The solution is four-part.
One, a fundamental change to how America views debt. As corporations: Relying on too high of a debt-equity ratio in your corporation because of the tax deduction received on debt's interest expense? Bad idea. Making mortgage loans and then reselling the good ones with the bad ones and thus refusing to take responsibility for the loans your bank made? Bad idea. And as individuals: Not paying off your credit cards? Bad idea. Taking out more mortgage loan on too much house? Bad idea. Taking out a second mortgage aka home equity loan? Bad idea.
Two, we need to repeal the Community Reinvestment Act of 1977 and any state laws similar too it. Forcing banks to make loans is a bad idea. Home ownership for poor people is a great idea, don't get me wrong, but the way that they were going about it is a bad idea. What we need is public housing (gov't owned and rented housing) NOT like Pruitt Igoe (ugly, modern, deforested) but more like English
council homes, which are attractive in their architecture. And these need to be for lower income families of all races - and spread all over - ghetto effects need to be avoided. Then we need to implement a plan like the British did - if you live in the same public housing for X number of years, Y percentage of the mortgage will be paid by the government to help you (in Britain it was 3 years and 30% or 20 years and 50%).
Three, we need to accept that for many years our economy has been over inflated (LOL, remind anyone of Gaia over inflation?) and that this is a system coming in to equilibrium and such regressions towards equilibrium are painful. Jobs WILL be lost, your stock value WILL go down, your house value WILL go down, the cost of goods WILL go up, and very likely your taxes WILL go up - America will be living at a tighter margin. We are going to have to accept that designer clothes, the newest computers right away, the big fancy vacations, the ostentation will have to be cut back. For in the pursuit of ostentation allowing profits - the profits have been privatized and the losses socialized. The solution, a fundamentally different way to how we view what we need/want.
Four, gov't needs to reevaluate how they expect American consumers to pay for certain items (post-high school education and medicine.) Part of the reason people took out home equity loans on houses they had not finished paying off yet was to meet bills - including college bills and medical bills. Most every other first world country has socialized medicine for emergency care and many for preventative care and child birth related care. Most every other first world country has a form of public college/university that you can get in to with out having to go in to debt provided you are smart enough/can do the work OR post-high school vocational programs (i.e. - wood working, carpentry, or auto repair.)
tl;dr much?
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