Readers suggested a topic around Fed policy and the housing bubble. "Will the Fed lower interest rates to bail out FBs and lenders?"

A reply, "It won’t help. Home prices are falling already and I believe that incomes must catch up."

Another, "I believe that incomes cannot catch up. Too much outsourcing is happening to places where the pay is 1/2 the American wage. The only way to get home price/income ratio back to normal is for home prices to fall (50%+ in my neck’o'the’woods)."

Another looks at the wider picture, "They will say for as long as economically possible that inflation is a risk. They’ll do this to keep foreigners funding our debt with the possibility of higher rates. When it becomes apparent to everyone that the debt in housing can’t be serviced at these low rates, then they’ll cut them."

"Deflation (happening now) followed by inflation. It is what has gone on for generally the last 35 years. The difference now is the time lapse between the two (almost occuring together if that is possible…or at least deflation happening with the FED TRYING to encourage inflation)."

"The FED cutting rates and people taking out more debt to purchase homes is a different story. However, it will make speculators in other areas (equities) more apt to start the inflation of other assets more probable."

The Chicago Tribune. "Concerns about the housing sector moved back to center stage Wednesday after the Federal Reserve drew attention to the sector in its latest policy statement. In deciding to keep short-term interest rates unchanged, the Fed stated, 'The moderation in economic growth appears to be continuing, partly reflecting a cooling of the housing market.'"

"The Fed's previous statement, in August, expressed a less focused concern: 'Economic growth has moderated from its quite strong pace earlier this year, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices.'"

"Deletion of the word 'gradual,' regarding the housing slump and removal of 'interest rates' and 'energy prices' as additional factors in the economic slowdown put the spotlight on housing."

"Unless you simply want to recoil emotionally from headlines about a bursting housing bubble, the Fed's statement Wednesday represents the beginning, not the end, of your thinking."

"The downturn in housing has not been gradual, as the Fed acknowledged, but is it nearly over? The bulge in inventories of unsold homes 'would suggest an even larger decline over a longer period of time,' says an analysis by Ray Stone."

"The contagion of a housing slump on the rest of the economy is unclear. Paul McCully at bond investment giant Pimco, called the housing trend 'a recession,' but adds, 'The housing recession is not the stuff of an economy-wide recession, unless it tips the consumer animal spirits into a recessionary funk.'"

"Jobs related to the housing industry are in danger, creating a multiplier effect as laid-off construction and mortgage finance workers curtail their spending. 'Based on the decline in [housing] units under construction, it appears as if between 50,000 and 100,000 construction workers will be laid off in the quarters immediately ahead,' wrote economist Stone."

The LA Times. "The weakening housing market continued to take its toll on the industry Thursday as mortgage lender Countrywide Financial Corp. disclosed the possibility of thousands of layoffs and builder KB Home reported slowing revenue growth."

"Calabasas-based Countrywide said it would reduce its general and administrative staff by 5% to 10%. Countrywide has about 13,000 employees in Southern California, including salespeople at call centers. Its other major employment centers are in the Dallas area, with 10,400 employees, and the Tempe-Chandler area of Arizona, with more than 5,000 workers, spokesman Rick Simon said."

"KB Home also said home orders in its U.S. and French markets plunged 43% from last year's third quarter. On the West Coast, orders plummeted 58%. CEO Bruce Karatz said the results 'reflect the challenging operating environment for the home building industry.'"

"'We do not expect conditions to improve significantly in the foreseeable future,' Karatz said in a statement."