It's too early to be talking about bailouts and I don't think we'll even need to by the time this whole thing plays out.

Lenders don't want to own people's homes and I think the industry will come up with some innovative programs to help people who didn't know what they were getting into concerning adjustable loans.

Mortgage fraud and first payment defaults will hurt, but the economy is strong enought to absorb these losses.

I have a few other answers to questions about subprime loans.

I think the Bloodhound Gang said it best when they sang "The roof, the roof, the roof is on fire.
The roof, the roof, the roof is on fire.
The roof, the roof, the roof is on fire.
We don't need no water let the mother$%^&*( burn
Burn mother$%^&*(, burn

Another bailout similar to S&L crisis. Unscruplus builders, lenders hype the market even though cost of building and materials did not increase. And now same people want public bailout and make more money. Thanks to our econamy and analysts.

Some of the comments are completely correct. Mr. Dodd wanting people to get bailed out is an excuse for him to look good iin the general public and thats about it, since it would make zero sense to just bail out this mess, 1) As one person already said, it would allow future lenders to behave in a similar fashion 2) Didn't these people borrow the money, and being in the business, I am well aware that a majority of these people could of cared less about anything they just wanted a loan and are just as much at fault as any lender if not more 3) Any government help would be bailing out bothe culprits the lender and borrower and ultimately the investors - there is a reason it is called investing , their is risk and these investors shouldn't be bailed out by the government they should be taking it upon themselves to take 60 cents 80 cents or what not to protect their investment 4)Finally you would end up bailing out a lot of people that don't even deserve it but take advantage of the system- imagine the default rate at first when anyone with a subprime loan knows they can negotiate - most will end up missing a payment to take advantage of this situation!!!

I strongly appose a government bailout for both lenders and borrowers. I do feel sorry for the select few that were taken advantage of by greedy lenders. Nonetheless, a majority of Americans have been using the housing "ATM" to finace themselves into massive debt, by purchasing new BMWs and plasma TV's. Let me tell you...their hands weren't tied. Both lenders and borrowers new exactly what they were doing. Now, those of us who made the decision not to financially ruin ourselves are going to be stuck footing the bill??? I guess that's the American way. What a joke.

A lot of the problem was greed. Let those that thought they were going to make big bucks, pay for their greed. I'm sick of bailing out people. And the government should be enforcing it's regulations. If they did we wouldn't be having theses problems. Oh! then again the last 4 years wouldn't have been so good for the rich

Lenders should make reasonable chances for people to refi or pay up faster. Government should not "pro-up" the real estate market - let supply and demand rule. Anybody who ended up in over their head, should face facts and teach the lesson to their friends.

There better not be any kind of bailout. My wife and I have been busting our butts to save money to buy a house, and are on track to do so next year. We didn't give in to the agents telling us not to worry, just buy a house and it will appreciate before we have to re-fi. If those individuals that threw caution into the wind are bailed out of the mess they got themselves into, it sets a really bad precedent.

While they're at it, why don't the Fed's use my tax dollars to pay off all the credit card debt for people who are too dumb to get into it in the first place - what a great motivator for me to stop saving and get into the pool with the rest of them.

Absolutely no bailouts for flippers. Maybe for families who really got suckered into loans they couldn't possibly afford by unscrupulous mortgage rokers. Go over to http://bubbletracking.blogspot.com/ and take a look at how many people bought multiple properties with "creative financing." The vast majority of the forclosures we are going to see aren't going to be families losing their homes, they are going to be flippers losing multiple properties. It isn't 2.2 million American "households" it is 2.2 million American "houses."

"Laissez-Faire"!!!!
Keep Hillary's greasy hands off!!!
She already screwed up our health care.

I took out a loan four years ago with no documentation for 100% of the value of the home. I sold it last year for a sizable profit.

I knew the risks going in! I knew that I may have to decalre bancruptcy and get forclosed upon.

People should not have the government bail them out of stupid choices!

I for one certainly don't believe we need to be talking about bailouts. I think there's fault on both sides in this problem--on the side of the banks and on that of consumers. Banks were far too eager to loan money, and people didn't do nearly enough homework before signing on the dotted lines.

Now the banks and consumers are realizing that they're in trouble. Personally, I think that perhaps some of the banks will simply have to eat some losses on this one. Or they'll need to innovate to find ways to work with these consumers. And consumers need to do the appropriate belt-tightening in order to pay their mortgages. If that means selling one of the $60k SUVs sitting in their driveway in favor of something more sensible or sending Johnny to public school instead of private, then so be it. The economy will handle the losses.

Large corporations are so fond of taking advantage of the "free market" when they're offshoring jobs or creating overseas tax shelters, but when they stand to lose money, they sure seem to look to our government for help in a hurry.

My fear is that millions people (like myself) who worked hard, saved what they could and bought houses they could afford will be forced to subsidize, through some sort of taxpayer sponsored bailout program, people who bought houses clearly above their means, with mortgages approved by institutions that should have known better. What this will amount to is a giant reward program for fiscal irresponsibility. How is that fair?

This "crisis" hasn't even gotten to the other dirty little secret in the mortgage industry that is going to explode: the recast of the negative amortization loan. A negative amortization loan is one in which the borrower does not have to pay all of the interest that has accrued on the loan. Instead, the unpaid interest is tacked onto the balance of the loan, thus decreasing the homeowner's equity. The buyer starts off with ridiculously low payments, but if the loan balance reaches 110% (or 120% depending on the loan) of the original loan balance, the loan payment is "recast" and the payment shock can be staggering-way higher than anything with a regular adjustable mortgage. The combination of decreasing values and increased loan balances is going to clobber this economy. Oh, and the number one holder of these mortgages is Washington Mutual, the largest thrift.

