I'm a tad late sharing my thoughts on this June 6 New York Times piece on real estate prices by Yale economics professor Robert Shiller, but better late than never.

Shiller appeals to historical trends and past recessions to make a case for his theory that home prices will continue to fall for years to come, even after other consumables recover most of their lost value once the economy perks up (whenever that happens). Shiller's use of history seems solid; after all, housing prices in the L.A. area didn't start marching upward until the better part of a decade after the '91 recession, the '92 riots and several major earthquakes sent Southern California real estate values plunging in a hurry.

What puzzles me about this piece is the point at which Shiller wades from the bedrock of history to speculation about consumer behavior in the housing market, namely his attempt to get inside the minds of young couples who are renters. Writes Shiller:

Let me graciously offer myself as a case study for the "young couple now renting an apartment." I am under 30, was married in 2007 and currently rent an apartment with my wife. In our case (and for many other non-homeowning twenty-something couples), Shiller has it exactly backward: The astronomically high home prices of the pre-2007 bubble were extremely discouraging, and made buying a home back then seem as realistic a possibility as owning a private jet. Cruel as it sounds, the steep decline in prices is exactly what we have been holding out for to break into the market -- and yes, as a Los Angeles Times staffer, I do indeed see unemployment all around me. In 2006, the American-as-apple-pie ritual of buying a home was a matter of creative financing and a willingness to take major risks on homes almost no one could actually afford. Today, affording a decent down payment is simply a matter of saving enough for a few years. I can't emphasize enough how much this matters to those of us who felt locked out of the housing market by unsustainably high prices.

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.

Come on, now -- in this economic climate, with so much real estate going for a song, someone wants to spend the money to tear down one building and put up two? Two skyscrapers with all the usual blah-blah condos, shops, offices, hotel?

And it isn't just any building they're tearing down. It's the Century Plaza Hotel. The National Trust for Historic Preservation has just selected it as one of the nation's eleven most endangered places.

Oops. We're not supposed to call it the Century Plaza any more; it's the Hyatt Regency Century Plaza. Not to me, it isn't. Try as they might, these companies that buy historic buildings strive to re-brand them, but the old name, the iconic name, always sticks. The Mann movie theatre company finally gave up on ''Mann's Chinese'' and restored it to splendor as ''Grauman's Chinese.''

The Century Plaza -- born, 1966, died, probably imminently -- has a storied if not gloried history, and a larger place in the nuanced politics of hotels. I am not joking. Hotels have politics. Democrats, liberal groups and causes drift to the Beverly Hills Hotel. In San Francisco, Republicans book the St. Francis, and Democrats have been fond of the Fairmont. Nowhere is this more pronounced than in Sacramento; for years, the GOP crossed picket lines to wine and dine at the Capitol Hyatt, and the Democrats put in a block's more shoe-leather to get to the labor-friendlier Sheraton.

A Democratic president did hole up at the Century Plaza once. Lyndon Johnson -- by 1967, as hated by the left because of Vietnam -- was in residence when ten thousand anti-war protesters clamored in the streets below the glass swoop of a building. Police waded in with nightsticks, injured scores and arrested several dozen.

And after that, the Democrats left the hotel to the Republicans. Richard Nixon, as my colleague Martha Groves reported, wined and dined the first moon-landing Apollo astronauts there. Ronald Reagan treated it like an extension of the White House, and both Presidents Bush staged buoyant events there.

The King and Queen of Spain were staying there when the 1987 Whittier earthquake hit, and, given the uncertainties that early earthquake reporting engenders the farther you are from the epicenter, there were worries for a time that hardline old Fascists would try to take advantage of the moment to stage a coup against the democratically minded sovereign. 

Just because we don't have buildings that were put up when Marie Antoinette was still prancing around Versailles with her head still attached doesn't mean we don't have an architectural heritage in LA. The real investor who bought it less than a year ago said. ''A jewel in my hometown,'' he called it. ''An icon,'' he said.

Yeah, well. This is LA. You know how fast we cycle through our icons. Today's jewel is tomorrow's dingy rhinestone.

Nice try, but I'm not buying. I'm with the National Trust -- green the Century Plaza. Mend it, don't end it. Make it work. Keep it ours.  

