Whenever the Times editorial board has opined in favor of helping troubled homeowners, most of the responses have been along the lines of, "Why should those of us who've been responsible bail out the ones who haven't?" This is the so-called moral hazard issue, and it came to mind again this week as the Los Angeles City Council and the federal government launched or expanded initiatives to aid borrowers who were struggling to pay their mortgages.

The City Council approved a plan Wednesday to offer payment-free loans of up to $75,000 to homeowners in foreclosure. The effort will be tested first in Pacoima, with $1 million available -- enough to help a couple dozen borrowers. The money will go to lenders who agree to write down the loan to the current, depressed value of the home. To participate, lenders may have to write off significantly more debt than the city will pay for, but they would still come away with more than they could collect by repossessing and selling the home.

Because the impact of foreclosures are felt most strongly by the surrounding community, it makes sense on some level for Los Angeles to try to attack the problem instead of waiting for the feds to fix their version of the loan-writedown program. But it's an expensive undertaking, and the city isn't exactly swimming in cash. The borrowers wouldn't have to make payments on the city's loans until they sold their homes. The hope is that property values would bounce back, enabling the city to be repaid with interest. But the risk is that the borrower sells or defaults before that, wiping out the city's investment. The only party sure to benefit from the transaction would be the lender, whose losses would be reduced, if not eliminated, by the money the city contributes. You could argue that there's no moral hazard in helping borrowers who are struggling because of unanticipated personal crises or unscrupulous lenders, but it's hard to find a similar way around the moral hazard problem posed by rescuing lenders. The only rationale there is that it's a necessary evil -- the stakes for communities and the economy in general are great enough for us to look the other way.

Meanwhile, the Treasury Department announced a few new wrinkles Thursday in its main program to help troubled borrowers. These were aimed mainly at those who couldn't be saved from foreclosure -- in other words, the ones who piled up so much debt, they can't afford their mortgage even if it were written down to the property's current value. The program provides financial incentives for lenders to repossess properties without foreclosing on the borrower's loan, either by allowing "short sales" or simply taking back the deeds. The main motive seems to be sparing those borrowers from having their credit scores ruined by a foreclosure. Hmmmm. No moral hazard problem there, no sirree.

I know, I know -- driving down the borrowers' credit ratings would only exacerbate their debt problems. And it's certainly true that many borrowers' troubles don't stem from fiscal recklessness or ignorance. They may have lost their jobs or endured a financially crippling illness. But those who took on gargantuan debt on a wing and a prayer, or who kept accumulating debt by living well beyond their means, should see their credit dry up. It's part of the dynamic equilibrium that the system provides, albeit not in a precise, Swiss watch sort of way. That's why I cringe at the thought of subsidizing this group of borrowers and their lenders, who really should bear the full cost of the decisions they made.

Free-marketeers and banking industry allies cheered yesterday when the Senate buried a proposal to let bankruptcy judges "cram down" home mortgage debt. Under current law, when homeowners file for personal bankruptcy, the court cannot alter the terms of the loans they hold on the homes they live in. Loans for vacation homes, investment properties, farms, commercial bulidings are all fair game for bankruptcy judges, but principle-residence mortgages are not. As a result, mortgage holders who file for bankruptcy are pretty much compelled to sell their homes to pay off whatever they owe. On Thursday, Sen. Dick Durbin (D-Ill.) sponsored an amendment to S 895, a bill to avert some foreclosures that would have put home mortgages on the same bankruptcy footing as other types of loans, but the amendment was defeated, 51-45.

Score another one for bank-industry lobbyists, who persuasively argued that exposing home mortgages to cramdowns would raise future interest rates. Of course it would. But so what?

One of the Big Important Lessons of the most recent housing bubble is that the U.S. has gone too far in its efforts to encourage home ownership. Guarding against cramdowns is one of several ways the feds and states work to make home ownership more affordable; others include the tax deduction for mortgage interest, measures that cap property tax increases (such as California's Proposition 13), and federal mortgage guarantee and insurance programs. These mechanisms have not just reduced the price of borrowing enough to allow some renters to buy houses; they've also encouraged speculators to try to create wealth out of thin air by betting the banks' money on rising property values. Many banks were happy to go along for the ride even if it meant lending sums that couldn't possibly be repaid. They just wanted the fees from the loan, not the long-term revenue stream, which they sold (along with the risk of default) to investors -- among them Fannie Mae and Freddie Mac, which Congress created and maintained ostensibly to protect would-be borrowers against a shortage of loans.

