Bair and Paulson, the Lie-namic Duo?
Remember, the knuckleheaded "save the mortgage" plan these two are shoving down taxpayers' throats relies on math that was already way way too optimistic. Existing workout numbers were showing far greater failure rates than those assumed by Bair in announcing her bogus taxpayer price tag for the deal.
But this, at caluclated risk, suggests that even those workout failure rates may be too optimistic. According to the NAR (which has an enormous interest in supressing this kind of news, unless it's angling to spook congress into an even bigger giveaway) 50% of reworked defaulted mortgages default again.
The problem isn't that interest rates got too high. The problem is that people borrowed more than they could afford under any reasonable scenario. Period. Full Stop. End of story.
It follows that the only solution is to let the houses foreclose, let the prices readjust downward, hard, and start from reasonable all over again. Yes, that will hurt many people, but it will put the majority of the pain where it should be: on banks, lenders, and greedy or ignorant borrowers.