Los Angeles Times:  "When the source of the problem is a decline of the value of the home well below the mortgage's principal balance, the best solution may be a write-down, perhaps combined with a government-orchestrated refinancing", Bernanke told a Columbia Business School audience.

Absolutely not!!! If the bank elected to take a risk by making loans to people with small down payments, this is the bank’s problem -  people owe more than their home is worth.  Let the bank figure it out, they can offer to lengthen the term of the loan to 40 years if it is an affordability factor but typically it isn’t.  Homeowners’ don’t want to pay back a $700,000 mortgage for a $600,000 home. And, this isn't a surprise because they didn't want to do it in the 90's either.

The bank took the risk, the bank should accept their loss and if the bank goes under – that is the result of their business judgment. And the government should have gotten involved in number of ways in 2004, 2005, or 2006,  – maybe by slowly raising interest rates, this would have put the brakes on the runaway appreciation.  Or now, perhaps the IRS might provide homeowner’s who are “under water” an extra tax write off… an incentive for the homeowner  to do the “right thing” and keep making those payments.

There will be more foreclosures, but homebuyer’s are buying these homes; buyers are out there buying homes today.  Supply and demand, if supply increases and demand isn’t there, prices drop… There shouldn’t be a bail out… I think this “needs” to happen –it went too far the other way.