An emerging story, which has not yet received the media's spotlight is the decision of the Board of Director's of Washington Mutual to revise their compensation package in such a manner that they will still get their bonuses.

This speaks to the failure of our corporate leaders to: first, accept responsibility for their failures and second, to act in an ethical manner. The Board of WAMU should be offering their resignations and publicly stating that they will forgo any compensation.

It was their failure to provide adequate oversight for the current sub prime crisis.

Please see Wall Street Journal

My last sentence was badly worded. WAMU is not the cause of the sub prime crisis. WAMU is simply one of many companies that contributed to the creation of this problem.

Most houses are bought and sold by ordinary people for any number of legitimate reasons. None of that would have been possible without lenders - banks and investors. In fact, modern society would be impossible without them.

Nor are lenders all super rich. Most of them are quite ordinary folks trying to send their kids to college, move to a better neighborhood, plan for retirement. But even if they were they deserve the protection of the law, the right to demand that contracts be honored, and their property respected.

As for appliances, brother jolly, that was just a metaphor. If they own them - meaning they are fully paid for - they can do with them as they choose.

Aaargh!

Step right this way, ladies and gents, children of all ages, and whatever pets you choose to bring, gape in horror at the crooked appraiser, see the bloated commissioned mortgage broker, he walks, he talks, he crawls on his belly like an animal...

Welcome to the R.I.C.O. arcade.

I'm a little nervous writing in a roomful of smarties, but I was interested in the Fed Reserve Chair's call for mortgage writedowns. The accompanying article said that banks would have a problem with this, which seems obvious.

I have one question--how is it that banks seem particularly reluctant to write down loans that are Fannie Mae guaranteed? Is it because they can get all the cash from Fannie Mae if the customer defaults? I would think Fannie Mae would be happy to take 60% in this market and would be encouraging banks to take the deal.

I would also like to run a thought by you all. Rather than write down the actual mortgage total, what if the lender were to lower the interest rate to something crazy like 2%, in return for the homeowner's promise to pay some amount--$200, $300, $500, whatever, per month, ON THE PRINCIPAL? They could work it out so that the total payment per month would be 60-75% of the current payment, which would give the homeowner a bit of a break, and the bank would be getting cash flow one way or another, which is what they need.

This would lower the total cost of the property by a lot, without changing the "value" which in today's market is anybody's guess anyway.

I think it would also have the effect of shoring up consumer confidence about themselves and their home purchases. Right now one of the reasons people are walking away is that they are upside down on value and feel their purchase was a huge mistake. In other words, there may be a bit of a shame spiral fueling this thing.

The combination low-interest/principal payment plan could be seen not as a handout or bailout, just a legitimate renegotiation by which banks could give honest people a chance to legitimately hack away at the principal on their loan. (And it could happen without banks ever having to actually say they are sorry.) People would love to watch the loan amount drop each month, and if their statement also included information about how much lower the total cost of their property would be than with a conventional 7% loan, it would cheer them up as well.

Best of all, when (if?) all the fuss dies down and the market turns around, the people who lined up in the early years of the century to buy homes they secretly knew they couldn't afford but desperately wanted anyway may actually find themselves with some equity. A lot of discussion on this issue has centered on poor people and people of color who used these subprime mortgages and will be worse off than ever after foreclosure. Maybe this plan could actually effect a teeny little wealth transfer to a group of people who need it.

I know that the whole economy thing is kind of a shared hallucination anyway--maybe this is just a way of making the trip seem better, but maybe it would actually work. You could call it the "Pride in America" payment plan, or the "Pride of Ownership" plan, or something.

Thoughts from the group?