice — he was just a guy who got caught.

Misery goes global

Today, Sichenzia is making amends as the lead investigator for a Deerfield Beach, Fla., law firm. He spends much of his time investigating applications on bad loans.

“I can find 11 felonies on every loan that I (examine),” he said.

As brokers, appraisers, lenders and others committed blatant fraud, Wall Street turned a blind eye. It bought the loans, packaged them in bundles and sold them to investors around the world.

Sichenzia said he was recently interviewed by a newspaper in Norway. It seems some Norwegian municipalities made the mistake of investing in some American mortgage- backed securities.

“Now they can’t meet payroll or keep the lights on in city hall in the dead of the Norwegian winter,” Sichenzia said.

Instead of bailing out borrowers and lenders, how about simply enforcing the laws? How about prosecuting everyone from the heads of Wall Street’s banks down to the hustling brokers and appraisers? Nah, that’s too messy.

So now the nation’s foreclosure rate is back to where it was during the savings-and- loan crisis 20 years ago.

Longtime Boulder mortgage banker Lou Barnes said Bush’s plan is just a start. He predicts massive government bailouts of lenders, investors and borrowers.

Credit markets are frozen, he said, and Bush knows it won’t be long before this ice spreads throughout the economy.

“The endgame of a credit crisis — if untended — is the 1930s,” Barnes said. “Grown- ups have to look past blame and punishment and look to preserving society. When the marketplace breaks, it’s the proper role of government to put it back together.”

Perhaps Barnes is right. But aren’t they still busy trying to put New Orleans back together?

Al Lewis’ column appears Sundays, Tuesdays and Fridays. Respond to him at denverpostbloghouse.com/lewis, 303-954-1967 or alewis@denverpost.com.

