The reason given out for keeping the meeting venue a secret is security concerns. Even with the participation of US Federal Reserve and European Central Bank, the Asian central banks are expected to steal the thunder at the meeting. The Asian bankers are uniting under the leadership of the governor of the Central Bank of Malaysia, Zeti Akhtar Aziz. – Blog of India¹

How about that Tracy Porter Guy!  Oh well, while everyone was being distracted over the weekend, the big story in the world was happening at a secret location near Sydney, Australia with almost no media coverage.  Thanks to the Herald Sun and the above blogger in India a few hints are emerging, though.

Meanwhile, the folks at MW² inadvertently added a further piece to the puzzle through yet another one  of those 'Oh, must be OK then,' says son as cardiologist cuts short golfing vacation to rush to mother's side stories the financial press likes to perpetrate:

LONDON (MarketWatch) — Jean-Claude Trichet may not be flying to the rescue of Greece and other debt-troubled southern European nations, but news Tuesday that the European Central Bank president will leave Sydney earlier than initially planned to attend a meeting of European Union leaders in Brussels was enough to provide the euro and financial markets with a lift.

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[1]: "World’s Top Central Banks Meeting in Australia", by Meena Rani K, Blog of India, February 8, 2010.

[2]: "Financial markets calm as Greek rescue speculation rises: Portugal plans 10-year euro-denominated bond issue", by William L. Watts, MarketWatch, February 9, 2010.

I'm feeling burned.  Do I have any company?

The document was an annual report on [minister Christian Paradis'] Public Works' massive real-estate portfolio, which contained factual information on high vacancy rates and weak returns on investment. Such reports had never been made public before. // The department's real-estate branch had consented to the full release, and the Access to Information office at Public Works had determined after extensive consultation that there was no legal basis to withhold any of the report. [however ...] – Canadian Press¹

This rather creepy straw-in-the-wind showed up as front page news this morning on Doom North's snowy front doorstep.

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[1]: "Tory cabinet minister's office blocked full release of report", February 7, 2010.

WASHINGTON — Treasury Secretary Timothy Geithner said Sunday that the U.S. wasn't in danger of losing its triple-A bond rating, in the wake of a warning from Moody's Investors Services about the U.S.'s treasury-bond rating. – WSJ¹

Meet the Treasury Department's secret weapon …

Long as you keep up that membership on the limo, Tim, you're golden 

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[1]: "Geithner: U.S. Won't Lose Triple-A Bond Rating", Judith Burns, Wall Street Journal, February 7, 2010.

In an interview yesterday with Jake Tapper, Geithner was reminded of this quote from President Obama a year ago:

"Under this plan, lenders who participate will be required to reduce those payments to no more than 31 percent of a borrower's income. And this will enable as many as 3 to 4 million homeowners to modify the terms of their mortgages to avoid foreclosure."

Here's how the the interview went after that:

TAPPER: If a year ago I had told you that today I'd be sitting here, and only 66,000 Americans had permanent mortgage modifications, would you have said at the time that that was a success?

 

GEITHNER: Oh, Jake, I think it's very important to recognize this program is providing very, very substantial cash flow relief right now to more than three quarters of a million Americans. And we — we believe we're still on a path to be able to reach many, many more American households. And of course we're going to make sure that those temporary modifications translate into permanent modifications. But again…

 

(CROSSTALK)

 

TAPPER: But a lot of those temporary modifications were done verbally though. They weren't done with the paperwork that a lot of…

 

(CROSSTALK)

 

GEITHNER: No. We're — we're absolutely committed to make sure that translates into what we said it would, which is for eligible Americans — they're getting permanent modifications that substantially lower their monthly payment. Now, Jake, remember like, you know, again for the average household that translates into hundreds and hundreds of dollars every month for them.

