In my adult lifetime, housing markets have always had a Tinker Bell component to them -- what a house is "worth" has much less to do with reality than with fantasy -- how much more can you get if everyone keeps clapping louder and louder about buying now! now! now! before the prices go up! up! up!
A three-bedroom bungalow "worth" $20,000 in 1970 is now "worth" $300,000, and that's in Saskatoon. In Vancouver, the same house is, or was, "worth" three-quarters of a million.
But if no one can figure out who owns the house, and if no one can figure out how to register a legal sale of the house, and if the company trying to lend money to a buyer to buy the house cannot register its mortgage against the title, THEN how much is that house "worth"?
Hell if I know!
And this goes way beyond ideology or whether a blogger hates Obama or Hank Paulson. Booman writes:
. . . it's easy to call for creative destruction from the sidelines but the people who have to actually make these decisions have a very weighty responsibility. As a matter of justice and political survival, they should absolutely start putting some people in prison. But as for how they should clean up this mess so that it both fixes the problem and doesn't cause another wave of mass unemployment? Well, hell if I know. . . . we need a financial services industry to keep credit flowing and, therefore, keep the economy growing. Lazy snark about 'extend and pretend' might feel good, but the gravity of the problem is large and the potential consequences so grave, that calls to lance the wound and take the pain all at once are far too smug.
In the big picture, the moratorium is small potatoes. The real issue is how the document trail issue is resolved. If it is resolved in a way that forces the banks to eat their shitpile in one sudden burst, and there is no will to bail them out again, then we're back September 2008. But, this time, the ship goes down to the bottom of the sea. So, I guess what I am saying is, be careful what you wish for and don't be so quick to judge the people who are responsible for keeping us out of a true Depression.