There are two sides at fault here: the banks and the homebuyers. There are numerous payment calculators that can be found on the web that allow a person to put in their income and it figures out the amount of loan they can afford. These calculators all produce results which are an excellent guide for prospective homebuyers to follow. If they use these calculators to determine how much of a loan they can afford to take out on their new home, then they won�t run into the problem of not being able to pay their payments. If a person is unable to afford the payments the wise choice is to keep renting, even though they would love to buy. Only a fool would buy an outrageously priced home and try to "make it work" with a special payment provided by the bank. The homeowner who bites off too big of a loan can only blame themselves for being too optimistic about being able to repay the loan; by using these calculators, the writing is on the wall.

Secondly, the lenders are at fault just as much as the overly optimistic and/or just plain ignorant homebuyer. It is the lenders that have tried to bend over backwards to accommodate these insane home prices, and whenever they come up with a loan policy that supports the higher prices then home prices continue to rise (thank you bankers for the extremely overpriced market!). Unfortunately, there is a breaking point that occurs when home buyers start to default on these loans � which is where we are at now. Soon home prices will start to drop because banks will realize that they cannot, safely and prudently, continue to make or take on risky loans. Everything soon comes back into perspective. The bankers can only blame themselves for their creativity in trying to allow people the opportunity to go into debt without a sound means of paying those loans back.

The lesson here is this, buyers shouldn�t take out a loan that they can�t afford (use the time-tested standard 30-year fixed rate to calculate the size of loan that your finances will allow), bankers shouldn�t make loans that are �creative� in order to provide financing when it is obvious that people are getting in too deep in debt. It�s called common sense. And as far as �the family down the street� picking up the tab to bail out the buyers/bankers who have made poor decisions, well, my opinion is that you reap what you sow. Let there be defaults, foreclosures and bankruptcies! Only then the market will get back to where it is supposed to be, a little rougher on the edges, but wiser and better for the experience.

Should the government step in when the stock market crashes after a bubble? After all, that may also cause a recession and destroy the savings of people who were suckered into the system by irresponsible banks and investment advisers.

When will we start hearing about the biggest subprime and Alt A lender--- FHA?????

The idea that people "got in over their heads" is an oversimplification. This really comes from the point of view of non-first-time homeowners. Many first-time homeowners who bought in the last year or two rented while watching prices skyrocket. Any broker or agent that these buyers could talk to would attempt the not-so-hard job of convincing them that buying NOW without a down payment, in any loan they could get, was the only option that made sence, considering that prices were increasing faster than any buyer could reasonably save or accrue interest. A great many of these "risky" buyers, especially the more recent ones, were SCARED into these loans!

The sub prime's come with unique terms that should have been explained to the buyer, by their bank, and the lawyer that they paid for. The bank made me pay for the bank's lawyer, as well as my lawyer. One of these lawyers should have told the borrower, if the bank was unwilling to explain the financing. My lawyer explained it very well. "This document states that if you dont pay on time, they get the house.(please initial here)" Not many people walk into a mortgage blind. The buyers knew up front that they could not afford the mortgage, if the rate increased, and that should have prevented them from getting the mortgage. Also, the usery rates imposed to the sub prime croud also boarders on the criminal side. The bank gets 3-5% more than they should, and the credit card people can charge up to 30%. Where does it cross the line between service and racketeering? I think that they crossed it with some of these sub prime loans. As Clinton pointed out, they should be able to refinance into a standard fixed 6.25%, 30 year term rate. Lowering the rate from 10% down to 6% will give them breathing room. If that can't be affordable, they need to hand over the property and walk away. Lending practices, such as some sub prime loans were way out of hand and the banks that pushed this junk, need to take some of the hit.

If borrowers were truly preyed upon by unscrupulous lenders, their governmental recourse should be through judiciary channels, not legislative (tax-funded) channels.

Any bail out of subprime customers would be a temporary band-aid. There is a reason they are subprime customers, they are bad with their money. They don't usually make rational decisions when it comes to purchases. Sure, there are the few who have bad credit because of medical bills, but that isn't the majority. Bailing out these people would be a slap in the face to those who have been more responsible with the money and decisions. Heck, even we struggle!

I think a bailout is a ridiculous idea. I'm a 24 year student who is graduating in early May. I'm looking to get a good downpayment secured before I buy a house. My wife and I realize that we may have to rent a little while longer, but that's better than jumping in over our heads. The idea that we're supposed to bail out people who made bad financial decisions in the first place is insulting. While owning a house is part of the American Dream, the American Dream is something you work for, not something you have handed to you by the government.

I agree with Roubini that we need to first look to the stakeholders (companies/shareholders/home owners) to finance the way out of this. I also would have liked to be in a better home/school but I am here in my fixed rate 30y mrtg because I knew I could afford it.
I am amazed at the information I hear about consumer credit card debt. Are we going to have this same conversation in a year over whether to bail out consumers from their consumer debt. Maybe we ought to allow these companies to take the hit and then the market would stop rewarding companies for being so shortsighted in going after short term profits over long term prudence.

Should the government bailout all gamblers that are unlucky. Let's face it, these loans were gambles from the start on behalf of the borrower and the lender. The odds were in favor of this problem, not the reverse. So they got caught and now have to pay up. Maybe its time the drive a cheaper used car and not go on vacation so that they could pay the bills they, themselves created. Folks made a choice to get into that home and that loan. Don't penalize those of us who've did our homework and didn't gamble.

