Or at the very least behaved like one. You know what they say, if it looks like a duck, swims like a duck and quacks like a duck, it's likely a duck. I've covered some of these topics earlier but want to bring together some new factors that show that house prices are not sustainable and have been artificially inflated, along with some new charts to illustrate the point.

While I'm pretty good at math, I'm not a mathematician. What I can do is recognize and relate patterns. So there won't be any complex formulas as in a more advanced proof, but it should also be easier to understand.

I'm also going to try and debunk the myth that interest rates made house prices affordable, even though prices had grown so fast. Using conservative calculations a responsible buyer should use when deciding how much to spend on a house, it appears that in 2006 houses were selling for almost twice what the median household could afford.

I've discussed the lack of success people were having with getting their mortgage modifications in past posts. Either because the banks aren't willing to renegotiate a mortgage with terms that reflect that currect fair market value of a home, dragging their feet in processing requests to modify mortgages or because borrowers are having a hard time getting the necessary paperwork done in time.

The $300 billion Housing Rescue Bill set up a program to help get 400,000 homeowners in trouble into better mortgages. The FDIC has also been working on getting mortgages modified for banks that have failed such as IndyMac.

And now today Reuters is reporting that the rate of defaults for mortgages that have already been modified is rising.

The data showed that after six months, nearly 37 percent of mortgage loans modified in the first quarter were 60 or more days delinquent. After three months, 19 percent were 60 or more days delinquent or in the process of foreclosure.

"One very troubling point is that, whether measured using 30-day or 60-day delinquencies, re-default rates increased each month and showed no signs of leveling off after six months or even eight months," John Dugan, head of the Office of the Comptroller of the Currency, said in a statement.

Lenders may need to get more aggressive with their modifications if they want to keep homeowners in their homes. They should have an incentive to do so because the current real estate market is very soft and they would have a hard time unloading their REOs.

But with all the money the US has been siphoning into the coffers of these big banks through the Federal Reserve and the various bailout programs, do they really care? They got their money. Why shouldn't they work on repairing the broken housing market?

What more could they want? More importantly, do they really think there is much more to give?

Today, more news on the failure of the Housing Rescue Bill to help homeowners that are having trouble paying their mortgages and possibly facing foreclosure.

The three-year program was supposed to help 400,000 borrowers avoid foreclosure. But it has attracted only 312 applications since its October launch because it is too expensive and onerous for lenders and borrowers alike, Preston said in an interview.

312 is far short of the goal of 400,000. Back in September I wrote on how the $700 billion Wall St bailout was not likely to provide homeowners with foreclosure help. Part of that discussions was about how hard it was for homeowners to get loan modifications.

I believe part of the reason for the failure was that lenders were able to choose if they wanted to participate or not. To do so, they would have to be willing to write down the mortgage to less than the current fair market value of the home. Since house values had already dropped significantly, this would mean a decent chunk of change.

You would think that the alternative of having to take posession of the home in the hopes of selling it in this market, where inventory is high and demand is low, wouldn't be very attractive. But when you factor in the billions in bailouts the banks have been getting it seems like a sweet deal. The lenders get the cash AND they get to take the house back.

It's a shame because getting people into these types of mortgages could have greatly helped with the foreclosure epidemic we're seeing.

Another part of the Housing Rescue Bill dealt with setting aside $3.92 billion to acquire and redevelop foreclosures. This partly helps out the communities by having homes that are unoccupied due to foreclosure not sit idle and unmaintained, becoming a blight in the neighborhood that would further reduce property values.

The big benefit though, again goes to the lenders. These homes have an owner. The lenders that took posession of them as a result of a foreclosure. The banks hold them, don't maintain them so they become an eyesore then federal (taxpayer) money is used to buy the homes from the banks and fix them up.

So far trillions of dollars have been spent or set aside to clean up the credit mess and yesterday I commented on another $7.4 trillion being set aside. Somehow it's being billed as an investment that will actually make money, as were other bailouts.

Newsflash. You don't make money pouring money into a collapsing bubble, you put it into the next bubble, and unfortunately, we're probably going to keep having them.

Just consider what people's reactions would have been if taxpayer money went to save Pets.com or some other internet bubble icon. People think of banks and other financial institutions differently, but lately their actions haven't been in accord with the traditional sound principals that allowed many to be successful for decades. The model is broken and no amount of money will bring the bubble economy back.

Or think of it like an old car that needs repair. You're going to have to make a repair/replace decision. If you smash up an old car, it may be cheaper to replace it than to try and repair it. With all the money being thrown around it seems only a few in Washington, like Ron Paul are actually even considering this option.

I don't know how to replace our failed Wall Street companies, but lets look at some better ways to spend trillions of dollars.

Going Green

Well, people are speculating that the next bubble will be in Eco Technology. The way other bubbles play out, talking about what the next bubble will be, might cause it to not bubble. Think about bubble mentality. While we're in a bubble everyone denies we're in a bubble. As long as people don't think there is a bubble it will continue. Widespread knowledge of a bubble seems to help deflate it.

