Look all,

I will concede that the housing tax credit is silly. But this is not a crisis in the housing market, it is a crisis in the idea of housing.

The reason home ownership exists is so that ordinary people can believe they've got a measure of stability and prosperity in a high-risk world. Let's admit this up front: the housing=stability meme is what Ibsen would have called a life-lie, but it's a pretty decent one as these things go, and in general we all support the housing=stability life-lie with things like the mortgage interest tax credit, neighborhood events, gardening competitions and the like. It's nice. It's good. It makes families feel more stable.

(To people who are big rental fans I say go out and get your own delusions of stability and leave the rest of us to ours.)

When the Financerati decided to play fast and loose with the housing-is-stability delusion, they opened a can of worms. Never mind whose "fault" it was, the buyers or the banks, the real estate crisis has pointed out to every homeowner in America that THERE IS NO FLOOR TO THE HOUSING MARKET. And there's nothing like looking down to get people nervous about being on the high wire. (To those who maintain that housing prices need to "come down"--is zero, with almost nobody qualified to buy anyway, what you had in mind?) A social contract is being busted up here, and it needs to be repaired.

Sure, people who are buying houses are happy to take the tax credit, which is intended to shore up the social contract and make people believe that housing is "safe" again. (In desperate times, of course people will take money.) But people aren't dumb. Everybody knows that as long as the foreclosure machine is running, there's a real possibility that the only direction for ordinary people is down.

I have been saying this since 2006: the only way to end the housing crisis, and the economic crisis that sprang from it, is through principal reduction. Anybody with a yearly income of less than, say, $300k per year who purchased a home (or perhaps even an income property) during the bubble years should be handed a no-questions-asked, no-credit-hit, refinance of their home at its CURRENT VALUE, at a low, fixed rate. End of crisis.

It's too bad we didn't do this a couple of years ago when all the cheap neighborhoods tanked. It would have been a lot less expensive.

The fact that banks have not requested this fix and the government has not offered it, tells you everything you need to know about who is running the country and how concerned they are about the middle class. When the banks own enough housing, they will just figure out a way to "rent" it to people, hold a lot of it off the market in the guise of careful underwriting, and drive prices back up that way.

For those of you about to throw a fit about principal reduction and the "greedy" homeowners who bought homes they couldn't afford, please read any book about how human beings will gang up and persecute each other about stupid, meaningless things (Lord of the Flies, The Scarlet Letter, The Human Stain, etc.) and get over it. This is not about the guy who bought the investment property, or the guy who got the house with three bathrooms. It's about where the nation's money ends up--and I'd like to see a little more of it in the hands of people like you and me, thanks very much.

So Dean, please, less about the tax credit, and more about restoring public confidence in housing, even if you are one of the "smart guys" who knows that housing isn't the safety net we like to believe it is.

Sorry about the rant, but this is as plain as the noses on our faces. The subprime foreclosures are almost over, and the veil will be lifted as the extravaganza gets really ramped up in "ordinary" neighborhoods all over the country. I just hope the realization won't come too late.