A glimpse at what we might be in for as the housing bubble bursts and real estate prices correct themselves.

INTRODUCTION: Ownership of Federal Securities

Ever wondered who exactly owns our national debt? Turns out, as of June ‘08, about 49% ($4.7T) is held by the federal government itself. Among the rest, about 27.9% ($2.6T) is held by foreign governments: a big number, but smaller than I expected. Also interesting: fully 5% of our debt is in the hands of state and local governments, another 4.9% in mutual funds, and that’s $1T right there.

The Dark Knight Trailer Recut - Toy Story 2

NPR: Paulson, Bernanke Under The Microscope

Commentary: Bankruptcy, not bailout, is the right answer - CNN.com

So what should the government do? Eliminate those policies that generated the current mess. This means, at a general level, abandoning the goal of home ownership independent of ability to pay. This means, in particular, getting rid of Fannie Mae and Freddie Mac, along with policies like the Community Reinvestment Act that pressure banks into subprime lending.

The right view of the financial mess is that an enormous fraction of subprime lending should never have occurred in the first place. Someone has to pay for that. That someone should not be, and does not need to be, the U.S. taxpayer.

Scenes from India - The Big Picture - Boston.com