But surely many of these people were convinced that they weren't being
irresponsible.

Some folks, sure. But I'm betting a huge number of these people are also people with huge credit card debt. It's wasn't a total snowjob on otherwise financially responsible people. Overall it's the current culture of "have it now and pay for it later."  Everyone's to blame on this...the CEOs, the banks, lenders, the mortgage industry, and us.  Everyone's played a part. Deep down, people knew they were gambling. They just expected that they were going to win...bc everyone else was. Well now, nobody is.

I believe the middle ground is that we shouldn't give the taxpayers' money to either the greedy lenders or irresponsible homeowners.

Al, you are right that lenders were overly aggressive in pitching these mortgages (among a multitude of sins). They should share in the blame - which is why I'm against this bailout.

But these homeowners have to bear responsibility, too. Just because someone tries to sell you a Rolex watch on a Times Square street corner doesn't mean you should buy it. What's the old saying - "If a deal is too good to be true, it probably is"?

A TV news show recently profiled a woman making $30,000 a year who bought a $200,000 home on a dubious "interest only for the first year" mortgage. When time came to start paying down the principle, she, of course, couldn't make her payments and defaulted. She claimed she didn't understand the deal she signed.

But I have to say, "Whose fault is that?" Anyone with a lick of sense understands that someone making 30 grand a year can't afford the monthly payments on a $200,000 mortgage. If you agree to such an obligation, it is your responsibility to understand what you are committing yourself to do. As both a philosophical and practical matter, I just don't believe people who act responsibly should be asked to subsidize those who act foolishly.

 Here's the issue I have with that, Emery: Most of those bad mortgages are a result of bad decision-making. Too many people bought more house than they could truly afford. Or they entered into mortgages (usually adjustable rate loans) that were simply unwise.

Sure but I thought that it was now unpatriotic and irresponsible(possibly even suicidally insane) to worry about any personal responsibility. We supposedly have to "act quickly and radically" without time to plan and think or it means insufficicient avaiable financing for small businesses or the middle which means less money for crap which means less demand for crap which means lay offs  for the people who producemarket and transport and sell crap and a spiral of economic contraction. We are off the map right now and apparently do not have the luxury of punishing the wicked or the negeligent.

Personally, to me the Paulson bailout sounded an awful lot like a scam taking advantage of the panic.

I do think that the predatory lenders were doing pretty much what they were explicitly ordered to do by Congress to make financing a home supposedly easier for the lower middle class (tyring to manipulate the market). This drove housing prices up as the market had more buyers competing over limited product. That drove construction up until there was more product than market for it which drove the value of the product down which made lots of the loans a huge loss for the people still stuck paying them.

There were also speculators buying houses with the intention of selling them for more than they paid (which would let them pay off their own loans) and when the value of homes dropped one "wave" of them suddenly got stuck with low value houses and couldn't affors to pay their higher value high interest loans.

The mark for market asset valuation from Sarbanes Oxley (a regulatory response to Enron vastly inflating their own value) makes it harder to recover from as well. It's hard to sell a debt when it's value keeps dropping invalue. Worse when you establish your own worth from owned debts as assets by their current value on the market you can quickly find yourself suddenly without enough assets to justify borrowing money or to even back what you've lent out.

Snippity snap.

"Second, according to what I hear from my betters in the world of finance, the most serious problems are not with the bundles of subprime mortgages themselves — a large but not lethal quantum as far as I can tell — but with derivatives contracts tied to subprime and other dicey debt. These contracts are superficially an attempt to 'insure' against risks of default, hence the name 'credit-default swaps.' In fact, they are an immense wager — which anyone with lots of money or borrowing ability can enter — about how mortgage-backed bonds, leveraged loan bonds, student loan bonds, credit card bonds and the like will perform.

"These wagers entail amounts many times larger than the total of subprime loans. In fact, there are roughly $62 trillion in credit-default swap derivatives out there, compared with about $1 trillion of subprime mortgages. These derivatives are 'weapons of financial mass destruction,' in the prophetic words of Warren E. Buffett. (Apparently believing that the worst is over, at least for one big investment bank, Mr. Buffett is now investing in Goldman Sachs.)

"The swaps market has been unregulated. It has been just a lot of people making bets with one another. Some of them made incredibly fortunate payoff wagers against the mortgage bonds, using credit-default swaps as their wagering vehicle. I am not sure who the big winners are, but they are out there, and the gains were big enough to cripple the part of Wall Street on the losing side of the bets.

"But let’s get back to the man of the hour. Why didn’t Mr. Paulson, the Treasury secretary, see it? He was once the head of Goldman Sachs, an immense player in the swaps world. Didn’t people at Treasury have a clue? If they didn’t, what was going on in their heads? If they did, why didn’t they do something about it a year ago, when saving the world would have been a lot cheaper?"