Uncle Ben Bernanke and Barney Frank are playing with fire. It's one thing to be a popular president who throws out a vague set of plans about bailing out people stuck in their homes and claiming you won't help the ones who acted in bad faith. It is a whole other animal to stand before Congress, dismiss the moral hazard concerns, and say we need to bailout those who did act in bad faith.
I'm not an economist, so my particular understanding of the economic arguments here are limited. But sites like this ought to make everybody on the Hill and in DC realize this issue is radioactive. Go into a bar (like this one). Ask some of the 92% of Americans who are not defaulting through tough economic times what they think about this plan, and they'll tell you - loudly - about how they did not choose teaser rates, saved enough for a down payment, and played by the rules. Remember when Democrats talked about helping people who played by the rules, not people who broke them?
In the 1950's and 60's large Northern cities were hit with a large migration of African-Americans from the South. The response of political machines throughout the Midwest and Northeast was to place those people in massive, isolated, stigmatized government public housing. That policy effectively created two Americas and produced a ton of racial tension that divided us. It said to most of America "these people are different - not equal."
In sort of the same way, giving subsidized loans and bailouts to people in some homes will divide us again. Everyday when people drive past the homes of folks they know who were bailed out their anger will simmer a little more until next November. Careful gentlemen..............we don't need more division based on perceived need. We need to discourage foolish behavior, level the playing field, and not create social tension. Isn't that what this whole "hope" thing is supposed to be about?