I can reiterate the comments of the commenters on the site where this article was originally posted. This is an excellent article. There are many complicated ideas and concepts behind the current debacle, many of which are handled quite well by the author.

Keeping these ideas and concepts intact and in mind, is not easy, and that makes the overall understanding of the mess hazardous.

If you've read the article and kept the ideas in good order, here are two more to think about.

The banks have really poisoned the stew by failing to immediately deal with properties they foreclosed upon by selling them at market value, which as it turns out in almost every case is much less than the balance due on the mortgage, much-much less. The banks didn't want to take the loss, because the paper (the mortgage) showed up on their balance sheet representing the full amount owed plus fees. (But billing a piece of paper doesn't have quite the same efficacy as adding a sum to homeowner's balance on the mortgage due.)

Incidentally, for the novice, when you see in your local paper an auction being advertised as a MORTGAGEE'S AUCTION or a FORECLOSURE AUCTION these auctions are ONLY part of a legal process required to take legal ownership of the property FROM the current owner and place the ownership of that property firmly and irrevocably into the hands of the bank. The banks MUST bid at these auctions an amount equal to every penny the current owner owes to the bank, otherwise, they haven't fulfilled their fiduciary responsibility to the current owner, by driving up the other potential buyers' bids at said auction. And as such, THIS IS NOT WHERE TO BUY REAL ESTATE THAT HAS BEEN FORECLOSED UPON! The newspaper ads you are reading are ads that are required by legal process.

The poisoning of the stew was exacerbated by a growing problem of empty building blight, which detroyed and depreciated whole neighborhoods, even whole cities. The real estate edict of location, location, location was ignored by banks as location after location was destroyed by the sight and the effect of the sight of empty and boarded up real estate foreclosures these derilict banks were seemingly refusing to sell.

Now there are literally tens of millions of boarded up buildings strewn across a devasted landscape of rapidly depreciating real estate.

The only way to stop the disintegration of housing values is going to send real estate values lower still. But it is a necessary evil. (No, it isn't Hank's assinine 700 billion dollar bailout solution, which will only make the problem worse because it will affect inflation on every commodity other than housing.)

The homes/buildings already on the market must be sold, which not too coincidentally will help with the unemployment numbers because these buildings need a significant amount of rehabilitation, those that can be rehabilitated.

These empty buildings must be sold in order to reduce the supply of housing on the market, to alleviate the empty building blight, and to let the demand side of the supply and demand equation drive housing prices upward again.

That is how economics works.

The 700 billion dollar bailout did absolutely nothing to soil the underpants of any potential buyer of any of this distressed real estate.

It is a buyer's market. It will remain a buyer's market as long as there is such a massive over-supply of housing available.

And keeping the price artificially high by holding large swathes of properties off the market just makes potential buyers of housing bolder about refusing to step in and buy now. It's like fishing in a pool very full of very large fish that aren't biting just yet. Only minnows are nibbling, but that certainly doesn't dissuade the fishermen.

Why would anyone buy a house now, now that the government has passed this bailout which will only make the supply of available housing increase as the exacerbated problem gets slowly sorted out in a new federal bureaucracy? (Don't worry. There are enough idiots to go around now! Or there soon will be.)

Nothing the government did last week helped at all.

Even raising the FDIC insured amount from $100k to $250k hurt the prospects for getting the country out of the housing slump. How?

Far less than 1% of the population has over $100k in the bank. BUT! Paying the insurance premiums on $250k of FDIC coverage is going to be spread out over the entire population of bank depositors in lowered interest being paid on savings accounts and CDs. That's perhaps wrongly assuming you are in the rare 2% group that has a black column in their personal finances.

So, the poor luckless consumer of housing has even LESS money to pay for housing than they would otherwise have had before this little $250k insurance policy perk was tossed into the wormy bailout package.

You see, at the root of all this need for liquidity in our chastened economy is the fact that "nobody's got no f-ing money." (The quote is from a good friend of mine here in town, Camille Franck.)

Keep your powder dry! And stay out of dark alleys.