 

That is real benefits — great — has greater income for them to meet their basic needs. But again step back for a sec. In February and March of last year house prices were falling off the cliff. People thought house prices might fall another 20 — 30 percent. And we've had six months now of early signs of stability in house prices. So what that means is millions and millions of Americans — middle class families across the country are now seeing more stability, and what is a basic source of financial security for all Americans.

 

Those programs were enormously effective in helping again pull a housing market that was in near collapse back to the point now where you're seeing the signs of stability.

66,000 loan mods has given millions of Americans more financial security? The most these programs have done is to slow the rate of decline in the housing market and create the illusion of a false bottom. Geithner's done no more for "rescuing" the housing market than Al Gore did for the internet.

If you are looking for an honest and frank evaluation of how the administration has dealt with the housing market and the banking crisis, I suggest you look elsewhere.  If you are in the mood for a Monday morning flight of fancy though, by all means, read the rest of the interview.

Representatives from 24 central banks and monetary authorities, including the US Federal Reserve and European Central Bank, landed in Sydney [Australia] to meet tomorrow [Feb 7th] at an undisclosed location. – Herald Sun¹ — UPDATE: here's a re-post of the story with an embedded video

The heavy stuff always happens under cover of something like Super-Weekend, eh?  But the blogosphere never sleeps   Thanks for pointing me at this one, twist, I'd completely missed it with my own focus on Iqualoit.

It isn't every day the BIS sends up a flare like this.  So the spectacle of G7 finance ministers contemplating the prospect of raw whale blubber on the frozen shores of Frobisher Bay was, after all, only theatre.

Turns out the real story was unfolding quietly on the other side of the world.  Perhaps the MSM finally starting to cover the Agency Debt problem a few days ago was the last straw, but it's safe to go along with the Herald Sun's narrative, which is basically that the "World" crisis (which we'd all half forgotten by now) was in truth a lot more serious than we thought at the time.

"This does feel like '08 and '07 all over again whereby we had these sorts of little fires pop up and they are supposedly contained but in reality they are not quite contained," said H3 Global Advisers chief executive Andrew Kaleel.

"Dubai should have been an isolated incident and now we are seeing issues with Greece, Portugal and Spain."

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[1]: "World bankers meet in Sydney as recovery fears intensify", by George Lekakis and Fleur Leyden, Herald Sun, February 6, 2010.

Like millions of American households, the Mortgage Bankers Association found itself stuck with real estate whose market value has plunged far below the amount it owed its lenders.

But the trade group for mortgage lenders is refusing to say exactly how it extracted itself from that predicament.

On Friday, CoStar Group Inc., a provider of commercial real estate data, announced that it had agreed to buy the MBA's 10-story headquarters building in Washington, D.C., for $41.3 million. The price is far below the $79 million the trade group says it paid for the glass-walled building in 2007, while it was still under construction. The price also is far below the $75 million financing that the MBA received from a group of banks led by PNC Financial Services Group Inc. to finance the purchase.

John Courson, chief executive officer of the trade group, declined in an interview Saturday to say whether the MBA would pay off the full loan amount. "We're not going to discuss the financing," he said. A spokeswoman for the MBA added that the MBA has reached "an agreement with all relevant parties" regarding the outstanding amount on that loan but declined to provide any details.

What were they thinking?  For one thing, here's their economic outlook from the Q1 2007 MBA data book:

While the outlook for the housing industry and the overall economy is still a bit cloudy (there are never any certainties in an assessment of the economic future), it still seems a good bet that a soft landing is achievable, and that is the judgment that has, and still does, underlie our forecast.

Apparently, like many Americans, they were a little too optimistic about the future of real estate.  They weren't counting on their property depreciating 48% in three years, or their own financial situation taking such a big hit.

In December the MBA's CEO John Courson was asked about the morality of walking away from a mortgage:

“It’s not for me to judge morality,” he says. “You probably have a legal obligation.” But, Mr. Courson says, defaults hurt neighborhoods by lowering property values and leaving homes abandoned and derelict. He says those considering a strategic default also should ask themselves this: “What about the message they will send to their family and their kids and their friends?”