Those buyers who continually pushed prices in many parts of the country to exceedingly high levels where the average hard working educated American could only afford the home by taking out an "exotic" mortgage and/or having unusually high mortgage payments, essentially robbed those of us who were not willing to take such extreme risks, from the American dream of owning your own home. To bail them out with anyones money would not only be unfair to who ever paid for it but it would continue to deprive other more fiscally conservative individuals from being able to own their own home. Unlike most other products, housing is a necessity. Home ownership adds to the stability and functionality of our society and culture. Affordability with traditional mortgages should be the goal the government is trying to reach, and if that means some people will loose their homes...so be it.

So, the wise and smart people who waited on the sidelines and didn't get involved in the pyramid scam of the 2001-2006 Housing Market are going to get "PUNISHED" for not doing stupid things like an ARM or Liar Loan?

So instead of the housing market correcting, we are going to "reward" stupid people who got in over their heads....amazing.

If we bail people out on this, then we are saying it's ok to make a HUGE mistake and you have no reprecussions.

These people that got these ridiculous loans KNEW most likely they could not afford a house to begin with. They knew they shouldn't be buying a house but they did. They knew the risks.

So again, it's ok to reap people of their earnings or overchange for housing, flippers and so on because everyones making a profit, but as soon as the ---- hits the fan we have to bail people out? Just amazing. It's called lesson learned and valuable experience, however how negative. Maybe this would have taught people financial responsiblity and also teaching their kids about their mistakes and what not to do (like buy a house until you have a nice savings and pay 1/3 of your monthly salary towards it) but if we bail them out it's going to speak volumes about living in debt and it's ok to make massive mistakes that ruin the economy.

Again, just amazing. The fact that this is being discussed at all show's just how stupid the government is. They knew this was going on and chose to ignore it. Don't believe for a second they didn't. Everything is rosy when people are making $$ and the economy is strong.

Let is sort itself out. NO HELP!

Here we go again. The good people who properly manage their lives get to pay for the greed and stupidity of everyone else. Let them crash and burn. I will buy them a house to rent with my good credit in a prpoperly priced housing market.

Let the free market economy handle it for once and we'll see that both the consumer and the lender learn their lessons. I bought and sold during the market and kept it within my means.

I'm now watching the idiots with the teaser rates and 0 down loans now having problems and they are not taking responsiblity for their own fiscal irresponsibility and it's appalling.

The Government needs to leave the market alone!

Senator Dodd's bailout idea is just another example of Democratic interference in the free markets. Let's be honest with ourselves - both borrowers AND lenders are at fault. I have read way too many stories of homeowners who were surprised to learn of their "teaser" rates (as low as 0%) being reset to higher rates. Did these borrowers truly believe that they could borrow at 0% forever. Over the last three years standard fixed-rate mortgage rates have been at historic lows, yet borrowers still opted not to lock in these low rates. The delusion of being able to refinance out at a later date helped by a never-ending rise in housing values was simply ignorance. Home ownership is a serious investment - for buyers not to do their homework is their own fault, not the government's.

For anyone who has taken Finance 101, their is a simple tradeoff: risk vs. reward. The reason subprime lenders can charge higher interest rates is due in sole part to the increased credit risk they are exposed to (for example, investing in Treasuries offers little risk, hence lower returns). It is the lenders sole responsibility to manage this risk-reward tradeoff. That involves truly evaluating loan-to-value ratios (including projected ratios in the event of a downturn), debt-to-income ratios and the overall ability of the borrower to make good on its loan. Simply because a lender couldn't properly evaluate the risk in the loans it was originating (or in many cases didn't even try) does not mean the government should intervene to correct their wrong. If the housing market had continued surging the lenders would have earned their high returns - and unfortunately the inverse works as well.

It's all about personal responsability.

It needs to be enfoced by law when dealing with large sums of money and property.

You will find most of the sub prime loans and subsequent forclosures are the result of mortgage brokers overcharging or lying to borrowers. Some studies have already proven that connection.

The homeowner and the lending bank are now stuck with unworkable loans. It's the Mortgage Broker who stuck them both with the loan, made huge comissions, and is laughing all the way home in his Hummer to his million dollar McMansion.

The answer is all very very simple.

We do not allow anyone in this country who handles large amounts of money or deals with life or death issues to do so unlicensed.

No one gives $10,000.00 to an investment house to buy say Microsoft Stock without dealing with a Licensed stock broker.

Why? Because if this person lies, or makes mistakes it will go against their license.

Too many complaints, then no more licenseand no more career!

We do the same with Doctors, Lawyers, Appraisers, etc.

The same needs to be done with Mortgage
employees.

What the worst thing that could happen when you give someone the title to your home? Someone that you never met, never heard of before, their company has been in business for less than 10 years and has no accountability?

You could lose your home.

And that is happending in America today.

i think government intervention in any way is an appalling example of abuse of power. it will socialize our society even more, and is clearly against our constitution. it is way past time for individual responsibility.

Supidity is not a defense.
If you don't read the fine details of a contract or have some one explain it to you, then why should the public bail you out? Why not bail people out? The public bails out the corporations of this country all the time, yet the conditioned mass seem to take this as par for the course. Where are all these conservatives and Clinton haters when the airlines need a bail out, when the farmers need subsidies?
If we don't want to bail out the indvidual, perpuate the free market, the let us really do it. No more gov't inervention in anything! Let information flow freely, let people make their own decisions and suceed/suffer accordingly.

Oh by the way, Kenyesain economics, you know the thought that rules our lovely little republic, is no way free market approach!

Aren't these people who lied on their mortgage application with regard to income supposed to go to jail for bank fraud when they are forclosed upon. When the tech bubble burst, I lost my money. I didnt see any bail out then. The big brokerage houses made huge profits back then just like the lenders are now. Let them take their lumps.

I stayed on the sidelines for five years, watching the prices rise always just out of reach. We lived in Paterson, NJ and saw the decline of our neighborhood while seeing tiny Cape Cods in Hawthorne go for $400k. We watched overpriced homes being put on the market without even an attempt at staging or dressing, easily 40% above what they were worth two years ago. In short, the market priced out every blue collar worked in New Jersey, and half of the white collar force.

