Some housing bubble news from Washington and the Wall Street Journal. "Cities and counties with some of the worst fallout from the nation's housing slump also are seeing a sharp upswing in vacant homes, a trend economists say might set up further declines in home prices. The national homeowner vacancy rate, which gauges the number of vacant homes on the market, rose to 2.8% in the fourth quarter, according to Census Bureau data."

"That was up from 2.7% in the previous quarter and matched the record set in the first quarter of last year."

From Bloomberg. "Democratic presidential candidate Hillary Clinton said she is proposing a $30 billion, two-year program to help homeowners and communities hit by rising foreclosures."

"'We've seen unprecedented Fed actions over the last several days to address the crisis on Wall Street, but nothing to address the crisis on Main Street,' Clinton said in a telephone interview."

"The Fed helped engineer the sale of Bear Stearns Cos. to JPMorgan Chase & Co. Those steps are 'not enough,' Clinton said. 'It's obviously part of what we have to be doing, but it's only dealing with some of the symptoms and not the underlying cause of the crisis.'"

"House Financial Services Committee Chairman Barney Frank has proposed legislation including $10 billion to help states and localities purchase mortgages. Frank and Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, also want to expand federal guarantees for restructured mortgages, legislation Clinton has co-sponsored in the Senate."

"Clinton wouldn't say how her new plan would be paid for. 'You don't pay for stimulus packages by definition,' she said."

The New York Sun. "Capitol Hill is finally taking notice of the Federal Reserve and its unprecedented programs to pour liquidity into the market. As banks borrowed a staggering $19 billion a day from the Fed this week — an increase of more than 1,800% over last week — and adjusted to the fact that the Fed had helped shield Bear Stearns from insolvency, members of Congress are beginning to question the impact of these decisions."

"Treasury Secretary Henry Paulson and the Bush administration have so far resisted efforts by Rep. Barney Frank and Senator Dodd to stave off foreclosures through broad government support for homeowners who can no longer afford their mortgages."

"The administration is 'going to have to live with helping Wall Street and doing nothing for Main Street,' a spokesman for Mr. Frank, Steven Adamske, said. 'The only way to fix this is solve housing crisis.'"

From Reuters. "Paul Volcker, a former head of the U.S. Federal Reserve, in an interview with Charlie Rose on PBS television, said the country's troubles are the inevitable consequence of a bubble in housing that was clearly unsustainable."

"'I don't think this crisis is over,' he said. 'It's quite a serious matter. We've seen the Federal Reserve take more extreme measures in some respects than any that have been taken in the past to deal with a financial crisis, which raises some real questions.'"

The LA Times. "The Fed's job is simple: Don't let the economy get too excited or too depressed. To do that, it gives the nation a steady supply of economic Zoloft. But Bernanke seems freaked out that his meds aren't working...For two weeks, he's been acting like it's the last scene of 'It's A Wonderful Life,' only instead of giving cash to a kindly if slightly schizophrenic George Bailey, he's giving it to investment bankers."

"So really, it's nothing like 'It's a Wonderful Life' and a lot like 'Scarface.'"

"All of his extreme action is predicated on the myth that we're entering the Second Great Depression. We're not. The run on investment banks Bernanke thought would occur this week didn't happen."

"More important, nobody besides the Fed is panicking. People are bummed because their houses are worth less, but people were bummed because their tech stocks were worth less, their alpacas were worth less and their Ugg boots were worth less."

""But your average American isn't freaking out. A CNN poll this week showed that people's main economic fear is inflation -- which is what you get when you print a lot of money, like the Fed is essentially doing by giving so much away."

"I appreciate the Fed's frantic gestures, but housing prices really are plummeting, and I'd rather hit that bottom as soon as possible. It's a hard choice, but I'll take lower inflation, less national debt and a stable future over job growth right now."

The Washington Post. "The record of longtime Federal Reserve chairman Alan Greenspan -- worshipped by business leaders and dubbed 'Maestro' in a 2000 biography by The Post's Bob Woodward -- is getting a critical look as his successor Ben S. Bernanke wrestles with problems that began on the Maestro's watch."

"In an interview yesterday, Greenspan said the Fed wasn't to blame. He said that global forces beyond the control of the Federal Reserve had kept long-term interest rates low, fueling the housing bubble earlier this decade."

"'Those who argue that you can incrementally increase interest rates to defuse bubbles ought to try it some time,' he said. 'I don't know of a single example of when interest rate policy has been successful in suppressing gains in asset prices.'"

"Greenspan also argues that the Fed...has less influence over long-term rates, which he asserted were more important to housing prices. Even after the Fed starting raising short-term rates, long-term rates did not rise. He said that at the time 'it became apparent that we lost control' of long-term interest rates 'as did the Bank of England and all the central banks. As a consequence, we had very little ability to put a brake on the rise in home prices.'"

"Kenneth Rogoff, a Harvard economics professor and former chief economist at the International Monetary Fund, says that 'the important point...is the philosophy of monetary policy that says 'you don't pay attention to asset prices when they are rising, only when they are falling.'"