So Mr. Courson, what is the message we should take away here?

UPDATE (John M): Take it away, Έλενα Παπαρίζου …

Instead of paying an estimated $2.5 million to $2.7 million per Super Bowl commercial, big brands are using social networking to connect with consumers — hoping to click in a more personal way. // "Social networking is the newest thing for marketers," says Vranica. "You've got 60 ads fighting for attention, so if you use social networking as a marketer and drum up some excitement, you'll have people specifically watching out for your commercial that night." – ABC¹

I wanted to be Sam Huff when I grew up.  Although we Ms lived in 02420 (still part of 02173 then) it was long enough ago that we counted as natural Giants fans.  Dad transferred his loyalties to the Pats even before amalgamation, but I never really did.

Did the kicker have some success as an announcer?  From hanging around grocery store checkouts there's some evidence that the utility guy's wife partnered for a while with a somebody Reagus on daytime TV.

There was another brief flurry of interest when Butkus was playing for the Bears.  A few years ago I picked up his auto-bio at the Salvation Army.  Weirdly, he mentioned the same play-sequence that I'd noticed when Page had dominated for about 5 minutes from right defensive end, of all things.

But I've completely lost track now.  There was something about Favre (Brent? Burt?) doing something unwholesome in the semis, so that means (I think) that one of the two teams isn't Green Bay, but that doesn't narrow it down very much.  I really haven't a clue who's playing tomorrow (it is tomorrow, isn't it?)

Seen a lot of stuff under Google Biz about the ads, though …

—————-

[1]: "Future of Advertising: Ads That Stare Back and Interact — Companies Use Social Networking, 3-D and More to Reach Consumers", by Eric Noll, ABC News, February 6, 2010.

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Plus, they'll all come back with the answer to that eternal riddle — What colour was the bear?

Astute Doomers will note that the south coast of Baffin Island is actually 2 degrees (C) warmer than Doom North this morning …

… and look where's the only place in the country above (well above ) freezing. That's what happens when you turn governance over to the Conservative-Reform Alliance Party …

UPDATE: I just can't shake the feeling that our government is simply playing an elaborate practical joke on the rest of the world.  This from a story in the Globe & Mail.¹

[Canadian Finance Minister] Mr. Flaherty spoke in front of a lit gas fireplace in a hotel nightspot with a white polar bear hide on the wall behind him. Above him, caribou antler chandeliers added to the image of an informal retreat setting that Mr. Flaherty has advocated.

———————

[1]: "Informal setting will help G7 reach consensus, Flaherty contends", by Bill Curry and Kevin Carmichael, Toronto Globe & Mail, February 5, 2010.

China’s currency reserves grew by more than the gross domestic product of Norway in 2009. Its $2.4 trillion of reserves is a bubble all its own, one growing before our eyes with nary a peep out of those searching for the next big one. – Bloomberg⁴

… but perhaps not since mid-December. The level of foreign central bank holdings of Treasury Debt has barely budged for seven weeks, of Agency Debt for twenty. Sometimes silence speaks in a very loud voice, even if the noise and crosstalk often makes it difficult to interpret the message.

Nice shirt, Cresswell

Twist's new treasuries-focus charts clearly show that an incipient top is continuing to form.

the Fed's own MBS holdings drifted back up $0.599 billion, canceling out a little more than half of last week's give-back, while the combined holdings by the cenbanks of US obligations moved just over a billion dollars, although the contrary moves of the two elements were modestly large. This week's Reuters report¹ was, as usual, based on the weekly update from the NY Fed's H.4.1 table site.² Here is Doom's updated CSV version³ of the agencies and treasuries foreign central bank holdings data set.

This week's treasuries buy was $4.150 billion, almost matching last week's selloff. The figure has edged down just $2.357 billion since December 16, 2009.

Agency Debt lost a significant $5.297 billion, but in the bigger picture we've had a mere $7.857 settling since September 16, 2009.