Now I'm supposed to see two sides to this story? No. For me, there's only one: reaping what you've sown. People flipped their way into homes they couldn't afford, signed loans without doing a cursory attempt at internalizing reality, and now someone is going to paint me a picture of misled innocents? I'm not buying it, much like I didn't buy your overpriced Cape Cod in Waldwick (note to Waldwick: you're not as great a place as your real estate suggests, get over yourselves).

Let them be foreclosed, every single one. Let the lenders suffer the notes. Put the houses back on the market. Let it correct itself. No bailouts, for anything. Otherwise, you've taken my example of self-restraint and delayed gratification and turned it into nothing. I won't have it.

By the time any of these things are implemented the market will have turned around. I hope the feds don't get involved and let the market correct itself.

Yeah right, wishful thinking, I know.

As someone who has just recently gotten a mortgage (with almost 100% financed, but on a fixed rate 30 year mortgage) Let me address some of these comments:

1) It would allow future lenders to behave in a similar fashion

Yes, that is possible, if the legislation, etc. is written poorly. It can be written in such a way to prevent future happenings like this.

2) Its the borrowers' on fault.
Yes, but its also the lenders' fault for not being up front with the borrowers. There is also the problem of the market itself. It became over inflated, leaving normal people unable to buy a house they normally would have been able to afford but with the social pressure that they should be able to afford it.

3) The abusers will also be bailed out.

Paritally true. Again, with well written legislation it is possible to help those that need it without helping the predators. The best way to handle it would be to send borrowers who fall under certain criteria to go through a legal arbitration. That way a judge could decide on a case by case basis, rather than just a blanket hand out.

4)People will take advantage of the system.

People are already taking advantage of the current system. No matter what system is put in place, someone will be able to abuse it. All that can be done is to craft the legislation in such a way as to limit the abusers while still helping most of the people.

One of the things this country was founded on was protecting the innocent at the risk of protecting the guilty; 50% of the bill of rights focuses on that. Just because some legislation will do the same in a different arena doesn't make the legislation bad.

I asked a builder that was building yet another $1.5M McMansion on spec in my neighborhood - "How can people buy this things?" - He responded that with interest only loans it's very easy, and he makes 28% on what he builds, so what does he care. "Oh, I get it, then they flip the property and reap the appreciation before they're mortgage rate adjusts higher."
That's great, except like many multi-level pyramid schemes, when you're the last one in line, and there is no willing to give you your money back, plus the appreciation, you are SOL!! Considering the decadence of these homes to begin with - I mean "Gee, do you really have enough room for you and your two toddlers, 6 bedrooms and 5 full baths and a foyer right out of a Hilton Hotel must get a little tight from time to time." It's hard to feel much sorrow for people that greedy. It's also hard to believe that there were that many people willing to throw caution to the wind. It was all so inevitable, it wasn't IF, it was WHEN.

- yet again we get "Reverse-Robin-Hood" ideas
- so folks that cannot afford homes that have been inflated into the stratosphere have to pay taxes to bail out the fools who bid up the prices into the stratosphere; and in the process prevent house prices moderating so they can afford to buy a home with - surprise! their own money!?!
- wow - this reminds me of Margaret Thatcher over in the U.K., who doled out $40 per head of population to make sure Brits couldn't get cheap vacations on Freddy Laker's airline, which was putting overbloated British Airlines out of biz

The Gov't stepping in will make a bad situation worse. Let the market correct itself - we'll all "learn our lesson" and do better in the long run. And for heaven's sake, will someone please lock Hillary in the closet until this is over!

So the public gets to pay for another banking bailout...Savings and Loan scandal all over again.

The banks and the individuals in trouble need to solve their own problems.

Many of these borrowers cannot qualify for the normal A type mortgages and are duped into these lenders as a last resort. I saw one of these lenders named who closed on a mortgage in Oct,2006 and generously charged the borrowers 9.35% when the market was in the low 6% levels. And of course the lender added in a 3 yr prepayment penalty.

You say:

"The real-life choice for many families in bubble markets isn't between a fancy McMansion and a modest older home. It's between a house in a school district that works, and a house in one that doesn't."

This is an insult to me. I stayed in the city, in a 1300 sq ft condo that I could AFFORD, and sent my kids to the Boston public school system, fighting them every day at every level to FIX IT.

The apartheidists who went running off to the suburbs will NOT get my tax money. I am sick and tired of teachers from white suburbs telling my kids about Rosa Parks and diversity, meanwhile driving past deer on their way to work.
We drive by ghetto on our way to school. I don't need to hear about Rosa Parks and diversity from apartheidists who won't send their kids to school with my (white) kids.

Let the apartheidists take the mess they made and solve it without my money.

My wife and I bought a home in 2005, when the market was just about as red hot as it could be. I bought when I was 23, making about 40,000 combined.

I was careful, I remembered the tech bubble fallout (from when I was 18). I knew there were a lot of sharks in the water looking for fresh blood. I was offered a 3/1 ARM by Wells Fargo for about 50% more than I wanted to spend on a home.

I did my homework and found a traditional 30 year mortgage that I could afford, and could buy my house. My wife and I did buy a home we could afford, and in no way do I want to help bail out idiots who decided, just as the .com's thought, that their investment couldn't come back to Earth.

The government didn't refund my $100 that I lost in the tech bubble, and I don't think they should help out buyers/lenders who got in over their heads. If it sends banking stocks into the dumps...who cares?