Traditionally, lenders assumed the repayment or credit risk, which was offset by their ability to repossess and resell the properties in question. Borrowers, meanwhile, assumed the investment risk -- that is, the risk that the property wouldn't prove to be as valuable as they'd hoped. Allowing bankruptcy courts to cram down home mortgage debt would make lenders share some of the investment risk with borrower, and they would almost certainly respond by charging higher interest rates (although the experience with farm and commercial loans suggests the increase would be small). More important, though, they'd also pay a lot more attention to the borrower's ability to repay. And after the debacle we're still mired in, who doesn't want that?

I understand the moral hazard argument. Responsible folks would suffer in the future if we intervened on behalf of the binge borrowers. Setting aside for a moment the number of borrowers who aren't to blame for their current troubles (e.g., those who lost their jobs, or who were fraudulently steered into subprime loans), consider what the aid here would be. Judges would have the power to write down mortgage debt only to the point that it matches the current, presumably depressed value of the house. If borrowers couldn't afford the payments at that level, there would be no cramdown. In other words, write-downs would happen only if they were better for the lenders in the long run than foreclosing and reselling the home.

Rational lenders would be doing those modifications anyway, regardless of the indignation felt by "responsible" homeowners. But a large percentage of the loans in trouble are owned by investors (through complex securities) and managed by loan servicing companies, which have been deterred from writing down debt by opposition from investors. The mere prospect of cramdowns may help servicers overcome investors' reluctance to making significant but economically rational modifications before borrowers go into bankruptcy. Of course, the banking industry might have prefered the alternative offered by S 895: it would provide servicers that modify loans immunity against investors' lawsuits. But that's more of an assault on the sanctity of contracts than allowing cramdowns would be -- the bankruptcy process, after all, is designed to tear up contracts in an effort to mitigate all parties' losses.

Credit: AP Photo / Nick Ut

The Obama administration added two more elements today to its homeowner-assistance program, offering help to more borrowers -- and encouraging investors to offload more of their riskiest mortgages onto the taxpayers.

The original Making Home Affordable program, which the Treasury Department announced earlier this year, enabled more troubled borrowers to refinance their Freddie Mac- or Fannie Mae-backed mortgages. It also provided subsidies to encourage lenders, loan servicing companies and borrowers to agree to temporary loan modifications that reduced monthly payments to 31% of the borrower's income. But the program didn't do anything about second mortgages, nor did it address many troubled borrowers with loans that were deeply underwater (that is, their homes were worth 95% or less of the amount they owed).

One of the new features announced today would enable borrowers with second mortgages -- a situation that describes about 50% of those in danger of foreclosure -- to get a temporary cut in interest rates on both their loans. This initiative addresses two problems with the loan modification program: the need to pay off a second loan made it impossible for some borrowers to afford their homes, even with a steep reduction in the primary mortgage, and the refusal by some lenders holding onto first mortgages to accept lower monthly payments as long as the second mortgage holder kept collecting the full amount.

The other initiative announced today would integrate a new version of the Hope for Homeowners program into the loan modification efforts. That program calls for lenders to write down a troubled borrower's debt until it's a bit less than the value of the house, then refinance the mortgage into a loan guaranteed by the Federal Housing Administration. The original version, which Congress approved last year, was a bust among lenders and borrowers alike -- in trying to screen out fraudulent borrowers and prevent unjust enrichment, Congress had made the program unwieldy and unattractive. Lawmakers are moving a bill to address the major shortcomings (it's been hotly disputed, but for other reasons); in the meantime, the Treasury Department said it would require mortgage servicing companies to evaluate troubled borrowers who were in line for loan modifications to see if they qualified for Hope for Homeowners. If they did qualify, the servicers would be required to ask the investors who owned the mortgage if they wanted to write it down and hand off the borrower off to another, FHA-backed lender. The thinking is that investors might settle for the lower payout offered by Hope for Homeowners rather than modifying the loan because a modification would still leave the borrower underwater -- and tempted to mail in his keys.

