Clinton tried to correct problems with Fannie Mae and Freddie Mac as did Bush. The problem has been known for years. Additional problems were caused by stripping our regulations in banking and insurance restrictions in product offerings in 99 during the Clinton administration- Bill signed it. There is also the underlying paper problem that has been an issue forever. So long as property values increased, all was good. After the 1999 deregulations along with attempts to increase home ownership, liar loans and no docs poriferated with an insufficeint premium spread for risk on these alternative sub - prime loans typically along the lines of only 1% or less and also interst only loan proliferations. As a sresult many unqualified borrowers entered the market and some people sold up into new houses they could not afford.

This upset the demand for homes, artifically increasing demand pushing prices too high. Many then cahsed out thsi artificial equity and again man ythrough bad loan products. Before the botton fell out, we had the lowest level of equity ownership since the great depression. And, many prodcuts began allowing less than 20% down and PMI insureres were assuming risks they should not have.

The botton fell out when the unqualifieds who through much fraud, and equity cash outs could not repay and foreclosures rose. This little equity made borrowers quite sensitive to a small drop in values. As loan balances quickly began to exceed value of homes, the loans became "upside down" and people started to walk away, many before the foreclosure cycle concluded.

The fallout spread to the paper also sensitive to price declines, homes sales, prepaids and defaults - fundamental problems therein. Now, they cannot determine the correct price adjustments for the risk and cannot value the paper often because of coupling different risk rated prodcuts and combining hte paper further with car loans. commercial real estate, credit card debt, etc all with different levels of risk. The underlying problem is how to value the paper and solve the liquidity issue. It seems no one is addressing that underlying problem...how to value the paper and it seems decoupling, or spearating out common or similar risk associated pieces is the most apporpriate solution. The banks could do this themselves but are cash strapped. I would favor the use of short term government loans from the government along the lines of a 12% interest rate...with time requirements to decouple, sell off, clean the books, take the losses and repay the loans. Collateralize the loans wiht other assets of the banks and insurance and deal with requirements to address the underlying fraud issues from the little guy to the top.