Dear Congressperson,

'Tis the season. At least Fannie and Freddie have suspended foreclosures until after Christmas, which is a step in the right direction.

It's been downright heartbreaking these past days to watch Henry Paulson careen about trying to shore up financial institution after institution at the highest levels, while ordinary folks who took out what they thought were the best mortgages they could get between 2000 and 2007 are cast as the mean and stupid people who brought down the housing market and indeed, our entire economy. It's even sadder that Paulson's now given up trying--can he really have such a limited and uncreative view of the situation? (I stole that line from an old Johnny Depp movie.)

I guess Paulson doesn't see what I see from my neighborhood--that the housing crisis is the financial and psychological root of the financial crisis, and housing is the place where the problem must be repaired. Ordinary people are walking away from their homes not only for financial reasons but because they've lost faith in housing as a source of security and wealth--even if it's a myth, the Scarlett O'Hara connection to one's homestead is a myth we mess with at our peril: it's part of our national DNA. And no wonder people have lost faith--back in '01, Paulson and his colleagues helped make it legal to make money betting AGAINST ordinary Americans being able to meet their payments! That business has been going strong for several years now, ripping away at the respect and trust between lender and debtor. Ho, ho, ho.

Paulson's approach has a very Grinchy feel to it, but he's not alone. Surveying Congress, I notice a disappointing lack of representation of ordinary people in the government response to the current financial crisis. I'm not singling you out, dear Congressperson--ignoring the real needs of constituents and adopting a gruff pro-business attitude seems to have become the way things are done over the last eight years. It must be difficult for all of you who are supposed to be representing us to avoid.

But the dislocation from peoples' real needs is so bad that the new FHA Hope for Homeowners program has so far fielded only 42 applications for refinances. This is the program that the People Who Know Things thought would help thousands of people into better mortgages in a hurry. It's not working, and that means a very uncertain Christmas for lots of good little girls and boys, as well as for the parents who don't know what will happen to the value of the house they're living in, or whether they'll be living in their house at all after the New Year.

So here is my question: is it possible that, sometime before Christmas, any member of Congress will approach people who are deep underwater on their bubble mortgages, in neighborhoods decimated by the crisis, and ask them what it would take to keep them in their homes? Because right now it seems that nobody from Hank Paulson on down has a sense of what would actually stem the tide of foreclosures.

If you want my opinion on what would work (and believe me, I know something about this situation), my first suggestions would be that we should modify interest rates down to a level such that people could hack away at the principal on their bubble mortgages, or have the banks short sell bubble homes to their current owners at current prices, figuring that banks and investors are more capable of handling losses than low-income families of five. But there are all kinds of reasons why that can't work, some of them valid. And efforts to encourage banks to write down principal have been markedly unsuccessful to date.

So here's my next suggestion. I'd suggest that we've reached the point where we need to pay people to stay in their houses. The government needs to find people in the hardest hit neighborhoods and offer to share the house payment on their bubble mortgages. The program would leave their crummy mortgages in place (avoiding problems with lawsuits, eventual investors, etc.) but offer to share the payment by whatever percentage their house has dropped from its purchase price. So if you bought a house in between 2001 and 2006 for 300k and it would sell today for $150k, the program would offer to pay half your mortgage until values stabilize.

The homeowner would pay taxes on the benefit, and would promise to meet some social (not financial) requirements. Live in the house, maintain it, work on behalf of the neighborhood, not be convicted of a crime, other requirements like that. There might be an equity sharing arrangement in the event the home is sold. Extra payments on principal would be encouraged (and might even be tax deductible).

The program could be run from Washington or be administered by local agencies. It would start in the hardest hit neighborhoods and work its way up the lines until the bleeding stops.

I think any of these programs could work, even if undertaken in the gruffest manner possible. But I think the biggest contributing factor to success would be, (in the spirit of the season) to let the people you represent know that they got a bad mortgage, not a bad house or bad neighbors. That the days of financiers making money by betting against them are done, that you, their representatives, know that they want to make a go of it in their homes, and will help them do just that.

In other words, reassure people and restore their faith in the system--not in some trickle-down way by offering financiers and mortgage sellers one more tranche of the housing pie, but by finding the words that will restore hope to the people you are charged to represent--and fighting on their behalf for a generous, useful program that will make the words true.

Thank you, and happy holidays.