On "Show of hands"...

You know, I like the "Ryan Plan"... especially the moratorium on capital gains as opposed to simply cutting it further.

However, you didn't explain how you would fix the financial problem as it exists RIGHT NOW. Even the Feds (notoriously bad at crisis assessment and estimation) puts the financial risk of the lending industry (not just the mortgage industry) at $800 billion dollars. Four of the ten largest lenders and loan insurance companies have already gone under, including Lehman Brothers... the biggest.

The issue as I understand it is as follows... (NOTE: I DO NOT claim to have any expertise or superior knowledge in this realm. I am simply passing on the most understandable explanation that I have heard to date)

Let's say that Ryan gets his wish, and no bail out happens. The most "at-risk" firms and institutions are forced to adjust the loans going into foreclosure anyway, because to simply foreclose the loan in a housing market that can't sustain the value of the LOAN, let alone the value of the HOME, the lender has no opportunity to recoup its loss and/or risk. This is BAD for the lender and/or guarantor of the loan, obviously.

Less "at risk" loans and mortgages are not adjusted, but restructured to allow homeowners and mortgagees to continue to struggle through the loan schedule until such time as they can successfully sell the home at its actual loan-value. This is bad for the homeowner and/or PMI provider.

The largest problem the lending market would face is the simple fact that NEW loans to people that qualify and can afford to pay them are not made because the lending insurance companies are incapable of taking on new risk, at ANY level. Thus, empty foreclosed homes stay on the market unsold, while viable new homeowners are unable to get loans. The housing market continues its downward cycle with no clear end in sight.

THIS is bad because more than 65% of the entire lending market is based on the sale of non-commercial real estate and the institution of new loans. This market facet is so important to American finance operations that almost NO banking, lending or savings institution in the US is without substantial real estate investments and risks.

It simply can't be ignored. To allow as much as 65% of ALL our major financing institution's investments to fail is FAR more than enough to collapse the present "soft" economy into what many think could be a "depression-era" slump that could dwarf October of 1929. The "margin's market" failure of '29 constituted only 17% of market investments... and left the lending market very nearly untouched (directly, at least) right through the 1930's.

(All figures and facts found HERE)

This is the simplest way I have heard yet to explain why SOMETHING has to be done to prop up the failing lending and housing markets, and why Fannie and Freddie can't (arguably) be allowed to collapse due to "free-market" pressure.

This is NOT an indicator that I have any idea of how to fix it. We have known for nearly a decade that this was a potential risk, and two Presidents and three Congresses have ignored the issue in lieu of maintaining the status quo. Removing or reducing the risk NOW won't stop the (seemingly) inevitable failure of more then 50% of all guranteed mortgages in the US if Fannie and Freddie go under.