Here's the problem, though. The greater the risk of a borrower abandoning a home, the more likely an investor group is going to want to turn that loan over to Uncle Sam through Hope for Homeowners. The FHA's underwriters would provide some protection against the feds assuming the worst loans, but a more important risk factor is housing prices. If the worst of the decline is behind us, borrowers who walk out on loans written down through the Hope for Homeowners program would leave the FHA guaranteeing amounts below or near the current value of the repossessed home. But if property values slide much further, homeowners would have more reason to give up on their loans, and the FHA would be stuck with considerable losses.

The changes to Hope for Homeowners will take a few months to put into place, buying more time for the market to bottom out. The flip side is that the longer it takes to get the program going, the fewer homeowners who'll be helped. If you're concerned about the impact of foreclosures on neighborhoods, the banking system and the economy, that's problematic. But if you're disturbed by the thought of the government bailing out any homeowners, no delay is too long.

Credit: AP Photo / David Zalubowski, FILE

You know how they call newspapers the "first draft of history"? Our editorial this morning in defense of the HALO program -- a three-pronged effort to keep homeless, non-violent offenders out of the criminal justice system -- is a pretty good example. By the time it was published, it may already have been moot.

Here's a quick tick-tock. City Attorney Rocky Delgadillo's office was planning to hold a press conference Thursday about an expansion of HALO, which is part of the Safer Cities Initiative in skid row. The program was planning to step up efforts to help homeless people resolve their legal problems without going to court or jail -- in particular, enabling them to discharge citations by performing community service (which could include attending classes or getting counseling). Late Tuesday afternoon, one of the organizers of the event sent an e-mail to others in Delgadillo's camp, noting that the conference had to be canceled because Mayor Antonio Villaraigosa's new budget wiped out HALO's funding (along with the rest of the Safer Cities Initiative). She also asked for help alerting those who'd already been invited to attend, including city council members, top brass at the LAPD, business leaders and skid row service providers.

Opposition to the proposed cut built swiftly, and by early Wednesday afternoon we in the Opinion Manufacturing Division had gotten wind of it. By the time I started talking to service providers and business people who were familiar with the program, supporters of HALO were well along in their efforts to persuade the City Council to restore its funding. They planned to make their case to the council Monday, when the Budget and Finance Committee is scheduled to review the public safety portion of the budget, among others. Curious why Villaraigosa had singled out the Safer Cities Initiative, I put in a call to his press office. Press Secretary Matt Szabo said he wasn't aware of the cut, so he tried to round up someone who could respond to my questions. No answer came by deadline, so we went ahead and ran an editorial praising HALO and urging the city not to sacrifice such programs without good reason:

... [T]he budget gap is so wide that city leaders may have little choice but to cut some programs that confer real, cost-effective benefits. But they need not cut just to cut. They must do their best to keep intact the best models for delivering services, spending tax dollars wisely and laying a foundation for better times.

Later that evening, I got an urgent message from Szabo saying that the proposed cut had been "inadvertent," and that Villaraigosa had not intended to shrink the Safer Cities staff. The mayor will seek an amendment to restore the positions. It's still a mystery to me how HALO's money vanished -- Szabo says no one in the mayor's office approved the cut -- but I care less about that than seeing the funding reappear.

Credit: David McNew / Getty Images

The clean-truck program for the Los Angeles port tries to accomplish too much by mixing the unionization of truck drivers with a worthy environmental agenda, the editorial board complains, saying that the move to eliminate independent truckers is tying up the needed anti-pollution program in court -- where it will probably lose anyway. One city program that shouldn't be lost even in an unthinkably bad budget year is the HALO initiative, which diverts homeless, nonviolent offenders to treatment programs, the board advises. Held together by four staffers, it's one program that not only does good work, but truly saves the public more than it costs.

The board also stands firmly behind California's high-school exit exam after a study found that, among low-performing students, girls and minorities were more likely to flunk the test and thus lose out on a diploma. The answer lies in educating low-performing students so they can pass, the board concludes; they will face other high-stakes tests in life, including increasingly common exams to get jobs and society should not accept that girls and minorities will forever be less able to find well-paid employment.

