I don't agree with the concept of adjusting the principal to bring it within the means of people to pay the loan. Those dirt bags that couldn't afford a home bought one on a crappy arm and used the 125 percent financing along with the inflated value to pay off their 20k +/- in credit card debt and buy a new car. It's POS like that that are going to walk out of this smelling like a rose. I feel they owe what they borrowed. Period. Even if it takes um 60 years to pay it off. I pay my bills, everyone else should pay theirs.

Looking at it in another angle the rising unemployment is going to nullify any attempts to stop the foreclosures. A family without job or source of income can't make a house payment so it won't matter how you restructure the loan.

As for cutting back on state gov't. I'd start at the top. Reduce the number of senators and representatives. That may be a good way to start at the federal level too.