There's plenty of blame to go around on the mortgage situation. What I find amazing though is how so many people got in trouble with adjustable rate mortgages when there was plenty of good advice in the media- including on CNBC and in many newspaper columns- warning that the interest rates would be rising. Considering what we put into mass education it is just astonishing that people would get themselves into such trouble in cases where there isn't outright fraud-- (and I do believe that fraud is a huge part of this). If people can't balance their checkbooks after many years of publicly supported education one wonders how much more the government should really do. Now, the government is forced to respond-- and play catch up on the problems.

Hi Jim;

We agree to a point. Was the Fed asleep at the switch when lenders elected to get into "pay Option Arms, Stated Income Loans, Homebuilders over inflating values, Investment Bankers packaging garbage MBS portfolios? Yes.

We have the National Mortgage Complaint Center & you continue to make it sound like this is something the Fed can fix? In our opinion they cannot. Nor can a stupid federal pay out to taxpayers.

Here is the issue. Real Estate valuations zoomed starting in about 2002 and concluding in the 3rd quarter of 2005. The problem-----------there really was not reason for people to think their real estate really had jumped in value by 40% to 70% in many markets. (In June of 2005's Money Magazine we called it "a train wreck waiting to happen")

Assuming they had all this magical new equity, people went out and refinanced their home based on equity that was not there. Now that the happy hour has ended, and millions of US consumers have started to wake up..............there equity (that was never there in the first place) is gone, their mortgage is something they can no longer afford & they will either lose their home to foreclosure or they will walk away. We have concluded the Federal bail outs or lender initiatives all come as too little & too late. Its time to pay the bar bill, and its going to be ugly. As amazing as this is to say---blinded by greed banks and mortgage bankers actually created an environment that would not only kill the borrower, but the also created an environment that would kill them too. (WaMU and CFC are two perfect examples)

Unless the Fed's Ben can restore value or equity that was never there in the first place, our real estate crisis will get much worse. (As we think it will)

We have already predicted that the mortgage insurance companies will fail because they did not set aside enough in loss reserves. The next shoe to drop will be the pension funds that bought MBS portfolios for a buck----------not knowing the portfolio was only worth $0.65 to $0.80 on the dollar.

We keep on wondering what did we all fail to learn from the S & L crisis? We also keep hoping that Wall Street will start looking 12 months out as opposed to 6 hours out.

School does not tecah how to balance checkbooks. It teaches new math and algebra and so on but the basics of life are not taught there. It is picked up at home, or just learned the hard way.
People are people. If it looks too good to be true, it is is a cliche because so many people have gotten caught up in taking what they thought was advantage of the greedy who offered these rates.
There is, as has been sid, more than enough blame to go around.
And a check for 3, 6, or 1200 dollars will not make a dent.

Don't blame Bernanke Jim. He inherited easy Al's failed policies.
Peole in this country need to smarten up and live within there means. Housing IS NOT a Constitutional right.

The son of a friend works in the Risk Reduction Department of a major mid-West bank. His Department issued a warning months ago to all the branch managers concerning sub prime and low investment mortgage risks. A majority of the loan managers ignored the warning and continued to place risky mortgages, receiving nice commissions and bonuses for their "good" work.

When people can buy housing with little or no money down, pay only interest, and other such "tricks", they will do so damn the consequenses. They'll worry about that later. Where the trouble lies is the way the mortgage industry handled it. They will get people thu so they could make their commisions and fees. So far all greed. But what were the banks thinking? I'll give all this money away, bunch a bunch of high risk loans with a few good ones and sell them off? Di they all think they would find a chair when the music stopped?

Mr. Cramer,

I recommend that you read "Capitalism The Unknown Ideal" by Ayn Rand before you make anymore statements praising Elliot Spitzer and associating Ben Bernanke's and Allan Greenspans' government buereaucrat actions with Ayn Rand's ideas.

The damage has been done.It is now time to think of a solution.I consider myself a middle class person I am trying to buy a house for 500K but my
credit score of 650 is not good enough to get a low interest loan.here we go again the rich bank will
insist a jumbo rate w/c I think I can afford but its like borderline already.if i get a good low rate i'd be comfortable.the guidelines are obsolete the credit scores i think should be adjusted and the whole
IRS laws of the USA should really be reviewed and
adjusted accordingly.

Your comments about Ayn Rand are inapplicable. Rand was opposed to inflation. Accordingly, she would have opposed the expansion of the dollar supply that made this crisis possible. Greenspan et al. were at the helm of a system designed to transfer the buying power of the dollar from those who earn dollars to those who manufacture them and lend them out. Had the advice of famous American economist Irving Fisher been followed, the supply of dollars would have been held constant via a 100% reserve requirement that would have obviated the need for decisions to be made, at the federal reserve, about interest rates. The buying power of the US dollar would then have increased or decreased as productivity increased or decreased. Instead, the monetary system has allowed credit-issuing institutions to monetize (via credit expansion) all increases in productivity, thereby transferring the benefit of those increases to the credit-issuing institutions, and preventing an increase in the buying power of everyones savings and earnings during periods of economic growth.

Don't blame the head of the fed. Blame the legality of increasing the supply of dollars, which has made a painful contraction of the supply possible as well.

In short: blame the funny money policies that create these cycles in the first place, and that serve the purposes only of those who would rather monetize (and thereby steal) the wealth created by others than pay interest to depositors for the use of their savings.

"
But we must never forget that it was the laissez-faire policies of Alan Greenspan and Ben Bernanke that are at the root of the mortgage problem."

Wrong. Alan Greenspan DID NOT HAVE laissez-faire policies. He had subsidize-the-interest-rate-to-keep-it-low policies, which caused the mortgage problem by encouraging, along with federal credit insuring, behavior such as giving loans to people not capable of fulfilling them (e.g. heads I win, tails the government loses).

Bernanke is shaping up similarly.

There has never been a situation in which laissez-faire existed. You might as well blame the mortgage problem on ghosts.

Earnings in 08 will blow, and the PPT will eventually be overwhelmed. Stocks have fallen from 14,000 to 12,500 area so far , thus they have not "held up". It's early in the game and many players still think this is just a bump in the road. That is good, it makes the process more orderly (bubble vision has been doing a good job).

Let's go so far out on a limb that we may catch a glimpse of reality. Housing prices are falling more rapidly as banks are selling them on the cheap, consumers will be spending less and unemployment will rise. The "real economy" is in for a big crap storm an the service industry's have no safety net or floor.

Over on Wall street their is tremendous uncertainty concerning what the gov't is willing or able to do in order to re-capitalize banks, monolines and the like, rate cuts are not getting the job done (well maybe preventing a crash) but check out the wolf wave we have headed this way (it's a microphone formation) and we got a ways to go, gov't intervention is gold's best friend. Gov't intervention may help stock maintain nominal prices (sans retailers) and keep Anglo-American banks lending , but market gains are not likely to keep up with inflation. Stagflatin anyone.

Sans really large gov't bailouts and or stock buy backs stock markets will fall the economy will fall far, yen will rise, and bond market will likely rally and the dollar as world reserve currency may stay afloat, and gold should level off. Govt's usually take a while to act but i think they will (as well as other currency's) begin the race to the bottom.

So much uncertainty, i filled the candy jar w/ Ambien