On the other side of the fold, Bill Maher doesn't get what all the tea-party protests were about, and thinks that Republicans don't get what the concerns of the majority of Americans are about. [Editor's note: If only he'd read the 1,688 comments that Marc Cooper received last week when he wrote a similarly forehead-slapping op-ed.]

Here are the big issues for normal people: the war, the economy, the environment, mending fences with our enemies and allies, and the rule of law.

And here's the list of Republican obsessions since President Obama took office: that his birth certificate is supposedly fake, he uses a teleprompter too much, he bowed to a Saudi guy, Europeans like him, he gives inappropriate gifts, his wife shamelessly flaunts her upper arms, and he shook hands with Hugo Chavez and slipped him the nuclear launch codes.

Do these sound like the concerns of a healthy, vibrant political party?

And a constitutional law professor writes in defense of scrapping the written test for firefighters in New Haven, Conn., after black and Latino firefighters scored lower, cutting them from the ranks of those considered for promotion. A lawsuit challenging the city's decision is now before the U.S. Supreme Court. The problem isn't in testing people for promotion, Kimberly West-Faulcon writes, but in using a bad test to measure the qualities needed for advancement -- especially after the city was advised by testing experts that there were better tests around.    
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On Monday's editorial page, The Times takes a look at LAPD Chief William J. Bratton's campaign commercial for city attorney candidate Jack Weiss and doesn't like what it sees.

Bratton, thankfully, is no [Daryl] Gates, but his political activity on behalf of his boss, Mayor Antonio Villaraigosa, is unbecoming, just as the Christopher Commission warned. His endorsement of Weiss for city attorney is worse — not because Weiss is an unworthy candidate but because of the office he is seeking. Should Weiss win, he would be responsible for representing the Police Department and its officers and for negotiating with plaintiffs who bring lawsuits against the LAPD. That argues for a respectful but arm’s length relationship, not one of political debts. Bratton should study his history, and stay out of city politics.

The page also calls for the release of Uighurs held improperly at Guantanamo Bay, and notes that the moral argument against the death penalty is only enhanced by the fact that holding condemned prisoners pending execution is prohibitively expensive.

On the Op-Ed page, USC law professor Clare Pastore makes the case for legal services funding and "civil Gideon" -- recognizing a right to provide counsel to the indigent in civil cases just as the Sixth Amendment requires in criminal cases.

Cheryl Benard, co-director of the Alternative Strategies Initiative at the Rand Corp., says the international community isn't helping in Afghanistan when it obsesses about Hamid Karzai, talks about removing him, and plays into the nation's "dysfunctional personality cult."

To venerate new leaders as demigods, only to demote them to villains within the space of a few years, is not a recipe for successful nation-building. Afghans need to honor the laws and the institutions of their new democracy and to stop focusing so excessively on the individuals who govern them. They need standards of conduct, rules obeyed both by the leader and his kin and cronies, pragmatic expectations — and, when they sour on their leaders, an established process of political succession that does not include murder.

And columnist Gregory Rodriguez examines the societal costs of loneliness and alienation.

We have to stop looking at declining civic participation as a primarily political problem that is solvable through increased activism. Although activism may increase participation, which in turn translates into less social isolation, it does not get to the deeper problem of the quality of connections we form with the people who surround us on a day-to-day basis.

*Photo: Rick Loomis / Los Angeles Times

Yes, it's raining, but the time has never been more perfect for tighter restrictions on water use, the editorial board suggests. Even stricter limits are coming, so we're better off working out the kinks on this now.

The sooner we get into the habit of using less water, the easier that cutback will be. The DWP estimates that outdoor irrigation -- running sprinklers -- makes up 30% of residential water use in Los Angeles. Limiting sprinkler use to Mondays and Thursdays would be a simple-to-remember (and simple-to-enforce) way to reduce waste. Ideally, we'd like to see Angelenos change their habits in longer-lasting ways, such as landscaping with drought-tolerant plants. But as a means of cutting use and promoting mindfulness, these restrictions make sense.

The board mourns waste in the federal economic stimulus package, saying several of the allocations offer little hope that they will jolt the economy or even provide jobs. And though the board isn't much happier with the state budget deal, it recognizes that the choice right now isn't between this and a better budget, but between this and the state's financial meltdown.