Photo: The Century Plaza Hotel.  Credit: AP Photo/Damian Dovarganes.

Riverside resident Susan Straight says losing the "community on my street, the street I've lived on for 22 years, breaks my heart." She shares tales of metal thieves, homes going vacant and more symptoms of the recession's disproportionate toll on the Inland Empire. South L.A. resident Toni Ann Johnson tells a more upbeat story. She says the last thing she expected to get from her move to Morningside Circle was a lesson in financial planning -- and she got exactly that.

More writers will offer their on-the-ground reports of the recession's toll on their neighborhoods on our Op-Ed pages this week and occasionally in the future (click here for the complete series). But our writers aren't the only ones with tales of the economic downturn's drastic effects on their neighborhoods. Click on the "Comments" link below to post your own thoughts about the recession.

Photo credit: AP

The Times' new Mapping Project has received thousands of comments from readers online (and is still accepting input here).  Letters to the editor also received mail about the paper's attempt to draw borders for its 87 neighborhoods. 

LAAlamanac.com's Gary Thornton, who lives in Montebello, had this to say:

I was both delighted and disappointed by your article on mapping out Los Angeles neighborhoods.

In 2002, we posted the first online neighborhood map of Los Angeles, which has since been viewed close to 2 million times. A year ago, we further revised and detailed our map and published it as a poster-sized wall map. As far as I can determine, it is the first-ever privately published wall map detailing the neighborhoods of L.A.

The Times' article makes it appear as though yours is the first serious effort to map out L.A. neighborhoods. The Times has always ignored our efforts, except for an occasional citation.

And Yolanda Lopez-Head, of Glendale, offered this response to Patt Morrison's column about the project:

Way to go, Patt Morrison! Keep East L.A. where it has always been: east of the Los Angeles River.

As a seventh-generation Angeleno, born in East L.A ., raised in Boyle Heights (yes, there is a distinction) and a South L.A. Fremont High School grad, I plead with our city not to erase our geographic and cultural history so readily, so illogically, so unnecessarily.

Iran's nukes, more on the California budget deal, lowered standards for sheriff's deputies in L.A. County and nursing home deaths, too.

Image: Map of Los Angeles from Times Mapping Project.  Credit: Los Angeles Times

In Thursday's Letters, readers vent their agitation over the Republican response, led in part by former presidential candidate Sen. John McCain, to President Barack Obama's stimulus package.

Anita C. Singer, of Laguna Woods, marvels that last week's Inaugural already seems a distant event:

Sen. John McCain is still behaving as if the campaign never ended, leading the GOP charge against President Obama. Republican leaders now pontificate about bipartisanship, but their public statements foster the old Washington gridlock and the old ways of doing the public's business.

Even more disingenuous is when they rant about the Democrats' recovery plan, claiming it will increase the deficit. What short memories they have. Under Republican control of the White House and the Congress for much of the last eight years, didn't the deficit increase off the charts?

It makes me wonder, who won the 2008 election, and wasn't it supposed to signal change?

Readers also reacted strongly to this story about the disappearance of facilities for equestrians in California.  Notes Joan Klengler, of Glendale:

Times and property uses have changed over the decades, and not necessarily for the better.

Those of us fortunate enough to live with our horses, adjacent to Griffith Park, are lucky enough to have access to miles of trails that are not likely to be replaced by housing developments and condo complexes, strip malls and parking lots. But even here, protecting the park from development has been an ongoing fight.

We believe strongly that preserving this way of life is worth the effort. Every day we lose a little more of the most precious things from our past. It is time to demand accountability from elected representatives and to fight to save what's left of our neighborhoods, parks and wild places -- not just for horse people but for everyone who enjoys having a place to go to that hasn't been paved over.

More on the nation's foreclosure epidemic, too.

*Jan. 27 photo of John McCain by Chip Somodevilla/Getty Images.

As a Times editorial today notes, mega-evangelist Rick Warren steered clear of controversy  in his invocation at President Obama's inauguration. No mention of same-sex marriage, as an analogy to incest or otherwise. Warren also is receiving ecumenical Brownie points for salting his prayer with allusions to Jewish and Muslim tributes to the God of Abraham. But a friend of mine argued over drinks on Inauguration night that this amounted to "faux inclusiveness." I think he's right.

