Having had to work with bankers for several decades now, this artcle does not build much confidence in the banking system. Bair has a good idea, and the banks ignore her. Gee, what's new?

In every downturn, you get the exact same scenario. The young yuppie scum who think they are so much smarter than their predecessors, they think they need to reinvent the banking wheel, so they push out all the seasoned veterans and then you have a bunch of inexperienced idiots at the helm who are going to reapeat the exact same mistakes because they force out those who know from experience how to deal with them.

You also have the stodginess in banking which is passed down form previous administartaions, so the upshot is young, arrognat morons who have not been there done that, learning stodginess form those they trained under and forced out. What a promising scenario that leads to. More pain, more bank failures and the same stupid mistakes going into the next round of business expansion, only to be repeated at the end of the next business cycle.

The bankers are sucking blood from mortgage borrowers on debt instruments that pour 95% of the borrower's payments into "interest". So, of course, the banks are opposed to restructuring debt under interest free loans from the Treasury. Actually, she went overboard; it would be far more prudent to have the Treasury issue simple interest loans for these monstrous mortgages... borrowers would regain their homes, the govt would recoup their operating losses, and the credit crunch would end... so would the entire secondary market of the mortgage industry; no big loss though, it is falling to pieces anyway. But the banks don't care about our country or it's people, they care about themselves, so they will continue to block any honest attempt at restructuring debt in this nation.

they're a business, not a charity. Last time I checked, the American Heart Association wasn't making mortgage loans.

As for the monstrous payments/so little going to the principle, that's the way a loan works. You want a quicker pay off, get a 15 year mortgage. You'll pay a lot less interest, but you'll have higher monthly payments.

The real culprits here are people who bought homes they could only afford under perfect circumstances, teaser loan rates, ARM.s they thought wouldn't increase their payments, etc. I always bought homes that were less than I could afford but I could comfortably pay for. The real issue is how much is the consumer's fault and how much responsibility should be put on the lender.

Absolutely, there's nothing wrong with the idea of amortization. If you want to pay less interest, go with a shorter term loan - or no loan at all, then you pay no interest. Oh wait, you don't have the money for that? Thank god there are banks that allow you to borrow money to buy a house.

I'd say the blame for the current mess is about 50-50 between borrowers and the financial industry. Sure, mortgage originators, brokers, purchasers, etc... were all incentivized to sell more and larger mortgages, since their bonuses were all based on how much business they banked. But borrowers are equally at fault for sticking their heads in the sand and thinking they could rely on property values increasing exponentially ad infinitum to pay for lifestyles consistently above their means.

We can't just write off the fact that most people are terrible financial consumers and don't have a clue about what they can and cannot afford. People need to learn from their mistakes, and if that means losing a house that you purchased with a teaser ARM at 15x your annual income, so that some more deserving first-time buyer can enter a market that's been stratospherically out of reach for the last decade, then so be it.

If you can't afford your home now, you probably couldn't afford it in the first place. Maybe you should go back to renting for a while, which is NOT just throwing your money away, once you take into account the taxes, transaction costs, maintenance, inflation, etc... that a landlord would cover in a rental. This nation needs to get over it's obsession with home ownership, which is only affordable for most due to the mortgage interest deduction, which basically amounts to all taxpayers subsidizing home ownership for some.

I've wondered how many true victims there are in this whole mess. I know there are some who were flat-out lied to and got stuck, but there are many, many people who are now being labeled victims who knew what they were doing, took the gamble, and lost. They either assumed they could refinance or sell the house for a profit before their ARMs kicked in, or they took out their equity to use for other things. Making bad financial decisions doesn't automatically make you a victim when things go bad.