Can The Financial Markets Be Saved?

Saving the financial markets has been at the top of the agenda of the Bush administration for the past couple of months, with literally trillions of dollars in taxpayer guarantees being used to support beleaguered Wall Street. But for millions of Americans, the real problem is the plunge in the value of their homes, which represent their largest asset and have been used to supplement their incomes during years of declining wages.

The crisis facing homeowners is real, and according to McClatchy News:

Housing Is Bad Enough, But Wait - It'll Get Worse

By Kevin G. Hall

WASHINGTON — If you think the housing slump can't get much worse, Martin Feldstein thinks that both home prices and the broader economy can — and very likely will — get a whole lot worse.

The Harvard University professor and former chief economic adviser to Ronald Reagan isn't part of the crowd that continually forecasts doom. For two decades, he's headed the National Bureau of Economic Research, which officially determines when U.S. recessions begin and end.

So when he spoke on Monday night at the annual dinner of the National Economists Club, a gathering of like-minded wonks, Feldstein's grim calculations were noteworthy.

"There are now 12 million homes in the United States with a loan-to-value ratio greater than 100 percent. That's one mortgage in four. The aggregate amount of that is some $2 trillion," said Feldstein. "If you look at the median (midpoint) loan-to-value ratio in that 12 million group of underwater mortgages — mortgages with negative equity — the median loan-to-value ratio is 120 percent." ...continue reading