Unlike other clergymen called upon to sanctify public events, Warren didn't opt for a Judeo-Christian or even Judeo-Christian-Islamic lowest common denominator. The culmination of the invocation was the Lord's Prayer, which Warren prefaced with a prayer for the Obamas "in the name of the one who changed my life, Yeshua, Isa, Jesus, Jesus (the Spanish prounciation)." The use of Jesus' Hebrew or Aramaic name -- Yeshua -- might seem like a nod to Jews, but probably only Jews for Jesus were impressed.

Obama has every right to include an explicitly Christian prayer in his inauguration. Last year he told a Christian magazine: "Accepting Jesus Christ in my life has been  a powerful guide for my conduct and my values and my ideals." But if Obama wanted to be inclusive, he might have passed over Warren for Daniel Coughlin, the Roman Catholic priest who serves as chaplain of the U.S. House of Representatives.

Coughlin isn't above making veiled references to Christianity. Last week, in a prayer thanking God for safeguarding the US Airways plane that crashed in the Hudson River, the people's padre praised the crew for "drowning self–interest items as in a momentary baptism."  But at momentous state occasions he tends to be more circumspect than Warren was at the inauguration.

When Coughlin gave the invocation at a memorial service for former President Gerald Ford, he prayed: “{W]e  humbly ask You, Lord, to grant peace and reconciliation, healing and gentle civility to this nation, as this man so nobly tried to do in life’s singular moments by his efforts to close chapter upon chapter on America’s sadness." No mention of Jesus -- or Yeshua.

For someone who doesn't seem to get much traction within her own administration, Sheila Bair at the FDIC seems to be having more influence than anyone else in Washington over how to respond to the subprime meltdown and the resulting wave of foreclosures.

Bair started calling last year for lenders to rework potentially troubled mortgages en masse by converting adjustable rate loans into fixed-rate ones. The administration instead promoted the Hope Now Alliance, a voluntary effort by lenders to adjust troubled mortgages on a case-by-case basis. The result: far more homes went into foreclosure each month than loans were modified (according to Hope Now, only recently has the pace of modifications caught up to the pace of defaults). Worse, it took lenders months to start offering meaningful adjustments in interest rates and monthly payments, rather than simply tacking unpaid interest and penalties onto the back end of loans.

This year, Bair set the tone again when the FDIC took over IndyMac Bank and its portfolio of poorly underwritten (and rapidly defaulting) mortgages. It declared a moratorium on foreclosures as it examined the portfolio, determining which mortgages met or could meet a standard level of affordability -- a 38% debt-to-income ratio (that is, monthly payments no greater than 38% of the borrower's monthly pay) -- given certain types of loan modifications, including steep but temporary reductions in interest, longer payback periods and delayed repayment of a portion of the loan balance. About two-thirds of the at-risk borrowers qualified for help, although the agency initially had trouble reaching many of those borrowers. If this kind of plan were implemented widely, the FDIC said last week, about 1.5 million homeowners could be saved from default.

Bair's approach  has been embraced by California lawmakers who've been active on the foreclosure issue, notably Assemblyman Ted Lieu (D-Torrance) and Assembly Speaker Karen Bass (D-Los Angeles), as well as Gov. Arnold Schwarzenegger. The main difference between the governor and lawmakers is the length of the moratoria they propose -- the Democrats want 120 days, Schwarzenegger proposed 90. That's a minor detail when compared to their agreement on the need to pressure lenders to make more sweeping and aggressive moves to avert foreclosures. Lieu's bill has hit a snag in Sacramento, yet the ideas he and the governor espouse reflect an emerging consensus on how to handle the foreclosure crisis. Sparked by Bair -- outside of Washington, at least -- it reflects how deftly she's handled the moral hazard issue. The FDIC's approach doesn't save lenders or borrowers from the pain of having made bad choices -- none of the borrower's debt would be forgiven (a costly move that has little support among banks), nor would lenders or investors recoup the face value of the loans. But it would help lenders recover more than they would if they repossessed the home, while giving borrowers time to find a less calamatous way out of their troubles.

Photo by Chip Somodevilla/Getty Images

Looks like the federal government won't be cornering the market on troubled bank assets after all. At least not this year.