The combined holdings figure dropped a slight $1.147 billion.  For going on two months the cenbanks have been contributing very little support to America's bailout habit.

Twist's ratios graphs rebounded down on the week, but in general the era still looks flat.

The Setser 52-week chart held pretty steady, as the anniversary week was quite similar to this one.

________________________

[1]: "Foreign central bank US Treasury holdings up – Fed", by Burton Frierson, Reuters, February 4, 2010.

[2]: "H.4.1 Factors Affecting Reserve Balances", Federal Reserve Statistical Release (weekly), Federal Reserve Bank of New York.

[3]: The updated data set as a Comma Separated Value (CSV) file is here.

[4]: "Biggest Bubble in History Is Growing Every Day", by William Pesek, Bloomberg, February 4, 2010.

[B]anks are now extending opportunities to REINSTATE mortgages loans…after a foreclosure…to the former homeowners!

You read that right….homeowner ‘loses’ their home to foreclosure. Legally, its no longer their home. Home is legally in the hands of the bank. In the past…after the homeowner loses the home in a foreclosure sale….they move out…afterall, its no longer their home..home becomes a REO listing.

Now, homeowners are being offered the opportunity to stay in their home…reinstate their mortgage reflecting the value as established at the foreclosure sale. New mortgage terms, market interest rates.

It seems that this new ’secret’ program is being tested in many major markets across the US. The former homeowner is now able to REINSTATE their mortgage…at the new value as established by the foreclosure sale. In other words, the negative equity is gone…the second mortgage is gone….back property taxes paid off…back HOA fees gone.  Their new mortgage amount IS the amount the lender paid at the foreclosure sale!

I want you to think about that for a moment. This means that even AFTER a homeowner missed payments…loses the home to foreclosure…that they can now IMMEDIATELY secure another loan for the homes current market value. WOW!

Consider this, 25% of all homeowners with mortgages are upside down by at least 10%…..10% of all homeowners with mortgages are upside down by at least 25%. HREU Students know that this trend of underwater homeowners will increase before it levels off. There are 50,000,000 mortgages in the US….as of today…6,000,000 aren’t ‘performing’. In other words, homeowners aren’t paying their mortgages!

What happens when all of these millions of upside down homeowners  discover that they can have their negative equity wiped out….secure a new mortgage…and keep their home…if they let it go into foreclosure?

I asked Tim if he could tell me any more particulars.  He said:

There is a company called Titanium Inc., which works on behalf of the lenders to do what they call home retention. Basically, they hire agents to door knock the homeowners who are headed for default and offer them the opportunity to do a mod…and if that won't work…a short sale.
 
Titanium is a very well respected and truly honorable company. They treat everyone…agents…distressed homeowners will respect. They are not the bad guys.
 
This is happening across the nation. We have 1000's of students, and I started hearing about this 2 weeks ago. So, I picked up the phone and started calling HREU students and asking them if they have been asked to do reinstatements.

Here is the process:
 
The agent gets an assignment from Titanium. The assignment is to go to the JUST foreclosed home and offer them a reinstatement of their loan using the NEW loan terms (Basically, a principal reduction. The new mortgage amount will be for whatever the property went for at auction). Any lingering debt from the previous loan…wiped clean…poof gone. Late HOAs, Taxes, Seconds, Liens…all gone. Homeowner DOES have trashed credit but, matters not. New mortgage, new loan amount.

So would this be a good deal, or not? It certainly sounds easier than a loan mod- no need to get investor approval or to work out a deal with other lien holders. It avoids evictions, keeps homeowners in their homes and keeps a property from being vacant.  On the other hand, if this were to become widespread, WHO IN HECK WOULD BOTHER PAYING THEIR MORTGAGE?