The annoying aspect of the "sub-prime" market being thrown into the lime-light is that the networks all came out and stated that the "sub-prime" market preys on "low income" family with higher fees and rates. That's not at all true. Sub-prime mortgage companys charge higher rates and fees because of the risk factor of the borrower. Credit scores are the main factor of obtaining a certain rate or program. These customers are people who 2 or 3 years ago were a conforming borrower, which is to say they could walk into any bank and get any rate that they could because of credit worthiness or score. low income customers are often turned down because they can't afford the loan they truly need where the lower credit score customers make enough money but just don't pay their bills. That spells one word and one word only. RISK!! These people are shopping for money and don't care if there is a prepay penalty on their existing loans because they just want the money. The mortgage companies or a large number of them are not to blame here folks. It's the customer who shops for money using the equity in their homes and rates, fees or prepay penalties are of no consiquence to them. Any bail out should be footed by the government and the tax payers it is the home owners or a majority of them that they are in the spot they are. Lets point the finger in right direction.

I do not believe that the government should bail the lendor or borrower out. There are consequences for lending to sub-prime customer's as well as for customer's who have borrowed more than they can afford while putting 0% down on an interest only loan.
I feel no pity for either side. Everyone knew what they were getting into and no one thought that they would get caught with the pants down. I'm not paying for someone else's mistake. No one paid for mine when I could not pay my credit cards while I was in college. I had to learn the hard way for my stupidity and so should they.

What a fantastic opportunity! How can I get myself classified as a subprime mortgage borrower? Is there a website or an 800 number where I can sign up? I can easily put myself at risk of defaulting � that�s not a problem at all. I just won�t make any more mortgage payments on my house.



Let�s take a moment to think about all of the benefits:



For Me: It will save me money. And since I don�t use any online billing systems, it will also save me time and postage. And it would increase my personal happiness. Just the thought of limitless trips to Starbucks, daily massages, and fine dining at restaurants makes my mouth water.



For the Economy: All of the money that is being wasted on my mortgage can be used for consumption to expand the economy (obviously there�s no sense in saving any of it). I can spend it on lots of terrific items that the Chinese ship to this country. Or I can purchase a gas guzzling SUV. Hmmm�which makes me think of another possible Government program for subprime auto loan borrowers�but that�s a topic for another day.



For the Mortgage Lenders: They will be sure to receive their money - from the Government of course, not from me!



For the Government: The U.S. Treasury will save money by not having to give me a take break for the mortgage interest that I pay.



For Other American Homeowners: I�m sure that others would also love to take advantage of such a wonderful program.



What a fantastic free lunch Senator Dodd has proposed. The government can call it something catchy like �Home Security� or �Homecare� or even �Homecaid.�

Where are the priorities of these legislators talking this nonsense?

Not that it is the way to go, but...Doesn't it make more sense to just provide new houses outright for the victims of Katrina? At least these good people were victims and had less choice in the matter.

Uncle Sam has a problem with admitting that there are problems out there that even the US taxpayer can't straddle with their hard earned cash. We're a nation of debtors because our leaders can't say no to any cost.

Those same legislative voices want to screw the conscientious saver twice for the greed of others. Once when they flip their share of the tax bill and the second time when they want to then go and buy a house at the artificially high prices cropped up by Government interference in supply and demand.

We should add a choice on our ballots every time we vote in a national election. One box for each party and one for "flush" which requires all elected officials to serve out their current term and go.

Whatever happened to Laissez-faire

Why should I, some one who had the werewithal not to get myself or my family into a 'subprime' mess, be literally held accountable for the stupidity of both borrowers and mortgage lenders. I'm sick and tired of being 'responsible' while talk of 'bailing out' the irresponsible is being considered.

Clearly, the system needs to be changed, but a bailout is certainly not the answer. I think a lot of financial suffering by both borrowers and lenders is in order ... otherwise, this episode is bound to repeat itself in the future.

And for those of you who argue that the economy will be rattled into possible recession over this mess ... well so be it ...

If the goverment wants to talk 'bailout' ... how about a bailout for the states of Louisiana, Mississippi and Alabama .... after Hurrican Katrina !!!

Why should I help pay for a bailout because another homebuyer made a stupid decision and got in over their heads. NO way will I agree to that. If the economy implodes then let it implode. It's a dangerous thing to manipulate the market like this.

I have not bought a house in the Bay Area because I felt it was totally unjustified. My taxi driver told me he had bought two "investment" houses and was going to sell at the end of the year. Why should I bail out these people or people that made incredibly greedy decisions?

I rent to save money to buy a house in a reasonable market. For my scrupulous saving and sound financial habits, I will be punished by allowing people to keep their houses artificially inflated? I don't think so. As soon as we start rewarding people for these types of decision, I am taking my graduate degrees and income somewhere else.

Thank you Steve for making the one point that everyone else has missed. Those of us who waited until we could responsibly buy an appropriate house for an appropriate price have watched housing prices skyrocket precisely because those with little money who got exotic mortgages increased the demand. Because of their irresponsibility, my ability to afford a house has been compromised. I have no sympathy for them if they lose their houses now. Maybe this will increase supply and bring prices back down. The few thousand dollars that they shelled out for closing costs should be considered the price for borrowing a house beyond their means.

I'll be G*d Da*ned if there is any bailout. I sold a house and bought a house in order to trade up during the last "housing boom." I could have easily gotten a No interest, or adjustable mortgage and built a house 2x the size on 10x the property. But instead I used a 30 year fixed mortgage beacuse although the interest rate is higher, it was the responsible thing to do. If people want to play with loaded guns, then let them, but don't make me clean up the mess

I strongly oppose the Government bailing out both the lenders and consumers. To use public funding to help out people and big business that knew exactly what they were getting into would be wrong. People that have leveraged themselves to the hill, so in the short term can live in a bigger house and drive expensive cars should have to pay the consequences of their actions without the help of the government. They put themselves in their mess, they should have to get themselves out of it. Being a former mortgage broker, I knew of many borrowers that didn't care of the long term effects of having adjustable mortgages, just that their mortgage in the short term was as low as possible and the house was as big as possible. Lender practices have become extremely easy in the past 3 years, and they are certainly a big part of the problem, as well.

