The subprime game is nothing but smoke and mirrors and the banking industry should be ashamed of themselves for playing. They really in the end, only fooled themselves. The hunter is now the hunted. Sorry, no bailout money available for this failed scam.

What nobody talks about these days are the 77 million baby boomers who kept buying into the idea that "your house is your biggest investment" and when you get to be 55-60 (NOW), you can sell and make a killing!

For the past 15 years people reaching retirement age could sell their houses for a lot more than they paid for them, retire off the proceeds rich and buy a smaller condo in a less expensive area with just a small fraction of their liquidated equity. For example, Californians or Hawaiians with beachfront homes moving to Vegas after cashing out. But now, on the heels of the subprime mortgage mess you have many in that huge generation counting on the above scenario. Who precisely is waiting in the wings to buy into their inflated home values? Gen X and Gen Y are much smaller populations-hardly sufficient in numbers to bail out the Boomers. This bubble is just STARTING to burst and probably won't bottom for another 7 years.

I'm not minimizing the effects of the housing situation but it does appear to me that most of the hits are being taken by speculators in Vegas, Florida, and California where many who thought they would play the flip game got burned.

Back in the real world where people buy houses to actually live in, things are a little less desperate. As for the people who "bet the house" on adjustable mortgages with little or no down payment, they simply gambled and lost and I feel no responsibility to bail them out. Nor is there any compelling reason to bail out Citi or any other company that took the same gamble for higher returns.

As time passes the problems will solve themselves because more and more people will need houses (the population is still growing) and the financing of property will become more prudent.

THIS CRISIS MAKES LITTLE SENSE , BECAUSE I VE BEEN RENTING ALL OF MY LIFE . I PAY THE MORTGAGE NOTE PLUS PROFIT FOR MY LANDLORD , BUT I CAN T GET A LOAN TO BUY MY OWN HOUSE .
THE PROBLEM IS THAT THEY ARE TOO PARTICULAR WHO THEY GIVE THESE MORTGAGES TO .
THERE ARE MILLIONS OF PEOPLE LIKE ME OUT THERE ,WHO COULD BUY THESE HOMES , BUT NO ONE WILL LET US.

The problem really is easy to fix.What you do is convert all Arms over to fix rates for people who want to.The people that are losing their homes are the ones Im worried about.These people were lied to despite the fact we have truth in lending laws.If all these people get foreclosed on we are not going into a reccession but a depression because most likely these people we be taken out of the markets not for one year but 10 years.Also Washington better watch out because they will feel
the backlash from doing nothing while AMERICANS are loosing their homes next election time.

eliminate the ysp and stop making realtors and mortgage brokers rich at the expense of home buyers, make this federally subsidised loans available to renters and do not let the market dictate the price of homes but rather their age and condition. There are too many games played with homes and the consumer pays in the end.

Not a good article. The sensational ten year figure comes out of nowhere and stays there. It happened in Japan, but the inflation there was much more stupendous than the US case. A comparison with the circa 1990 experience in the US might be closer to the mark. (I am talking in terms of US money -- the fading dollar and the baby boomer retirement boom do complicate the issue.)

Great Column Douglas. We have the Homeowners Consumer Center & the National Mortgage Complaint Center & in June of 2005 we called the real estate market a "train wreck waiting to happen" in Money Magazine. We are not so sure if this could last 10 years because if it does we will have more to worry about than a recession. However, we are very, very concerned about next years adjustable rate mortgage re-sets & we figure their will be at least 1.2 million new foreclosures. We think by this time next year the big news will not just be real estate. We think that the pension funds will be in line in front of the US Congress asking for a bail out.

One of the posters here had a very good point as well. Yield Spread Premiums. The mortgage industry gets a kick back called a "yield spread premium" for inflating a borrowers interest rate. Mortgage brokers must disclose these, mortgage bankers and banks do not. Gee-we wonder why the Mortgage Bankers Association is all of a sudden writing lots of checks to members of the US Senate?