Big news all over the national news scene today as President Bush and other high level bureaucrats are going public with proposed solutions for just how to solve the current threats associated with the subprime woes.  But what actions will ultimately be taken and should the government intervene anyway?

One school of thought says that the crisis has indeed happened and the mortgage market and lenders will just have to solve it themselves.  If that means the nontraditional lenders go belly up, well then so be it.  While most of us don’t feel too much pity for the lenders that created their own predicament, we do at least partially understand the pressure put on homeowners caught up in the middle.

More or less, this is also the basis of the Bush administration’s effort to address the situation.  Bush said today, “A federal bailout of lenders would only encourage a recurrence of the problem,” and explained that “The government’s got a role to play, but it is limited.”

Bush offered modest help when it comes to asking Congress to give the Federal Housing Administration (FHA) the ability to accept more homeowners with subprime mortgages into its guaranteed program if they do have good credit.  Also, he promised to encourage the reform of lending practices and tax codes for affected borrowers.

In the end, the problem is not going to be solved by any one solution, but rather by an intricate balance.  The conditions are forcing some lenders out of business and require others to change their business model away from subprime lending.  Some homeowners are going to go through really painful situations.

Hopefully all involved will come away having learned a lesson and we’ll get back in touch with reality.  In many ways what’s happening now is much the same as what happened in the dotcom boom and crash in the late 1990’s.  Heck, looking at the big picture, this whole market meltdown could actually end up being a good thing!