while I am somewhat sympathetic to people who were duped into certain things like pre-payment penalties, the old adage "if it's too good to be true, it probably is" seems to have been forgotten by everyone. People bought houses they couldn't afford using mortgage products they didn't understand. But I'm not sure why my tax dollars should bail out people who got in over their heads. I feel sorry for them, sure. But I bought my home using a 30 year fixed rate mortgage at a price I could afford. Sure, I would love to buy a new place with all the latest and greatest bells and whistles, but those places cost too much. Of course because of job situations or whatever people have to move sometimes, but no one required them to use a risky loan product.

Unfortunately for the Democrats and Clinton in particular, the deregulation that led to the current out-of-control mortgage industry was in large part a Democratic project. Clinton's husband oversaw much of it during his own terms in office.

Granted, the economic climate was different then, and one could argue that what was bad by the post-bubble recession hadn't necessarily been bad back in 1994. But Congressional Democrats fiddled along the whole time while Rome was burning, and if they don't have an answer for their friends they're surely going to be pegged for one from their foes.

Of course, it's doubtful that so many Americans would have gotten themselves into these messes, had the education system prepared them with the basic numeracy required to evaluate interest rates and what happens in five years when the introductory rate changes to the higher permanent rate.

This is one of the many interesting little land mines laid back in the good ol' Reagan years, when all manner of educational and other Big Gummint programs were starved out of existence. You don't notice it right away, but twenty-seven years later you have a generation of adults who are so badly educated they walk right into an obvious boondoggle like this.

Speech sounds good doesn't it. May even be sincere?? Hillary is certainly eager to change the subject away from her relationship with lobbists. This could also be all about her lobbists' friends. Bailing out the defrauded "home owners?" would also bail out those sad lenders who "through no fault of their own?" are now going bankrupt.

Hillary says, "but they are citzens too!" Lets' let them be just like the rest of us citizens--talk to our elected representatives

without a check book in hand. Think what it would do for our elections if all this lobbists' money was not flowing in--none to nobody. Those folk running for office constantly complain about spending so much time raising money. I agree--it is beyond insane! Now why would Congress not want to pass a law making this happen? They could then put all this time spent raising money into doing the job we elected them for.

Many lobbists would be job hunting. I cry, cry, cry.

Don't expect any big time changes in real estate finance in the next few years. Too many fat cats, who also contribute to politicians' election campaigns, have a vested interest in keeping things pretty much as they are. It doesn't seem to matter whether Democrats or Republicans are in power. I can't think of any great pro-consumer reforms that have come out of Washington since stock exchange commissions became competitive and air fares were deregulated. Those things happened in the 1970's!

In order to understand our present situation, it is instructive to read this article from the WSJ from June 9, 2005:

In Treating U.S. After Bubble, Fed Helped Create New Threats

* Low Rates Bolstered Economy, But Housing, Foreign Debt Appear Out of Balance

* Greenspan's Legacy at Stake

"If I were a biologist I'd call this a perfect example of symbiosis," former Fed Chairman Paul Volcker mused in a February speech at Stanford University. "Contented American consumers matched against delighted foreign producers. Happy borrowers matched against willing lenders. The difficulty is, the seemingly comfortable pattern can't go on indefinitely."

Almost every economist agrees. The debate is over how, not whether, the global economy rebalances: Will it be smooth, through some combination of declining dollar and accelerating foreign demand? Or will it be chaotic, with a dollar collapse, much higher U.S. interest rates and perhaps a global recession?

Mr. Volcker thinks a crisis is likely. Investor confidence could fade "at some point," he said, with "damaging volatility in both exchange markets and interest rates."

http://www.andongkim.com/articles/2005/06/greenspanafterbubble.htm

re: 'Clinton's proposals to fix the mess include eliminating prepayment penalties, [As if someone was out there willing or even able to lend money to people with marginal credit to refi their homes at rapidly disappearing lower rates] tightening regulatory supervision of mortgage brokers [A return to traditional lending standards means a return to traditional pricing, which is why housing prices are collapsing since fewer can qualify, which in turn is wiping out the paper equity people thought they had in their homes, which in turn is impacting mortgage equity borrowing by homeowners, which in turn is drying up one of the main sources of consumer spending, which is the only thing that has kept the Bush economy afloat], expanding federal government support for homeowners facing foreclosure [which neccessarily means more govenment borrowing, further drying up available credit], and boosting funding for affordable housing [even more government borrowing, etc.].'

Any "solution" at this point is akin to someone offering a "solution" to the Captain of the Titanic -- after it struck the iceberg.

I wonder how much of her support of the give away to the credit card companies a few years ago helped to fuel this.

One part of the mortgage industry that will probably die a well deserved death soon is Mortgage Brokering. These storefront operators have operated for years with a central conflict of interest - the lenders pay them more for originating a bad loan than a good loan. About half of the people with toxic loans could have qualified for better terms, but they went to brokers who simply screwed them over for the YSPs.

The system needs more light shined on it - in particular the lenders who pay the YSPs (at least those that haven't already folded).