The NY Times has two insightful articles dealing with the economic meltdown and the mortgage mess. "Slow Start to U.S. Plan for Modifying Mortgages" explains why foreclosures continue to rise by pointing to a system that is overwhelmed. It also makes it clear (at least to me) that the financial institutions really have no incentive to modify loans.
While the article doesn't do a good job spelling it out, part of the reason the financial instituitons aren't modifying loans or renegotiating in good faith is that they know they have access to U.S. taxpayer dollars, and don't have to worry about any real pressure from bankruptcy courts or the federal government, who continue to bail them out (which is another reason we should have nationalized the failing institutions). The end result is that home foreclosures continue to climb in spite of trillions in bailouts for the banks and billions that were made available to stave off foreclosure.
The second article worth reading is from the Times' economics reporter, Edmund L. Andrews. In "My Personal Credit Crisis" Andrews writes about his mortgage/debt nightmare.
In a surprisingly frank and personal review of how he got in over his head, Andrews provides an overview of how a combination of easy money, industry myopia, and wishful thinking on his part has driven him to the point of foreclosure, and bankruptcy. One thing is clear: blaming the debtor is not sufficient for understanding the mess he's (we're) in.
Read both articles. They also help us understand why the "stabilizing" economic picture painted by some analysts may be wildly optimistic, and even naive.