On the other side of the fold, Australian journalist Gerard Wright ponders the lessons to be learned from the disastrous wildfires in his country that killed close to 200 people.

They will examine how a decade of prosperity encouraged suburban families to build dream houses in more rural areas, and how many of those families never learned the self-sufficiency and community spirit that is part of the Australian rural ethos.

And, Facebook or not, columnist Joel Stein doesn't want to know 25 things about you, and he's willing to bet that you don't want to know 25 things about him, even though he's quite willing to tell you all about them, anyway.

Illustration by Lisa Benson/Washington Post Writers Group

The Opinion Manufacturing Division offers two very different views on the birth of octuplets in Bellflower. Author William H. Woodwell Jr., citing the troubles his family experienced with twin daughters born 16 weeks early, throws a glass of cold water on the celebratory coverage of the Bellflower babies. Extremely premature births impose tremendous costs, Woodwell argues, and often lead to less than fully functional children. That's why he calls for a crackdown on fertility treatments and -- here's the ugly part -- culling some of the multiple fetuses they sometimes create:

Fertility doctors must be held more accountable for their actions. The medically assisted birth of triplets or higher should be viewed as the equivalent of malpractice.

In addition, when fertility treatments yield triplets or more, we need to promote responsible decision-making on the part of parents -- chiefly, by encouraging or even somehow requiring them to engage in multifetal reduction.

Sorry, but that sounds too much like China's brutal one-child policy to me. (Remember, irate letter writers, that Op-Ed writers do not express the Views of This Newspaper.) On the other side of the spread, the editorial board takes a much more equanimious approach to the event. It notes the great challenges that the births pose to the family, yet it doesn't assume the worst:

People might cluck, but then people are always ready to cluck at the parenting decisions of others. We're more inclined, as a society, to define and foresee problems in eccentricity than to think that perhaps it will turn out to be simply extraordinary.

Elsewhere in the editorial stack, the board blasts Sen. John Cornyn (R-Texas) for trying to make President Obama's choice for attorney general, Eric Holder, promise not to prosecute a set of potential defendants (U.S. intelligence officers who used "enhanced interrogation techniques") before he's confirmed. And it praises President Obama for starting his efforts in the Middle East on the right note, giving his first official television interview as president to the Saudi-owned satellite news channel Al Arabiya. Hmm. I wonder if Obama's appearance drew more viewers than Al Jazeera did when it aired its last Osama bin Laden tape.

Back in Op-Ed land, freelance writer Lee Gapay offers a rare bit of unadulterated good news: He's finally found space in a subsidized housing project for seniors after 6 1/2 years spent living in his pickup truck. (You may remember Gapay from his last piece about being homeless, which ran on Thanksgiving Day.) And columnist Tim Rutten writes that the decision by Pope Benedict XVI to rescind the excommunications of four anti-Semitic bishops in a traditionalist Catholic sect wasn't merely an inside-the-Vatican issue, but also a blow to religious liberty and tolerance.

Photo: Kaiser Permanente Bellflower Medical Center/Getty Images

When is a budget not a budget? When it's the California Republicans' specious proposal for cutting $22 billion in state spending. The Times editorial board today explains the difference between the GOP's offer and a real attempt to negotiate:

The problem with the $22-billion GOP plan as a starting point is that it doesn't bring the state the cash it needs today. Instead, it's in some sense a shopping list of things the party's lawmakers wish hadn't happened over the last 10 years.

The board urges Washington to give General Motors and Chrysler some short-term help, then come up with a better reason not to let the companies go into Chapter 11. It also calls on California to implement the recommendations in the state EPA's "Green Chemistry" report.

On the Op-Ed side of the ledger, former Screen Actors Guild President Melissa Gilbert exhorts fellow thespians to vote against authorizing a strike. A work stoppage in the midst of a recession is not just a "foolhardy" idea, Gilbert writes, but also a move SAG simply can't afford:

The cost of the current negotiations, which have dragged on since the spring, must be approaching $1 million. The guild reports that it has about $48 million in reserves, but nearly every penny is already allocated for operating costs. Where are the millions more needed to fund a strike, including the staff overtime and travel expenses that are inevitable?

