Some housing bubble news from Washington and the Wall Street Journal. "President Bush, looking for ways to respond to the subprime-mortgage crisis, will outline a series of policy changes and recommendations today to help borrowers avoid default, senior administration officials said. 'The president wants to see as many homeowners who can stay in their homes with a little help be able to stay in their homes,' a senior administration official said. 'We're not looking for an industry bailout or a Wall Street bailout. The focus here is on the homeowner.'"

From Bloomberg. "President George W. Bush today pledged to help people with risky subprime mortgages keep their homes and tighten safeguards against predatory lending, while rejecting a bailout for 'speculators.'"

"'I plan to help homeowners, the government's got a role to play,' Bush said. 'But it's not the government's job to bail out speculators or those who made the decision to buy a home they couldn't afford.'"

From MarketWatch. "Not everyone is keen on helping borrowers who got themselves into trouble by taking out risky loans that are about to 'reset' and sock them with higher payments.'

"Even Barney Frank, who chairs the House Financial Services Committee agrees. 'You can't just give people a free ride,' he told the New York Times this week."

"Housing has clearly become a political issue. But support for straightforward bailouts thus far appears to be limited to private observers, while politicians are suggesting more modest steps."

"Even with reforms, some borrowers could be left out in the cold, says Alec Crawford, mortgage-backed securities strategist at RBS Greenwich Capital. In a note, he said that the FHA is apparently only considering breaks for borrowers with so-called '5/1' and '7/1' adjustable-rate mortgages, not '2/28' subprime loans."

"'Any change of the type we expect would probably have a small impact on the subprime market,' Crawford wrote."

"There would also be political consequences if the White House didn't act, argues analyst Richard Bove. Still, a bailout or expensive measures rammed through by either party might be unpopular with taxpayers who had no role in other peoples' decisions to take out risky mortgages."

The New York Times. "Ben S. Bernanke, chairman of the Federal Reserve Board, declared on Friday that the central bank 'stands ready to take additional actions as needed' to prevent the chaos in mortgage markets from derailing the broader economy."

"'Obviously, if current conditions persist in mortgage markets, the demand for homes could weaken further, with possible implications for the rest of the economy,' Mr. Bernanke told listeners at the Federal Reserve’s annual symposium."

"Mr. Bernanke walked a very tight line between trying to reassure financial markets and locking the Federal Reserve into a rescue effort that could prove either unwarranted or unwise over the longer term."

"'It is not the responsibility of the Federal Reserve — nor would it be appropriate — to protect lenders and investors from the consequences of their financial decisions,' he said."

From Newsday. "A crisis-ridden mortgage industry maybe hoping for a bailout, but local experts awaiting President George Bush's proposals to aid homeowners struggling to pay their loans say that that's an unlikely scenario."

"'I don't think that's in the cards and I don't think that's a good idea because then it would validate some of the lending practices we've seen,' said Pearl Kamer, economist for the Long Island Association."

"Kamer said she expects the volatility in the credit markets continue for two or three months but said that there will be a return to traditional lending standards and an increased confidence on the part of lenders that borrowers will be able to repay their loans."

"'I don't think we should ever return to the excesses in mortgage lending that we've seen over the past two years,' she said. 'It's a dangerous phenomenon in a globally linked economy.'"

From Reuters. "While innovations in mortgage finance expanded home ownership around the world, they also sowed the seeds of the current U.S. subprime mortgage crisis, economists told a Federal Reserve conference on Friday."

"'Recent events suggest that ... a revolution has produced a terror,' professors Richard Green and Susan Wachter said in a paper presented at a conference organized by the Kansas City Federal Reserve Bank."

"Green and Wachter said advances in computer technology, use of capital markets to funds mortgages, and low worldwide interest rates created favorable conditions for mortgage finance. Lower and more flexible borrowing costs, they said, helped spur housing demand and contributed to rising home values."

"But the sophistication of some financial tools lulled investors into misjudging risks, the authors said."

"'The creation of structured finance for mortgage credit risk abetted the rise of the subprime market. For a time, capital markets seemed to have an appetite for almost any kind of risk, so long as it received sufficiently large yield in exchange,' Green and Wachter wrote."

"Green and Wachter said investors' care-free attitude toward risks of subprime mortgages and the housing market defies explanation and may have further inflated the housing bubble."

"'When investors mis-price risk, the result is the artificial inflation of housing prices. The pricing boom of 2006 was likely in part due to this unsustainable credit boom,' the authors wrote."

From USA Today. "Mortgage brokers are leaving the business in droves as the crisis in subprime mortgages leads to fewer products to sell, tighter lending standards and a backlash from lenders who blame them for the meltdown."

"Brokers don't lend money, but they match home buyers with lenders in 58% of all home loans."

"Darrell Sexton shuttered his Indianapolis brokerage, The Money Station, at the end of last year after sales plummeted from $5.2 million to under $1 million in three years. While Sexton's firm also was a lender, much of the decline was in his subprime brokerage business."

"Sexton says he had to put his own 7,000-square-foot house up for sale, though it has languished because of the housing downturn. He's looking for a sales job in another industry." "'You begin to question your self-worth,' he says."

"Compounding the stress is that some lenders and lawmakers blame the crisis on aggressive brokers who they say pushed mortgages that customers didn't understand or couldn't afford. Brokers can earn higher commissions by steering borrowers to loans with higher interest rates."

"'Who made this mess? The short-term folks,' John Robbins, who chairs the Mortgage Bankers Association, said in a May speech."

"Brokers concede there are some bad actors but say they're just peddling loans that lenders develop. 'It's like blaming the corner grocer for lung cancer because they sell cigarettes,' says broker Marc Savitt of Martinsburg, W.Va."

"The German state of Saxony's Finance Minister Horst Metz will resign after state-owned Landesbank Sachsen Girozentrale got 17.3 billion euros ($23.7 billion) in emergency funds related to investments in U.S. subprime loans."

"Metz will leave office Sept. 30, Finance Ministry spokesman Burkhard Beyer said in a telephone interview today. SachsenLB agreed to a takeover by LBBW, Germany's largest state-owned bank, on Aug. 26 after its Dublin-based units couldn't sell short-term debt on fears that bad U.S. mortgage investment would hurt their ability to repay."

From Marketplace. "Scott Jagow: The credit rating agencies are taking a lot of flak for this subprime mess. Wall Street, Congress, other countries wanna know what in the world they were thinking giving their top ratings to garbage mortgages. Some heads are starting to roll."

"Standard & Poor's President Kathleen Corbet has stepped down. The official line is 'pursue other opportunities' but speculation says this may be just the beginning of the subprime fallout for credit rating companies."

From NPR.org. "People in the real estate industry like to say that housing markets are local. When prices were rising, many argued that there wouldn't be a real nationwide housing slump, or bursting bubble, because when prices fall in some neighborhoods, they rise in others."

"This time, though, things are different, especially in larger metro areas."

"Bill Cheney, chief economist for John Hancock Financial Services, agrees that housing markets are local. 'But what's so remarkable about this cycle is that we've had this synchronized boom and bust across so much of the country,' Cheney says."

"'Almost all the big metro areas saw prices run up. And almost all of them have seen prices come down now,' he said."