IN what cannot exactly be called a conservative approach, “the Bush administration and the Federal Reserve are inching closer toward a government rescue of distressed homeowners and mortgage lenders.” The NYT adds that Bush and the federal reserve do so even though “they oppose it on ideological grounds.”

This observer, for one, isn’t so sure about that. George W. Bush likes to call himself a “compassionate conservative.” Can a “compassionate conservative” ignore it when people go broke and can’t deal with their mortgages?

Ben S. Bernanke, the chair of the Fed, told a group of bankers in Florida on Tuesday that “more can and should be done” to help those whose homes suddenly have become worth-less.

That doesn’t sound like someone who doesn’t want to act but feel forced to do so. That sounds like someone who wants to prevent people from taking responsibility for their own mistakes and failures.

Aside from the government, Bernanke also wants the banking industry  to play Santa Claus. He seemingly tries to push them “into forgiving portions of many mortgages and signaled his concern that market forces would not be enough to prevent a broader economic calamity.”

Bush is busy playing Santa Claus as well: “One month ago, President Bush signed an economic stimulus bill that greatly increased the size of loans the F.H.A. can insure, while allowing Fannie Mae and Freddie Mac to purchase significantly larger mortgages from lenders and guarantee them against default by homeowners.”

This move “increases the limits on F.H.A., Freddie Mac and Fannie Mae mortgages from $417,000 to as much as $729,750.” The result: “Historically, the F.H.A. and the mortgage companies have focused on conservative mortgages for people borrowing relatively modest sums. But they are now being encouraged to finance much bigger mortgages, in some cases to people who put almost no money down.”

As if that’s not enough “the administration went further by removing limits on the volume of mortgages that Fannie Mae and Freddie Mac can hold in their own portfolios. That means the two companies could buy up billions of dollars in mortgages that other investors have been too frightened to touch.”

Now, all of the above shouldn’t necessarily cost tax payers one dime. But there’s one problem: “because the companies are chartered by Congress, investors have assumed that Congress would bail them out if needed.”

If the government always help those who create their own problems, how can the government become smaller and how can it call itself ‘conservative’?