Housing fixes fall short

New focus should be on write-downs, negative equity

The government’s efforts to combat the worst financial crisis since the 1930s can be divided into three phases. Phase one, executed in good part in catch-as-catch-can fashion, was directed toward shoring up financial firms that were undercapitalized and had lost the confidence of their creditors. The goal was to prevent their failure, which would have made the crisis worse — far worse.

Phase one is still far from over, new flare-ups continue to arise, and new approaches for recapitalizing banks are being considered.