Resolve the Subprime in House Market

"So far, the measures we’ve taken to resolve this crisis have thrown the rational principles of finance out the window. We are going on a crash diet—contradicting mortgage contracts on an ad hoc basis and giving away handfuls of money—when we should be coming up with an eating regime we can live on indefinitely. Instead of making whatever short-term patches seem necessary, we might take a more systemic, market-based approach, such as stipulating that mortgage values always be linked to housing prices and adjusted each month.

Speculative excesses are an endemic problem of the market system, but capitalism also provides its own self-correcting mechanisms. There’s no reason to abandon those tools now."

Robert J. Shiller, professor of economics at Yale University, in Foreign Policy