Treasury Secretary Henry M. Paulson Jr. disclosed today that the $700 billion Troubled Asset Relief Program approved by Congress last month at his request won't buy ... troubled assets. Despite its zeal to sell the rescue plan, it was clear from the start that the administration's vision for the program was blurry. Some officials wanted to pay a premium for the assets in question (mortgages, mortgage-backed securities and other "illiquid" financial instruments) as a way of recapitalizing struggling banks. Others just wanted to establish market values for those assets to clarify how rich (or poor) the banks that owned them were. The Times' editorial board liked the latter approach, not the former, because there are far more efficient ways to recapitalize banks than overpaying for defaulting loans. And in fact, that's what the Treasury Department has been doing with the TARP funds spent thus far (close to $300 billion): making direct investments in banks and other financial institutions (read: American International Group).

Just because the government isn't shopping for troubled assets, however, that doesn't mean the Treasury Department won't add some to the taxpayers' portfolio. As part of the AIG bailout, the government is helping AIG buy $70 billion worth of exotic derivatives called collateralized debt obligations that banks issued but AIG insured. (The government and AIG will put up $35 billion for the securities, a price that reflects their current market value.) According to the Wall Street Journal, AIG will have to cover the first $5 billion in losses incurred by the CDOs, which are backed by subprime mortgages and other loans. In addition, Paulson laid out two further objectives for the TARP that could result in the government acquiring or guaranteeing risky bets placed by lenders. One is to provide more credit for consumers by lending money to banks against the collateral of securitized auto and credit-card debt. The other is to avert foreclosures, potentially by backing new loans to some troubled borrowers. Although there's no specific plan for aiding homeowners yet, FDIC chief Sheila Bair has pushed for the feds to guarantee refinancings for borrowers whose mortgages could be modified to meet a standard measure of affordability.

Meanwhile, the administration is resisting pressure from lawmakers to make more demands on banks that receive federal help. Lawmakers had particularly sought to require those banks to make new loans, rather than hoarding the money or using it to pay dividends, and to avert more foreclosures. In a statement released today, the four top regulatory agencies for the financial industry provided new guidance for all banks and thrifts, gently pushing them to make more loans and fewer foreclosures without setting any specific requirements. In essence, the regulators urged banks to make loans to creditworthy borrowers, to not weaken their cash reserves by paying excessive dividends, to not make foreclosures until they'd considered less costly modifications, and to end any financial incentives that gave executives short-term benefits for making long-term commitments. If banks and thrifts really need to be told such things, that's a sad commentary on their management as well as the regulators' past practices.

Photo of Treasury Secretary Paulson: Carol T. Powers/Bloomberg News

The backlash isn't dying down so fast over the passage of Proposition 8, which gives signs of being one of those events that transform a group into a force. Proposition 8 has brought gays and their many supporters to a new level of anger and determination that the initiative's backers probably hadn't foreseen.

There are the ongoing protests, the legal challenges. There are the calls to boycott all things Mormon because the church strongly and successfully called on its members to donate and work for the Yes on 8 campaign, and even the movement to boycott all things Utah (including the Sundance Festival, hardly a bastion of social conservativism). And now a gay-rights group in Utah (not quite the oxymoron you might think) plans to use the words of the church itself to launch legislation there that would expand civil rights for gays.

In an apparent effort to soothe scorched feelings after the vote, Mormon Elder L. Whitney Clayton  said that in general, the church does not oppose civil unions and domestic partnerships created to extend equal benefits such as health insurance and property rights to gays and lesbians. Taking him at his word, Equality Utah says it will help draft five bills for the Utah Legislature seeking these as well as equal rights in employment, housing and probate. The idea is that the church, a powerful force in the state, is faced with a choice of either favoring these rights or coming off as less than honest.

Church spokesmen are mum on this issue so far.

Mormons have been beset this week by news that tends to cast their community in a negative light. A Holocaust survivors' group stopped all discussions with the Church of Jesus Christ of Latter-day Saints, saying that despite a 13-year-old agreement to stop the practice, Mormons continue to posthumously "baptize by proxy" Jewish Holocaust victims as Mormons, a practice that deeply offends most Jews. And a judge has ordered the University of Phoenix and its parent company to pay $1.88 million to settle accusations that it discriminated against its non-Mormon employees.

Photo by Chris Detrick/AP