One of the things that killed Detroit is also one of the things that killed the banks: derivatives. If we can bail out the banks we can bail out Detroit.

Terrified of the political consequences of helping people!

Everything must go! Privatize privatize privatize....

During the Housing fix discussions, President Obama (and just about every economist) was talking about helping the American people through principal reduction?
All you heard from the right was how horrible the idea was because of the “Moral Hazard” … “a contract is a contract” … “what would stop everyone from stop paying their mortgages just to get the reduction?”

Well, Pension contract are contracts, too. Why no cries about the “moral hazard” of every city using their pension liability to break those contracts … just like they want to do in D-town?

And lots of pepole did.

So everybody's being consistent. Rather unusual, if you ask me.

One small difference is that many of those who were insolvent or very nearly so went with bankruptcy; probably more should have. "Principal reduction" was a funny kind of thing. When pushed to argue for it, the people it would help were those who were slowly running into the conditions that would lead to bankruptcy except that bankruptcy would hurt their credit and be stressful on them.

But most of the people principal reduction would have helped never actually faced bankruptcy--they were just underwater, having paid the house's previous owners too much in hindsight and on the hook with the banks. In many cases those owners are no longer under water, and if they'd had their principal reduced and sold their houses now it would be a mess to untangle how they'd reimburse the banks or the government for their windfall profits.