Unless the purpose of bailing anybody out of the "mess" is to implement the ultimate nanny state, I suggest we take it easy.

The lenders well knew what they were doing all the way through - subprime lending has been provided at a premium for centuries. Everybody who claims he didn't know there was an extra risk to this form of lending [which is why it is provided at a premium] is either stupid or, well, stupid.

The borrowers aren't innocent either. Of course we all want to live well but ultimately it is up to the borrower to think things through before he signs on the dotted line. If even an insignificant increase in monthly payments will make a difference, then not signing is probably the best solution although it will mean no new car or plasma screen this year.

Don't push the bill for the faults of the parties above over to the rest of us, thank you very much.

.... unless of course what you really want is a nanny state.

The bubble has been forming for years and only when people stop making money does anyone listen. It didn't take a genius to figure out what was going to happen. I do not own a home because a lot of people bought homes they couldn't afford and priced me out of the market. I've had to live with their decision, now let them live with it too.

While I agree with most of what was written above, I see references to "Banks" and "Lenders" who should pay....

But for the most part the "Banks" are out of the picture. The "Lenders" have sold the loan to Investors and have already been paid.

The real question is how to we reform the process where everyone involved in making the loan to start with has no stake in it. The brokers get paid, the Originators get paid, the appraisers get paid. So now we have faceless bondholders. (some possibly the pension plan of hard working people like you and I left to take the fall.

While there should not be a bailout, make no mistake we will all pay in one form or another, (less access to credit, reduced earnings in pension plans).

One group that doesn't get mentioned is the builders who often worked together with the lenders to get unqualified people in these houses. They would walk aaway scott free. I think the builders and the lenders have to take a hit and they should be the ones to make it so that their customers can stay in their home and help stabilize the neighborhoods. Otherwise, all the other people around them will suffer as well, as the neighborhood goes downhill.

I don't think that any kind of bailout should be used. These subprime lenders got themselves into the situation with unsculpulous lending practices in order to fatten their own wallets. They can bail themselves out.
I also don't feel bad for the homeowners. It takes little intelligence to look at a deal and figure out that it's too good to be true. If you're living in a $100k home, don't go buy a $200k home just because interest rates dropped. You couldn't afford it before, why would you think that you could going forward? The borrowers were just as greedy as the lenders in wanting to improve their quality of life beyond their paychecks.
Let the greedy lenders who made the loans take the houses back in foreclosure, and let the greedy buyers who wanted to live beyond their means have their credit destroyed.

This is just another excuse for the Hillarys of the country to make silly claims about the market being 'broken'. It will only be broken if the government steps in to fix it. I second the comments that the lenders are not the only 'culprits'. Hey, we all want more than we can afford, and the less responsible among us will ignore the realities of things like ARMs and Negative Amortization loans in order to try and live beyond our means. When my tax dollars start bailing out those who want to live better than I can afford...I'm going to scream long and hard.

Actions have consequences, and it's about time everyone learned that. Those who make foolish investments SHOULD lose their shirts, and if Clinton and Dodd want to provide new shirts let them buy them with their OWN money. Why is it so difficult to understand that stupid behavior should not be rewarded?!?!

But why am I getting so steamed up? I'm retiring to Brasil in a few months (where I'll be paying cash for a modest house I can afford), so I don't care what mortgage rates are - prime or subprime. I'll vote absentee for the Libertarian candidate, but that's clearly too little too late. Good luck to those of you who will be stuck subsidizing Hillarycare or Obamacare or Rudycare or whatever else the feds mess up.

Folks, I think that it is counterproductive for our society to call everyone who makes a mistake a "victim". Today, we have far too many "victims", which means people who made a mistake and now want someone else to foot the bill. Whaterver happenned to individual fiscal responsibility and prudence? Sure, there are some victims of of deceiptful lenders out there, but these are exceptions, not the majority of cases. The majority simply let their wants get ahead of their needs and their abilities -- these are not "victims". By classifying everyone as a victim, we're encouraging and condoning irresponsibility, which makes life more difficult and expensive for the rest of us who do not indulge in such behavior.

Complete crap. They should let them all default, learn a lesson the hard way. Yeah, it'd suck for the economy, but hey, what else can they do? Eventually, you have to make people take some responsibility damnit. With all the defaults, maybe it'll make my commute easier since less people will be driving in the county I have to go through to get to my office. :)

The guy who brought up BMW's and big screens is right on the money. While I've rented and busted my rear to save for the last few years, I watched an acquaintance refi and take out HELOC's like there's no tomorrow. One time, he pulled me aside and asked me if I'd ever seen 20 grand cash. Unbelievable!I knew right then and there that trouble was coming. The next thing I know, he's got a new jacuzzi, the biggest TV I'd ever seen and a new BMW. What do ya know, a year later and his business is on the fritz and he's got a stack of credit card bills on his counter 2 inches high. Now he's being foreclosed on. I really don't want to see his life fall apart, but if he sees a dime from a bailout, I'm moving to Canada. Perhaps in my next post, I'll bring up my jobless flipper "friend" who can't sell his house to avoid foreclosure. All I can say is POOF!

The government shouldn't bail the out. Instead, those who made a killing on the housing boom should do. It is only unfair for us who rented all the time because of the high cost of homes to pay for the mistake of the greedy people.

