Way to go on comparing apples and oranges. Bankruptcy does lead to modified contracts but the process of these modifications has been known for decades. It is well known and bankruptcy law has been relatively stable. If Obama et al. decided to change bankruptcy law every month in ill-defined ways then you will see the same cry for the same well-justified reason: the government induced uncertainty is far more harmful as compared to the benefits.
"There's really no good reason for homes to be an exception and it's one of the more direct ways to keep people in homes."
Pure bullshit. There is an excellent reason to have special rules regarding housing when it comes to bankruptcy and mortgages. Namely, if lenders are assured that their claim to the property will not be removed during a bankruptcy, the loan is a lower risk loan and will therefore result in lower interest payments. Historically, this has been correct. The current housing glut is partly due to the over-exuberance of bankers (for which they should be allowed to go bankrupt) and partly due to government action like Fannie Mae and Freddy Mac which subsidized housing for years, excessively loose monetary policy which reduced the price of debt in general (and since housing is already is nice market for debt due to bankruptcy law, this hit housing very hard), community-reinvestment act and friends, etc...
"Frankly, this is probably better for all of us considering the massive overallocation of resources to housing investment and the current existence of too much housing stock."
So houses are overvalued. Yeah, but the problem lies with the other congressional regulation which indeed needs to go down the drain but now we are dreaming.
"Either we help people stay in them and they cover a percent of the mortgage or we kick them out and sell the house to... oh wait. Yeah. I'm more scared of the knockon effects of allowing a massive devaluation in housing than the potential knockon effects of judges modifying mortgages in bankruptcy just like they modify all other obligations in bankruptcy."
Um... either way, the value of houses decline. Just that one way, home owners are still stuck under what is possibly crushing debt and we have just established a precedent that Irresponsible debt = GOOD and by implication Responsibility and financial planning = BAD and in a society which already has too much debt, do you really want to do that? In contrast, with the other path, we allow the banks to do what they do best: deal with mortgages.
"Further, Phil was talking to people with $2 TRILLION to invest? Um, maybe, but that's 15 percent of US GDP. Pretty rare air there, and the idea that all these people (and perhaps Phil, too) weren't simply talking their book is nonsense."
Um... the US economy has ~$150 trillion of capital (by some reliable counts. This is a difficult variable to determine). GDP is how much that increases. You do realize that $2 Trillion is nowhere close to what these people will earn. Furthermore, the second part is ad hominem (which is not complete unjustified as these people rely heavily on their reputation in the article). Still their basic point that investors are scared shitless of an overly active (and in this case, confused) government. This has actually been demonstrated in the past. In particular, it is very interesting to look at investor confidence surveys during ~1938 (when FDR was Mr. Anti-Business) and ~1942-3 (when FDR was Mr. Win-The-War). Investment and gdp numbers also closely follow.
Lastly, this is not the first time that I have heard this sentiment.
Look here: http://www.smartmoney.com/investing/stocks/government-interv... . Whats really interesting about this article is that it was written in September 2008. The article predicts that as long as government keeps meddling in the markets, prices will remain low and uncertain. Lo-and-behold, a forward looking prediction that came to be true. Admittedly, this could be coincidence but then again this is the most plausible thing that I have seen in the last 6 months of this entire affair.