Both Mrs. Clinton and Mr. Obama have endorsed the best idea currently on the table to prevent foreclosure: amending the law so that troubled borrowers can have their mortgages modified in bankruptcy court. That would give lenders a big incentive to work with borrowers — reducing interest or lowering principal balances — before they opted for bankruptcy protection. Mrs. Clinton also has called for $30 billion in federal funds to bolster state and local foreclosure-prevention efforts and has proposed a 90-day moratorium on foreclosures and a rate freeze on subprime adjustable mortgages. Those measures also could help, but as the crisis has developed, the problem has become less one of resetting interest rates and more one of borrowers owing more than their homes are worth. Bankruptcy reform is a better way to deal with that problem.This reminds me of a line in Jonah Goldberg's book Liberal Fascism
"Crisis is routinely identified as a core mechanism of fascism because is short circuits debate and democratic deliberation."So here we have another crisis (like the healthcare crisis, the education crisis, the this crisis and that crisis). What is interesting though is the crisis is not so much a crisis of mortgages or foreclosures, but a crisis of home prices.
Just like the internet bubble, the home prices bubble was doomed to collapse, all bubble burst as some point. What strikes me as odd is that we now must consider only governmental help to forestall something bad that will impact a few hundred thousand people. Thus, we need more federal intervention for the "emergency" that will remain in place and make matters worse. We never considered governmental help when the internet bubble burst. We have for decades suggested that we need more nationalized health care, but that hasn't happened because we deliberated it (and continue to do so). The fact is that the housing price bubble has burst and the irrational exuberance of the past three or five years has ended. Home prices will return to balance and the market will pick up.
As for the concept of predatory lending, there are already laws against that. We don't need more.