The various economic eggheads of the world (Moody’s, Case-Shiller, etc.) estimate about 4 million families, or 1 in 12, owe more than their house is worth. So, why don’t lenders acknowledge that and lower their mortgages? Whoa, Nelly, that’s not a popular topic. Read on from the WSJ:

In ordinary times, a lender shouldn’t need prodding from the government to do what’s in its self-interest. But these aren’t ordinary times. . . . No one in Washington wants to help the “speculators” who bought homes they don’t live in or those who lent to them.

[In Rep. Barney Frank's plan] the lender takes a hit, but gets rid of the risk that house prices will keep falling or the borrower will default on a new loan; the government picks up that risk. . . . The homeowner has to surrender some profits, if any, to the government when the house is sold.

The White House condemns this as a “bailout” and says it won’t work.

As Mr. Wessel points out, when the U.S. Department of Treasure reported in a presentation, “‘Homeowners who can afford their mortgage but walk away because they are underwater are merely speculators.’” … It’s a bit jarring to hear the Treasury vilifying people who are acting in their economic self-interest.”

Although convoluted, I think the plan has merit. But my worry is that the government, our government, doesn’t work well with convoluted. I think we’ve had example after example of how that doesn’t work.