cramdown

Bernanke signs on to voluntary mortgage cramdowns

This will be a quick note. I will probably post more extensively tomorrow.
The Housing Crisis Fairy ain't coming. Ten years of housing were built in the 5 years of 2001-2005, and the only way the market will be restored to a reasonable equilibrium is by falling house prices. Those who bought houses in 2004-7 at very least are going to have to acknowledge that the value of their house is declining. I.e., there will be pain.
Fed Chairman Ben Bernanke has signed on to the idea of voluntary mortgage cramdowns, similar to those proposed by the Office of Thrift Supervision last week. Here's a quick summary, per CNN:

2 housing crisis proposals Democrats should support

Like many people, I loathe the idea of a housing "bailout" for the greedy, the reckless, and the spendthrift. Certainly those bankers and borrowers had no problem "privatising their gains" in the early part of this decade. I see no reason why they should look to the prudent and the thrifty now, especially when so many millions of those prudent and thrifty are those whose own dreams of owning a home of their own at a reasonable price were frozen out by the housing mania.
But out of crisis comes opportunity. In this case, the opportunity for the Democratic party to show average Americans what a Democratic majority would do for them and their financial well-being. The opportunity to earn their trust and their votes for years to come. To show that a party that believes in governance for the average citizen can separate the wolves from the sheep, penalizing the former and acting with basic humanity to the latter.