The Perfect Storm has come at last, which makes the rationale for this blog somewhat tenuous.
But, even as we confront the bad consequences of bad policy, it is interesting to see revealed the preferences and prejudices of the Right.
The Problem Is Still Falling House Prices - Martin Feldstein thinks peonage will help: "The federal government would offer any homeowner with a mortgage an opportunity to replace 20% of the mortgage with a low-interest loan from the government, subject to a maximum of $80,000. This would be available to new buyers as well as those with mortgages. The interest on that loan would reflect the government's cost of funds and could be as low as 2%. The loan would not be secured by the house but would be a loan with full recourse, allowing the government to take other property or income in the unlikely event that the individual does not pay. It would by law be senior to other unsecured debt and not eligible for relief in bankruptcy."
The problem, to Feldstein, is not the ill-gotten gains of the banks and rich folks, or the oppression of the merely middle-class. The problem is that the middle class are feckless. You cannot build a reliable financial pyramid scheme on the foundation of people, who might walk away from a bad investment. The people at the bottom have to be made to pay. No bankruptcy for them.