Experts inside the Bush Administration tried to warn about the mortgage meltdown. They even proposed new regulations to set guidelines for the risky loans written by the banks who now have their hat in hand looking for a bailout. The banks fought these regulations and the Bush administration caved in. Now, we taxpayers are paying for this lapse in judgment in two ways -- an economic meltdown and a huge tax bill. According to an Associated Press report today, regulators warnings to banks in 2005 included:

• Banks were warned exotic mortgages were often inappropriate for buyers with bad credit. Anyone surprised about that?
• Banks that bundled and sold mortgages were told to be sure investors know what they were buying. We know that's not true. AAA ratings were given to much of this debt that proved to be of much lower quality and much more risky.
• Regulators urged banks to help buyers make responsible decisions and clearly advise people that interest rates might skyrocket and huge payments might be due sooner than expected. Do you believe that mortgage brokers or banks clearly warned people about the dangers of the loans they were taking? I don't.

Stories abound about how the Goldman Sachs Group (NYSE: GS) avoided the mortgage meltdown and generated $4 billion in profits on the bet that risky home loans would fall in value. That move was made by a small trading group, according to the Wall Street Journal.[subscription required] in the firm's mortgage department and it helped to offset the $1.5 billion to $2 billion in mortgage-related loses elsewhere in the firm. While most other financial institutions are losing big, Goldman expects to report a net annual income of more than $11 billion, according to today's Journal. They made lots of money selling those risky mortgage securities to unsuspecting clients.

That's great that Goldman called this mortgage meltdown early and I'm sure investors in Goldman's stock are very happy. But what about all the investors who took the advice of Goldman brokers to buy these risky mortgage-related securities? Why weren't they warned as well when the decision was made to dump the securities? Why should Goldman gain while its clients suffer?

Clearly someone needs to open an investigation into what kind of advice Goldman was giving its clients and how that advice differed from the actual trades Goldman was making. While buying Goldman's stock may be a good idea, it doesn't sound like being a Goldman client works well when the financial industry is facing a meltdown.

Lita Epstein has written more than 20 books including "Trading for Dummies" and "Reading Financial Reports for Dummies."

The Commerce Department reported July consumer spending numbers this morning, and as expected, consumers picked up the pace during July. Spending during July rose 0.4%, matching what analysts had been expecting to see.

What surprised analysts was the degree to which incomes lifted in the month. July saw a 0.5% rise in income, which was the best move in the past four month.

While it is great to see spending on the rise, we should definitely be cautious to read too much into the July figures. Consumer confidence has been eroding in August, so do not be surprised if July's increases wind up being temporary as the mortgage meltdown has started to weigh in on every one's mind.