If only Wall Street and Treasury Secretary Henry Paulson had listened to Sheila Bair, we may have averted this financial meltdown.

As the chairwoman of the Federal Deposit Insurance Corp., Ms. Bair is perhaps the most prescient regulator in U.S. history. Last October, when she foresaw the immense scale of the foreclosure crisis, she proposed a straightforward but revolutionary idea: Mortgage lenders should permanently freeze all adjustable-rate mortgages at their starter rate.

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