But replacing or dirty power plants with cleaner ones is a good idea. Global warming or not, the potential health impacts alone of cleaner air and water are non-trivial. Lets start with coal. Even though we keep hearing about "clean coal", many of the existing coal power plants have been grandfathered and do not even meet today's pollution standards. There are also people questioning how effective "clean coal" actually is. So lets see what it would take to replace all our existing coal based generators.

According to the US Department of Energy, there are 1,495 generators in the US that use coal as it's primary fuel source.  The total nameplate capacity is 335,830 MWs.

Unenergy has a cost comparison of energy supply technologies which shows the capital costs involved in building different types of power plants, including green ones. I used their numbers to create the table below that shows what it would cost to replace the existing coal generators with new, environmentaly friendly alternatives. Dollar values are in millions.

Type	Net Output (MW/hr)	# required	Design/Test cost	Cost per Plant	Total cost to replace coal
Solar Tower	195	1722.21	$300	$740	$1,274,733
Solar Tower & PV panels	340	987.74	$470	$980	$968,451
Geothermal steam	270	1243.82	$750	$1,100	$1,368,947
Wave Power	180	1865.72	$400	$1,250	$2,332,555
Concentrated Solar PV	145	2316.07	$300	$890	$2,061,603
Parabolic Concentrated Solar steam	195	1722.21	$500	$1,150	$1,981,038
Concentrated Solar Tower (Steam)	93	3611.08	$400	$1,000	$3,611,479
Conventional PV	95	3535.06	$100	$1,100	$3,888,662
Wind Farms	190	1767.53	$100	$1,250	$2,209,510

So for a couple trillion we could replace all the existing coal generators with cleaner technology. According to Unenergy, the operational cost of some of these plants is also considerably less and their profitability should be better. Instead of giving hand outs to billionaire bankers and subsidies to energy companies that are making record profits, why not put money into technology that will be better for all of us? Cleaner air and water should also mean better quality of life and reduced health care costs.

The job creation will also help with the unemployment problems we're looking at. Lower cost of energy and healthcare might make it profitable to bring more manufacturing back to the US.

Healthcare

I've seen estimates of single person coverage averages from $2,200-$4,400 per year. There are about 50 million uninsured and 75 million underinsured people in america. A trillion dollars could pay for their insurance premiums for 2-4 years.

Is it really a wise idea to pour so much money into a system that has failed on such a large scale? Couldn't we do better?

Typically, when you work for a mid to large corporation you have your annual performance review and the result of that, along with the performance of the company and their profits as a whole determined your budget.

I know we live in a faster paced world and we need to cut some corners, but even though we call it a bonus for brevity, let's not forget what it's all about. It's rewarding employees for their good work in growing the company's profits.

How do you justify anyone getting a bonus when the actions of the people running these companies resulted in large losses and/or write down, destroying shareholder equity and the need to literally have a former Wall St CEO get down on his knees and beg Congress for a $700 Billion hand out to prevent a global economic crisis?

What part of that gives them the right to pat themselves on the back and write themselves checks?

In what other industries would that happen? Imagine an engineering and construction firm that completely screws up the building of a new bridge that results in a collapse that causes many injuries and millions in losses to the city. Not counting the cost of rebuilding the bridge. Do you think anyone would allow public funds to be used to pay bonuses to anyone at that firm?

You don't create incentive for people to do a better job by rewarding poor performance. A bit ironic that an industry with so many accountants can't accept accountability isn't it?

Hopefully something comes out of NY AG Andrew Cuomo's investigation into bonuses paid by financial institutions that participated in the bail out.

I ran across the strangest story published a couple days ago on The North County Times by Zach Fox. It's about a family home in foreclosure. That's not all that strange, except they never missed a single payment! Are the government bailouts so good that mortgage companies are looking to add more foreclosures to their books?

Mateo Martinez, a gardener, bought a $536,500 home in Vista, CA two years ago. According to his mortgage broker, Pascual Barajas, Martinez earns about $25,000 a year. That's not enough to qualify for that big a mortgage so Barajas set him up with a stated-income mortgage, aka liar-loan. Somehow Barajas found $12,000 per month extra to add to Martinez's income. That turns out to an extra $144,000 per year. So the reported income was almost 7 times the real income. Without doing so, there was no way to qualify for a loan whos monthly payment was about $4,000. It also appears that the loan was either a interest only or negative amortization loan. According to Martinez, he had no idea that Barajas had inflated his income.

Now, $25,000/year turns out to about $2,083 per month. That's about half what the mortgage payment is. Martinez claims to have been able to keep up payments by working odd jobs and renting rooms to his sons.

Somehow, they managed to keep up mortgage payments but back in January PHH Mortgage Corp of Mount Laurel, NJ, sent a letter demanding that he prove the business he claimed in his application existed and he was earning the income claimed in his application. PHH Mortgage Corp first made big foreclosures news this past summer when a woman committed suicide while being foreclosed by PHH Mortgage Corp.

It seems that he was unable to comply and PHH demanded payment in full.  Martinez kept sending his monthly payment but they were sent back and the foreclosure process began.

The family was planning on staying in the home even though the value has dropped by nearly $200,000 and they were planning for the increased payment when the rates reset in three years. How this is possible is beyond me.

There are about 90,000 low or no doc subprime and Alt-A mortgages in NJ. What does this mean for them?