I know the government doesn't worry about scaring private investors away from purchasing MBS- Fannie and Freddie will purchase anything that has mortgage written on it.  Our mortgage industry has been nationalized. The losses for lenders however, would likely to be huge, should something like this become common. Why then would lenders consider doing something like this, if this is indeed going on?  My guess would be because the losses would be nationalized as well.

Tim said that he could provide us with the names of agents that could verify that they have been seeing this being done by lenders.  Where's our industry folks? Has anyone else heard of similar reports?

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… Historically, the New York Fed has been among the most profitable shareholder-owned corporations in the world. Yet it keeps the details of its shareholders’ ownership information private. What we do know is that its owners include precisely those institutions it is tasked to regulate and supervise and those [it] has obviously failed to adequately supervise. – Josh Rosner¹

Or to ask the obvious question with reverse sense; Does Wall Street Own, As In Literally Own, Its Own Regulator?

Rosner's article is long, detailed and well worth reading, but I think the question he brings up in the above needs to be clarified, like, yesterday.

————–

[1]: "Has the New York Fed been serving the public trust? Has Geithner?", by Joshua Rosner, Naked Capitalism, February 3, 2010.

The substantial costs of TARP — in money, moral hazard effects on the market, and Government credibility — will have been for naught if we do nothing to correct the fundamental problems in our financial system and end up in a similar or even greater crisis in two, or five, or ten years’ time. It is hard to see how any of the fundamental problems in the system have been addressed to date.

• To the extent that huge, interconnected, “too big to fail” institutions contributed to the crisis, those institutions are now even larger, in part because of the substantial subsidies provided by TARP and other bailout programs.
• To the extent that institutions were previously incentivized to take reckless risks through a “heads, I win; tails, the Government will bail me out” mentality, the market is more convinced than ever that the Government will step in as necessary to save systemically significant institutions. This perception was reinforced when TARP was extended until October 3, 2010, thus permitting Treasury to maintain a war chest of potential rescue funding at the same time that banks that have shown questionable ability to return to profitability (and in some cases are posting multi-billion-dollar losses) are exiting TARP programs.
• To the extent that large institutions’ risky behavior resulted from the desire to justify ever-greater bonuses — and indeed, the race appears to be on for TARP recipients to exit the program in order to avoid its pay restrictions — the current bonus season demonstrates that although there have been some improvements in the form that bonus compensation takes for some executives, there has been little fundamental change in the excessive compensation culture on Wall Street.
• To the extent that the crisis was fueled by a “bubble” in the housing market, the Federal Government’s concerted efforts to support home prices — as discussed more fully in Section 3 of this report — risk re-inflating that bubble in light of the Government’s effective takeover of the housing market through purchases and guarantees, either direct or implicit, of nearly all of the residential mortgage market.

 

Stated another way, even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car.

John M addendum: sorry, twist, but couldn't help myself (don't tell the chickens )

And the administration keeps passing out booze to the drivers instead of focusing on seatbelts.  The crash won't be pretty.

"Another month or so, these old, guaranteed [AIG] bonuses will be a thing of the past." – pay czar¹

Yes, it really is that simple.

WARNING: no visible volume control and very, very LOUD

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Yo, Ken! "… signed into law"??? uh, I don't recall Congress ever legislating Financial Products Div bonuses before the crisis, or George W. Bush signing anything. What on earth are you talking about?

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[1]: "Pay czar says AIG bonus flap to end in March", by David Morgan, Reuters, February 3, 2010.

So, I'll put this forward succinctly: legal personhood for corporations is not optional. It's absolutely fundamental to modern commerce. To believe otherwise, you basically have to be an anarchic anti-capitalist; indeed, you have to be against the very notion of large-scale cooperation and division of labour. But you're not, are you? – Chris MacDonald, September 27, 2009¹

Well Chris, as it happens …

MORE: The good professor is in the process of expanding his thoughts into a three-parter. He was also kind enough to reply to my effort here (see below).

