Readers suggested a topic on the news of the week. "We might as well have a weekend discussion on the bush pseudo-bailout. (It will be spread over the all the posts otherwise…). The abbreviated summary of positions so far:"

"1. 'Bailout will accomplish nothing and is just political positioning.' 2. 'If retroactive modification of mortgage contract occurs, new loans will dry up.' 3. 'Bailout is interfering with the free market! I’m leaving the country.' 4. 'FHA and appraisers will conspire to keep prices artificially high, believe you me.'"

"For my own point of view, I think it’s 1. Initial reviews of phone calls to the toll-free number seem to consistent with this view."

One reported. "CNBC received an avalanche of emails about the plan and if those idiots are to be believed 80%-90% were vehemently against the plan and any bailout. A few of the emails were read on air and based on the emails read it sounded like CNBC was flooded with a bunch of HBBers. Maybe there is hope yet."

One saw consequences, "The basic question is: Are you more worried about the popping of the current bubble, or the prevention of future bubbles? Policies that mitigate the effects of our current crash are diametricly opposed to those which seek to prevent another bubble. Do you try to make it possible for FBs to refinance out of foreclosure, or do you try to limit the stupid financing?"

One questioned the planning, "The way it was released does have some of the markings of a trial-balloon. The idea can’t have been hatched in secret, having time to get the bugs worked out, so it’s immature at best."

"Experts are still weighing in on it’s effects assuming various unknown conditions and limitations.. and who knows.. maybe even bloggers ideas are contributing to the plan as govt lurkers keep tabs."

Another said, "This thing will sink when JJ has a million-FB march on Washington demanding much more than a rate freeze."

One points to the politics, "The real issue is rising and record breaking foreclosures. At this juncture, the housing crash is like a rapidly unfolding natural disaster. It cannot be stopped from wreaking havoc. It’s a national disaster with global consequences."

"Consequently, you cannot fault the administration for trying to get ahead of the burgeoning political foreclosure firestorm. It does not want to be accused of doing nothing while 2 million or more families are thrown out on the streets. It had to act."

One looked at the road to hell, "I think the plan will actually make things worse. The market for MBS was dismal already. Now I imagine it will cease to function unless much higher interest rates are paid by all future borrowers. This in turn will cause housing prices to drop even more than they would have if the bubble had been left to collapse on its own."

The Courier Gazette. "Collin County real estate agents and mortgage brokers are tempering their enthusiasm for President Bush’s subprime mortgage bailout. Concern stems from the fear that it is prolonging the inevitable, they say."

"Since Monday, the Collin County clerk has posted 49 trustee sale notices, properties that have been foreclosed on and are scheduled for a Jan. 1 sale on the courthouse steps."

"'A large class of people that bought homes misstated their income or did not have the willingness to pay debts on time. Homes were sold to those people in record numbers. Those people will return to being renters,' said."

"Investors make up another large chunk of those who defaulted on subprime loans. 'The biggest problem is spec buyers and pseudo investors who bought when they didn’t have the money long term,' he said. 'They bought in droves in Collin County when prices got too high in other states.'"

"Many times, homebuilders would sell spec homes 10 at a time to investors to close out a neighborhood, he said. Bob Baker, president of the Collin County Association of Realtors, believes many of the current foreclosures probably were new homes just a couple of years ago."

"'Collin County has a lot of new homes,' he said. 'These foreclosures are probably buyers who bought new homes. I would say about two-thirds of the builders use the adjustable rate' for their in-house mortgages."

The LA Times. "The success of the Bush administration's plan to stem home foreclosures will hinge in large part on whether the investors who own sub-prime mortgages will play along and accept lower interest payments to keep people in their houses. That may be asking a lot."

"Thanks to the alchemy of modern finance, investors who put up funds for the same 'pool' of thousands of sub-prime mortgages can face very different levels of risk, depending on the section of the pool they own."