"In reality, Rogoff adds, 'if you cut interest rates when asset prices are in free fall, then when asset prices are rising while indebtedness is rising all over country, you need to raise rates. He actively chose not to do that.'"

"Alan Blinder, a Princeton University economics professor who was vice chairman of the Fed under Greenspan in the mid-1990s, said that Greenspan 'brushed off' warnings -- most notably from fellow Fed governor Ned Gramlich -- about mortgage abuses and dangers."

"'Lending standards were being horribly relaxed, and the Fed should have done something about that, not to mention about deceptive and in some cases fraudulent practices,' Blinder said. 'This was a corner of the credit markets that was allowed to go crazy.'"

"Gramlich, who died last fall, proposed that the Fed send examiners into the consumer lending offices of Fed-regulated bank holding companies, which he said originated about 30 percent of subprime loans. In a speech last Aug. 31, Gramlich said 'this whole subprime experience has demonstrated that taking rates down could have some real costs, in terms of encouraging excessive subprime borrowing.'"

"Moreover, he added, there was 'a giant hole in the supervisory safety net. It is like a city with a murder law but no cops on the beat.'"

National Public Radio. "The Federal Reserve took historic steps earlier this week to save investment bank Bear Stearns, in an effort to stop panic from infecting Wall Street. But the credit crisis isn't just a problem for the investment community, says former Treasury Secretary Robert Rubin, it is also 'a Main Street problem' that could affect all Americans."

"As such, Rubin says policymakers must examine the series of events — and the failures in the regulatory process — that led to the current crisis of confidence in financial markets in order to prevent a similar crisis in the future."

"'There were a goodly number of observers who felt over the last three, four, five years that excesses may well have been developing in the financial markets ... but I don't know of anybody who foresaw the combination of circumstances that has occurred here,' says Rubin, who serves on the executive committee of Citigroup."

"Rubin cites the confluence of events that allowed things to spin out of control — including historically low interest rates and ratings agencies that gave top marks to complex financial instruments with risks that weren't clearly understood. The market relied on those ratings."

"'All evidence suggests that should not have been done,' he tells Renee Montagne. 'The question,' he says, 'is what can we learn from this and what do we do moving forward?'"

The Times Online. "It may be difficult to believe but speculators are shrugging off the bleak outlook for the housing market by continuing to invest in new-build developments in the hope of turning a quick profit. Many of them are lured by stories of the substantial gains made at the height of the boom."

"But today, despite falling house prices and warnings about the growing risks of buying off-plan, investors are still buying flats and houses with the aim of 'flipping' them on to another investor before the building is complete."

"Some new developments, particularly those in the London Docklands, are still changing hands faster than they are being built."

"Amid the slowdown, it is in estate agents' interests to drive the market in flipping. Jaimie Beers, an agent at the new homes division of Franklyn James in Canary Wharf, which specialises in trading off-plan properties, says: 'Flipping used to be a very specialist thing; only big players would do it. But I've flipped property for all types of people from nurses to people working in Canary Wharf who see the new developments go up every day.'"

"According to Beers, the surge in flipping is being fuelled by a lack of property for sale. 'There was very little completed stock for sale last year and investors were finding it hard to find finished properties that would give them decent returns, so they went for off-plans instead.'"

"'Some of the flats at The Icon building have turned hands at least three times. Some even more. The building will not be finished until mid-2009,' says Beers."

From CNN Money. "Yolanda Cruz knew soon after she refinanced her home two and a half years ago she had a problem. She thought the $1,478 monthly payment quoted by her mortgage broker included taxes and insurance."

"In fact, Cruz says she asked the broker repeatedly if those costs were included and was reassured they were. 'We just took his word for it, and unfortunately that's not what it was,' Cruz said."

"Soon, she began receiving tax bills from her town of East Windsor, Connecticut. She couldn't afford to pay them. 'I feel I was taken advantage of,' Cruz said."

"Cruz, who sought help from the Connecticut Fair Housing Center, tried for months to resolve the problem. All the while she continued to make the monthly payments at rate that she had agreed to in 2005, $1,478. The problem: That payment didn't cover her taxes or her insurance."

"'The problem is, the servicer doesn't have the power to renegotiate a loan,' said Erin Kemple, the Connecticut Fair Housing Center's Executive Director. 'Because they don't actually own the loan [they can't] make changes to the payment plan. All they are doing is managing this loan for a group of investors, so there's no way that the investors can be asked, 'Can we rest this loan?'"

"Borrowers like Cruz may be offered a temporary repayment plan, which keeps foreclosure at bay, but tacks the owed money onto to the back of the loan."

"'The payments in this kind of workout are unaffordable to the homeowner,' said Diane Cipollone of the National Fair Housing Alliance. 'And sometimes homeowners sign it anyway...But soon they default on the repayment plan, and that's counterproductive.'"

"With an apparent stalemate between lenders and borrowers, will people be forced to go into foreclosure or even to just walk away? 'Yes,' said Connecticut Fair Housing's Erin Kemple. 'The simple answer is yes.'"