• Feb 1: "The US Supreme Court, Free Speech, and Corporate Citizenship"
• Feb 2: "Free Speech: Means, Ends, and Citizens United"
• Feb 3 (UPDATE — now available): "Corporate Personhood and Citizens United"
  

First of all, thank-you for your comment (replying to mine) that served to get us started on this.  The comments were under your recent update on the issue at hand.

But before this generates into sticky-buns-at-20-paces in The Atrium, perhaps we should explore just how profoundly we disagree with each other on this issue.  I've just read your September '09 post and some of the comments underneath.  That was an early analysis of "Citizens United", and for Doomers who (like me before yesterday) weren't aware, it's now the point at issue in what's becoming perhaps the most important fight between President and US Supreme Court since 1937.

My thoughts on large corporations are strongly influenced by a 1970 polemic by Robert Townsend called "Up The Organization," and in particular his thoughts on his almost exact contemporary Harold Geneen.  It's rather curious, in that my father was one of Geneen's key engineers when he lost the confidence of Charles Adams in '59 and even today I'm constantly reminded of him because I worship Sundays with the brother of the guy who was his representative in Santiago on the occasion of 9/11 (the month Neruda died).

But more than that, I'm alarmed at how this private corporate person is swallowing up history.  I grew up in an atmosphere dominated by the great military companies that flourished around Route 128 after World War II.  In fact, just to drop one name Doomers have probably never heard, our family was pretty close to that of Frank Lewis, the manager of Alfred Loomis' private research facility who Loomis sent to Cambridge in the wake of the Tizard mission to help found the Rad Lab.

Now I never learned anything secret that was going on (probably nobody cares any more that dad had figured out ffts sometime in the '50s, so that Hawk was actually front-running Cooley/Tukey) but the extreme closeness with which these institutions held, and are still holding what they are doing, and what they did, I regard as a direct threat to democracy.  Eisenhower didn't know the half of it.

It's like corporations have been war-fighting ever since '45.  I mean, Harold was running the phone company, for heaven's sake.  But nowadays Sun Tzu is by no means out of place in the boardroom, and as the Australian author Kate Jennings has noted, Wall Street is actually joined at the hip with America's intelligence community.  Knowledge is power, and without transparency just their size is transforming the largest corporate persons into a tribe of monsters.

So here I am, feeling slightly foolish in the shoes of Robert Fludd, cheering on that same New Dark Age that Jane Jacobs used to worry about and ranged against you and the entire Enlightenment project.  To begin with, I think our fellow Haligonian, the late George Parkin Grant, was dead right in "English Speaking Justice" and that he showed conclusively that Rawls' had run contractarian theory into a reductio ad absurdum.  Now your colleague Dave Heckerl has been trying to convince me that there's more to contemporary liberalism than Rawls, so I've been having a go at Rorty and Trilling, etc. but I'm not sold just yet.

Now the thought experiment you give at the end of the September post, like Hobbes' original formulation, evidently assumes atomic individuals as an initial condition, but wasn't that always the fatal flaw in the whole Enlightenment project?  I think that Tawney in "Religion and the Rise of Capitalism" shows pretty convincingly that the very concept of modern individualism evolved out of the Enlightenment itself (assisted by their understanding of classical Greek thought) and related movements like the Empiricists.  Also, it seems to come out of Ivan Illich's work that Hobbes' State of Nature can't possibly be right as humans just display too much essential non-economic interdependence.

So even human individuals (e.g. J.P. Morgan in 1907 or Ken Griffin in 2010) can become problematical when they grow too large, let alone corporate persons.

To grope at some categories, I think that morality is part of collective ontology and ethics arises out of individual reason.  A couple of years ago Tatjana Takseva helped show me how the latter began to dominate the English speaking world in the 17th Century.  But now that temporary dominance is fading, and we find ourselves in opposite parties as the inevitable conflict unfolds.

However, I don't think a corporate person can host either morality or ethics.

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[1]: "Why Corporations Must be Legal Persons", by Chris MacDonald, Business Ethics Blog, September 27, 2009.