Columnist Tim Rutten looks peers into the staggeringly large Ponzi scheme allegedly perpetrated by Bernie Madoff, a regulated securities broker-dealer, and sees -- gasp! -- the bitter fruits of deregulation. Hmm. I thought Madoff was accused of perpetrating much of the fraud during the years Eliot Spitzer -- Wall Street's self-appointed regulator-in-chief -- was New York's crusading attorney general. Perhaps Spitzer needed more rules in the securities rulebook. Or maybe he was just distracted?

Rounding out the day's brother-can-you-spare-a-dime theme, physician Jan Gurley, who treats homeless patients in San Francisco, calls on the better off among us to spread some holiday cheer to those living on the streets:

When you personally give a gift to a homeless person, you aren't playing Santa -- you are Santa. I'm a doctor who treats the homeless, and I can promise you, no one else is likely to drop off a present out of the blue to the huddle of human misery you pass by every day.

At a loss for what to give a stranger who has nothing and needs everything? Check out Gurley's suggestions here.

AP Photo/Rich Pedroncelli

The Times editorial board weighs in today on President-elect Barack Obama's economic brain trust, especially two top advisors who represent a very different set of constituents. New York Federal Reserve chief Timothy F. Geithner, Obama's pick for Treasury secretary, has helped funnel billions in tax dollars toward financial institutions, while former Treasury Secretary Lawrence H. Summers, Obama's choice for director of the National Economic Council, favors vast spending on another economic stimulus package. It's an appropriate approach given the extent of our financial troubles, but the new administration needs to do more than just broaden its focus beyond Wall Street: It needs to come up with a better rationale for when and when not to intervene in the market.

We also editorialize on the increasingly bizarre trial of the men accused of killing Russian journalist Anna Politkovskaya. After a military court decided to open its doors to journalists, they were abruptly shut again by a judge who claimed jurors feared for their safety -- yet one of the jurors subsequently told radio listeners that the jurors hadn't sought a closed court and had refused to sign a statement requesting a media ban. The Russian justice system itself is on trial in this case, so the judge needs to find a way to guarantee both jurors' safety and the security of state secrets.

Lastly, The Times points out that the still-undecided state Senate race between Republican Tony Strickland and Democrat Hannah-Beth Jackson doesn't make a strong case for redistricting -- but it's a good idea anyway. Strickland and Jackson ran the kind of polarizing, old-school campaign common in today's "safe" districts, even though their 19th Senate District contains a pretty even match of Republicans and Democrats. The idea of Proposition 11 on the Nov. 4 ballot is to end gerrymandering and make more districts similar to the 19th, with the goal of forcing politicians to listen to a broader cross-section of their constituents and thus encouraging more centrist lawmakers. It's a solid notion, even if it didn't quite work in the case of Strickland and Jackson.

On the Op-Ed page, columnist Jonah Goldberg calls public-school teachers' unions "arguably the single worst mainstream institution in our country today." Goldberg is tired of conservatives accusing President-elect Barack Obama of hypocrisy for sending his children to expensive private schools while rejecting vouchers that would allow poor families to do the same, and even more tired of Democratic politicians in thrall to teachers' unions. Both sides simply need to stop tolerating awful schools.

Also, American Civil Liberties Union attorney Jonathan Hafetz, who represents a Qatari man arrested in 2001 and never tried because he was labeled an "enemy combatant," calls his client's detention "a radical departure from America's deepest values, a moment when our country lost its bearings."

For more than 200 years, America has stood by the principle that people can't be imprisoned without being charged. It not only embodies the country's ideals but also reflects a practical understanding that the criminal justice system remains the most effective way of fighting terrorism.

Finally, Navy Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, urges Americans to do a better job of looking after their veterans and the families of those who have been killed in action.

We live in a country that doesn't force our young men and women to pick up arms and go fight. We don't have to. They do it willingly, even eagerly. Not because they enjoy danger or killing or sacrifice, but rather in spite of those things. They serve and they work so hard so that someday -- maybe -- our children and grandchildren might not have to. All they want in return is our gratitude, 100% of it. It's not too much to ask.

* Illustration by Jonathan Twingley / For The Times