Any bail out will send the wrong signal.
To banks, to investors, to borrowers, ... everyone will think it is OK to play high risk because if it is doesn't work someone will bail you out.
Did anyone believe that a 2% teaser rate would not be changed?
Even if the real estate appreaciates and one get's a profit he has to sell or still pay the higher rate. If he intended to sell he is an investor that should have known the risk of investing and isn't in need of protection.
Homes are worth less? Really? Every source has different figures. And even if the price has fallen 10% in one year, thay most likely rose before that 1-200%. Did anyone think that a double digit appriciation can go on forever?

I relocated from Germany to the US and first couldn't get a mortgage, then only ARM products, .... finally I bought with a 30yr product.
A few weird things happened:
> at one point it was easier for my wife to do a no doc loan as it was for me to do this fully documented (the holy credit score)
> I was offered ARM first ... shouldn't a low credit score indicate that someone is inexperienced and a risky product might not be the right thing to do?

BTW I'm now paying less in rent/tax/insurance than I did before renting

These loans were knowingly and fraudulently made and ample documentation has been made public to support racketeering charges.

The states have victim compensation funds for victims of violent crimes, but not for victims of financial crimes, which can be more devastating and longer in recovery, if ever. I support compensation to victims as long as it comes from fines levied on the perpetrators.

Imagine this scenario! I live in a home for 10+ plus years. I raise my family, pay my mortgage, and I�m generally a good citizen, until real fallout. A true recession, not this little hiccup, forces me out of a job. The Lender forces foreclosure. Is there a bailout? No, of course not. Why? Because; I have paid down the principle on my mortgage. Now the lender can recoup their costs. The lender still makes their cut by selling the property at a reduced price. But this is really a tragedy. I�ve lost 10 or so years of hard work and that�s where the discount comes from, not from the lender.

You can�t cover the cost of a loan that is only 12, 24, or 36 months old. The risk to the lender is in the first 6, 7, 8 years. After that, appreciation and principle �pay down� take over. Lenders who were in it for the short term forgot what made real estate a safe investment. And that was the long-term gains. Let them eat crow. The buyer has lost very little in my opinion and can bounce back easily. Either way, it doesn�t help the common guy. Unless!

Capitalism can save this situation. Tighten loan standards (LTV<90%) and keep interest rates relatively low until mortgages no longer have the presence they do now. Until, say, small business loans dominate over mortgages. Or create incentives for small businesses. Investors need an excuse to leave the Housing market and place their money somewhere else. Interest rates can then move and only slightly affect the economy through the sub-prime market. Loans will not reset at a higher rate. Money gets pumped back into the economy, both locally and nation wide. Inflation would rise but compensation needs to follow. And, then the economy can begin its gradual downturn with interest rate hikes. But that would call for corporate responsibility.

What plagues us is Illegal Immigration, and domestic jobs being sent overseas. Corporate America will inevitably find a way to keep salaries low. Either through hiring of illegal workers, or sending jobs oversees. Look for your politicians to battle these problems. Some will say that assimilation and an influx of workers are needed to keep America moving. That�s just a way for them to avoid the problem. You have 2.3 children, but your tax dollars are spread thin to cover the costs of 5 students. How do you combat that? No state tax and higher sales tax. You can make money �under the table� but you can�t spend it there. If you can�t tax every dollar a person makes (because it�s illegal), you can tax every dollar they spend. That will also help cap inflation. Why? The inflated cost is tax revenue, not income. If not, next the Illegal will be living in your foreclosed home.

I'm in an Adjustable rate (2/28) with a subprime lender...and guess what? I don't expect anyone to bail me out. I don't expect the lender to help me out. If I fall behind on my payments, that's my fault. I went looking for the house, I went looking for the loan and I signed on the dotted line. I also read all the pages concerning the adjustable rate, Adjustable Rate Rider, I also read all about the pre payment penalty, Pre Payment Penalty Rider. If a person is going into forclosure because they bought too much house and borrowed too much money then tuff! Take responsibility and get another job if you have to, to pay the mortgage. Too many people these days don't take responsibility for there own actions. Own up to your problem! I hope no one gets bailed out. This is a great lesson learned in economics for every home buyer who owes more than the home is worth.

This is the most "ridiculous" notion I have ever heard of having the government even "entertaining" the thought of getting involved with mortgage buyouts. The housing market must cool as it is. Hopefully this is someone's crazy speculation and wishful thinking.

Making mortgage lenders the culprit for college educated families, unable or unwilling to perform basic math and assess the impacts of an adjusted interest rate, is equally ridiculous. Does anyone take responsibility anymore???

It always comes down to one thing: greed. Greed on the part of the lenders, greed on the part of homeowners trying to catch the wave of unsustainable 15-30% yearly increases in home prices. Homes are finally being viewed again as places to raise families, entertain, etc rather than a place to make a quick buck. So ... no bailouts. BTW, I'm a young doctor looking to buy into the outragiously priced SF/Bay area mark and it'll take me a full 1-2 years saving as much as I can to get that 10-20% downpayment on an entry level townhouse or home.

No bailout. I have little sympathy for those who live beyond their means.
I pay enough taxes and don't want to spend anymore on people who are basically morons.
If they lose their homes by pulling out equity for cars, boats and vacations, they can purchase a tent at Walmart for 25 bucks.
For those who are trouble due to illness or job loss or a streak of misfortune, I am all for helping out and will gladly support that.

How about Prop 101 �Personal Accountability�. If you can�t balance a check book you have no business buying a house. Every mortgage application should begin with a simple math quiz. Everybody is to blame on this, from creative lending practices to individuals that convinced themselves that they could continue to �rob paul to pay peter� by buying a home that they couldn�t afford and then juicing the �perceived� equity to buy a BMW. Basic economics, not rocket science.