L sent me a link to No Paws Left Behind, which looks like a worthwhile organization.  On their about page they say:

No Paws Left Behind, Inc. is a focus driven not for profit organization, designed to bring awareness to all communities the silent victims of foreclosure who have no voice or rights to implement change.  As a united front, we will restore moral obligations toward all pets that have the potential to be, or have been, left behind to suffer needlessly.  We further pledge to act as a support group for those who find foreclosure imminent and need help to find shelter for their beloved pets; be a resource for those who find or know of abandoned pets; and last, but by no means least, we must unite to end the needless suffering by creating a national movement targeting lawmakers to change the laws categorizing pets as personal property.

Animal lovers might want to check out the website.

If you are a pet owner facing foreclosure, please take the advice of a woman I met who runs an animal rescue.  Seek help EARLY.  Shelters are full, and you can't wait until the day before the Sheriff shows up to find a place for your pet.  At that point, there is not much they can do.

Here's another hint if you find yourself moving into a rental.  Just because  a listing says "no pets" doesn't mean that you can't negotiate.  It's a soft renters market, a lot of landlords are willing to be flexible.

WASHINGTON, Feb 1 (Reuters) – The $5 trillion market for U.S. agency mortgage-backed securities should be able to weather the scheduled end of Federal Reserve purchases as value-seeking investors fill the void, a Freddie Mac executive said on Monday.

Those investors could include Freddie Mac, which has room to increase its $755 billion portfolio, Mike Dawson, a vice president of deal and contract management at Freddie Mac, told reporters at an American Securitization Forum conference.

"I don't see huge changes out there other than a little spread widening," he said, referring to yields on MBS relative to benchmark securities.

Freddie Mac is a value-seeking investor?  That must be why the administration lifted the $400 billion cap on funds available to the GSEs on Christmas Eve- so they could go out seeking great values in MBS. Right.

It doesn't get much funnier than that.

While strategic defaulters may force us to deal with increased foreclosures now, they save us from having to swallow the problem over a longer period of time.

One of the key reasons that it may make sense for some severely underwater homeowners to default is because they can't rationally hope to have equity in their home for many years to come. If circumstances dictate that these homeowners need to move, or no longer have the means to pay for their mortgage a few years down the road, they will likely still be in a position where they will have to foreclose or short-sell, rather than sell their house on the open market through the normal process.

Even if these homeowners remain in a position to pay their mortgage for years to come, the lack of equity in their home will keep them out of the homebuyer pool, even if, under normal circumstances, they'd like to move up to a larger home. These factors could help keep the housing market stumbling along for some years.

Additionally, for the housing market to truly find itself on a sustainable path, we'd need to see home prices fall back into line with historical norms. One widely used gauge of home prices involves comparing housing prices with prevailing rental rates. Between 1988 and 2000, the average home in the U.S. sold for 14.6 times the average annual rental rate. Though this multiple has fallen significantly since its high of 25 in mid-2007, it was still at 18 during the third quarter of 2009. Strategic foreclosures could help bring this multiple down further, allowing more potential buyers to be able to afford a home, and putting the market back on a sustainable path.

And though my colleagues and I have poked some fun at the extraordinarily low interest rates that the Fed has been providing for banks, this highly accommodative stance from the Fed gives the banks additional ability to absorb hits from their mortgage portfolios now. Prolonging the process risks the possibility that the banks will have to keep limping along when interest rates are not there to cushion the blow.

Finally, as one reader pointed out to me in an email, homeowners who walk away from a hefty mortgage in favor of a lower rent payment suddenly end up with more money in their pockets at the end of every month. This money can be pumped back into the economy if they decide to spend it at Wal-Mart or Costco, for instance, or it can be pumped back into the stock markets as these folks rebuild their retirement nest egg.

In other words, if a borrower has to suffer the slings and arrows of outrageous fortune, they might as well do it now.