Congressman John Conyers (Democrat – MI) wrote an opinion piece today in the Wall Street Journal explaining his belief that bankruptcy judges should be given the power to modify home loans to stop the foreclosure crisis. Conyers is chairman of the House Judiciary Committee, and the Committee this week approved legislation (Helping Families Save Their Homes in Bankruptcy Act of 2009) that would empower BK judges to modify loans.

A major argument against this policy is the idea of  “moral hazard”, that is rewarding foolish people for foolish behavior. Conyers response is “I would simply ask them to come to Detroit, my home town…We don’t have the luxury of worrying about hypothetical future moral lessons. We need to stop the bleeding today.”

With the new Democratic majority in both Houses, it’s my opinion (Don) this will ultimately come to be law. If this happens, the very unpleasant idea of BK will however, have the potential blessing for many of saving their home from foreclosure, in turn stabilizing the market.

Yet for those who planned on making those high mortgage payments for the next 30 years (when they bought at the height of the market) will find it galling that their neighbor’s had their payments cut maybe in half.

Tough decisions for the policy makers!