Bernanke Speech on Subprime

Bernanke is putting the write down solution on the table. He is telling banks and investors to consider writing down the principal of the loan because it would reduce foreclosures and borrowers may actually stay in their homes and pay. This may result in lower losses than trying to restructure interest rates because if people owe more than the house is worth they walk away even if the interest rate is reduced. This is one way to begin de-leveraging!

If you haven't yet, it's time to stop paying your mortgage:-)
(I am not serious - but it shows one moral hazard attached to all of these proposals).