"At the bottom are investors whose tranches pay high returns but could face wipeout if too many homeowners fall into default. Therein lies the problem in getting investors in a pool of mortgages to agree to change the terms of the underlying loans."

"Modification is 'clearly going to favor the guy at the bottom' of the pool, said Jeffrey Gundlach, chief investment officer at Los Angeles-based TCW Group Inc., which manages more than $50 billion in CDOs for investors."

"'The guy at the bottom is starving for modification,' Gundlach said. On the other hand, investors at the top of the pool, who know they have little risk of loss from a wave of foreclosures, could be hurt by modifications that could lead to reduced interest earnings for the pool overall."

"There also is a fear that many struggling sub-prime borrowers who would be initially helped by the Bush plan's interest rate freeze could default even before the freeze period is up. Investors might well prefer to just cut those people off now."

"Some analysts said the risk of borrowers returning for more forbearance could be intensified by a provision in the program that calls for fast-tracking hundreds of thousands of loans for a rate freeze, as opposed to undertaking a detailed and time-consuming study of the borrowers' finances."

"'To decide if a modification is beneficial,' analysts at brokerage Deutsche Bank Securities wrote in a note to clients Friday, a mortgage servicer needs to assess the borrower 'with the same degree of care as a new borrower walking through the door.'"

"Determining eligibility for a rate freeze based on just a few criteria, as the Bush plan proposes, 'is to repeat the same type of underwriting shortcuts that got us here,' the analysts wrote, referring to the no-questions-asked frenzy of 2005 and 2006 that gave home loans to almost anyone who could fog a mirror."

"This is the kind of stuff governed by detailed contracts between investors and loan servicers. And in general, Gundlach said, 'if you're going to modify more than 5% of the loans [in a pool], you're in blatant breach of contract.'"

"As for the idea that the servicers would get permission from every pool investor, good luck. Specific pools can have hundreds of investors, many of them foreign. The logistics of achieving some kind of consensus are daunting at best."

"Josh Rosner, a managing director of financial consulting firm Graham Fisher & Co. in New York, figures that a rash of legal challenges to loan modifications is inevitable. 'I think that's exactly where we're going to be' in 2008, he said."

"Well-intentioned though the rescue plan may be, Rosner said, to some investors it will amount to confiscation of their assets with the assent of Uncle Sam."

"Edward Yardeni, a veteran economist who heads Yardeni Research in New York, may echo many Americans' views when he asserts, perhaps only partly tongue-in-cheek, that lenders who made sub-prime loans under the terms targeted by the rescue plan 'should be charged with usury, arrested and thrown into lenders prison.'"

The University of Arizona. "Gerald Swanson, a professor of economics in The University of Arizona's Eller College of Management, said that extracting the country from the subprime mortgage morass promises to be painful."

"'For the past two years, I've said allowing people to buy homes with interest-only mortgages is letting them rent with the option to buy,' Swanson said."

"'That's a dangerous game because if the housing market goes down and the mortgage flips, guess what will they do? Stop renting,' he said. 'Why continue to pay into an asset that is falling in value? So, houses are flipping and people are finding good reasons to just walk away.'"

"The problem there is that foreign banks bought many of these securities based on the assumption that as the interest rates on subprime mortgages went up, so would the value of their securities."

"'We've given the world McDonald's, i-Pods, Coca Cola and the securitization of debt. Maybe they didn't want that,' Swanson said."

"'The moral hazard is that we gave banks the ability to issue loans, package them, sell them and avoid the risk. If you can make transactions taking cash off the top and then not have to assume any risk attached to it, would you do it?'"

"There's a corollary in the early 1990s, when Japan's real estate market came crashing down. Swanson said it continued to fester for a decade because Japanese government and banking officials initially refused to acknowledge the depth of the problem, a strategy he hopes the U.S. avoids."

"'We put up a bunch of incentives for people to try to make some money and now it's starting to unwind and there will be some costs,' he said. 'We will not get out of this situation until we allow these losses to actually occur.'"

"'Some people,' Swanson said, 'made dumb bets.'"