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Citi's Flip-Flop on Mortgage Cramdowns: A Really Bad Idea

This is just a continuation of the same thing that created this mess.
First the government pressures banks to lend to unhealthy borrowers.
Now that they cannot pay, the government is pressuring banks to take a write-off while allowing the same unhealty borrower to keep the house.

How does this stabilize the banking sector? It does the opposite. It will only increase bank losses and make capital shrink further.

The banks are not the only lenders. This will cause private investor mortgage pools to disappear.

Does it make anyone feel comfortable buying a house, knowing that the government is artificially holding up prices?

Do you feel comfortable that the government now indirectly has a lien on every mortgaged residential property in the country; and more directly through Fannie/Freddie. In the future the green police will stop by and tell you that you need to plant and maintain more trees or lose your house.