A ‘Moral Hazard’ for a Housing Bailout: Sorting the Victims From Those Who Volunteered (New York Times)

Ellen Seidman, a former director of the Office of Thrift Supervision and now a senior fellow at the New America Foundation, said the government’s first challenge is to buy mortgages at their true current value. If the government overpaid or became caught by an even further decline in the market value of its mortgages, taxpayers would indeed be bailing out both the industry and imprudent home buyers.

“It’s not easy, but it’s not impossible,” Ms. Seidman said. “There are various auction mechanisms, both inside and outside government.” ...