Let me tell you a parable. Two brothers left home to strike out on their own. One rented a loft from an elderly couple while working and going to school. His father had done this before getting married and felt it was a safe way to leave the nest. The other purchased a home of 5 bedrooms in a nice neighborhood with no money down under the terms of an interest only mortgage. He knew he would have to work 2 and a half jobs to make ends meet but was hoping to stay long enough to allow the home to appreciate so he could dump it for a profit. Neither is purchasing Plasma TVs or gold plated SUVs. After 3 years both brothers needed to move. Who is in better financial shape?

If all were to remain as it is today, the first brother would have money saved up for a down payment but the cost of homes is still so high that he couldn't put down 20% without selling organs on the black market. If Senator Dodd's bailout were to occur, the second bother would be rewarded for taking on such a tremendous debt without taking into account the possibility that the economy might soften. Neither brother is in great shape but neither are any of us when we have so much of our personal wealth wrapped up into our homes. Combine that situation with the colusion that occurs between banks and credit card issuers once a person is late with a payment and you end up with an economic situation that cannot end well. One late payment to any creditor allows a credit card issuer to raise rates to 30% and higher overnight. That is akin to wolves pouncing on a wounded animal. A bail out helps the culprits of the fraud more than the victim. If we do nothing, it may take better part of a decade for property values to right themselves to normal levels. How many of us have parents and grandparents who bought their home in the early 1930s? We might be headed for that kind of economic restructuring again.

The only "saving grace" here is that any potential bailout isn't probably going to come from your pocket, it's going to come in the form of additional unfunded deficit spending. Why not bail out everyone who lost money in the market? We'll just print more money to hand out to those people who lost money! Who cares how many billions it costs? We've already got billions of dollars in deficit already! What's a few more billion, right?

The problem is the federal government already has the same economic sense as house flippers who got burned, so the real question we should be asking is, who's going to bail out the feds when it all comes crashing down on THEM?

You have got to be kidding me! Are we really talking about bailing out greedy, irresponsible people and punishing the patient and the responsible? Obviously there is a bigger problem here, once again, corporate greed, go figure. All I have seen in the last 10 years in real estate is one big get rich quick scheme. Everyone from realtors, appraisers, brokers (huge problem), and yes of course the home buyer. BTW, many home buyers were speculators, so it's time to pay for a bad decision. Believe me, I lost money in the market, is someone going to write me a check? So I learned my lesson, bit the bullet, sold my house, and now I'm renting. You all knew this was coming. people are walking on my head and I hear snoring all the time, but that's the cost of being conservative. Next time don't try to upgrade to 2400 sq feet in the heart of Irvine, don't buy a second home, don't buy that 745LI with your home equity, and of course don't spend 100K on upgrades, just so you can invite guests over and show off. It's called conspicuous consumption.

There are simple solutions for these issues. Waive the prepayment penalties off of these loans and help borrowers to refiance them into lower rate 30 year FIXED term mortgages. Let the lender cut their profits which are high enough as they are. On a 200,000 at 8% interest they are making $16,000 per year on interest. The forclosures would go down the deliquency would go down and home values would not be as affected. You could also lower conforming rates to help increase sales of homes, but tighten the guidelines where you could not obtain financing in categories like subprime and alt-a without a downpayment. Most of the comments on here are from responsible people who feel they will be directly affected from other peoples mistakes and lack of financial responsibility. Those same individuals will be more affected if foreclosure rates sky rocket and their home value decrease due to a flood of homes on the market. Why not applaud those folks by lowering the rates so they can afford more home or lower their existing payments and let the ones who are in this pickle get out of those loans and get back on their feet.

You must not allow the same thing to happen in the future. What you have to realize is these alt-a loans are for people that have good credit, but typically can not show income. Why do you think they can not show income? Easy answer they are not paying taxes on what they make. I am surprised to learn how many American these days are not paying taxes like they should be.

We can easily fix the problems in front of us by everyone coming together and everyone taking their share of responsibility. The main concern is to make sure once the problem is fixed that it is prevented from happening again in the future.

It is a sad day for some hard working employees and consumers. I have read many comments about the government staying out of it I am glad to see our government seeing a concern and looking into helping the problem. We are blessed to have a government that is trying to protect us.

Bailing out the morons who over-leveraged themselves is like trying to pump all the water out of a sinking ship- without plugging up the hole!

Senator Dodd is a parasite. Why don't the politicians open up their wallets and bail out the system- since they are soooo compassionate!

Let the system work out the excesses- or create a worse bubble down the road!

It never ceases to amaze me how stupid politicians are- that goes for both parties!

Dear Senator Dodd,

I am one of Millions of American Victims who bought his house at the peak of the real estate market bubble. I believed that there was no end in sight to the appreciation in the real estate market and, as the result, fell Victim to the following:
1. My real estate agent
2. The mortgage industry
3. Peer pressure
4. The US Treasury
5. Banking regulators
6. The Public school system

As you can clearly see, I am a Victim of all these public and private agencies. And, this is not just an isolated incident, but rather one that affected masses of unsuspecting, honest tax payers.

The latest comps reveal that I now owe $300,000 more on my home than it's worth, which places me, a Victim, in a rather precarious financial situation, with kids to put through college, and all.

Would you be so kind as to mail me a Government bail-out check in the amount of $300,000 dollars (along with all other Victims), so that I can be made whole again.

Sincerely yours,

Unsuspecting Victim

P.S. you can count on my vote when you come up for re-election, assuming I get the bail-out check, of course.

We're afraid the crisis can trigger a recession. Why don't we just lower the interest rate, home loan payment will go down, recession risk lowered, government doesn't have to spend a dime. To a certain extend, the home owner has to take responsibility also.