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Debate in Congress and among financial regulatory policymakers over how to manage the housing and credit crises have mostly focused on how the interconnected crises have affected the markets—and not on how it has affected the average American. When a large Wall Street investment bank such as Bear Stearns Cos., which was known for its aggressive mortgage lending cum mortgage securitization practices, is allowed to avoid bankruptcy because it’s too large to fail, but ordinary folk are told to pay heavily for their mistakes, then something is morally wrong.

When the invisible hand of the marketplace is given a hefty influx of money from the Federal Reserve (with an implicit backing from U.S. taxpayers) to help the credit market, many applaud the action. But what about individual homeowners facing foreclosure? This essay will take the position that one essential perspective in this ménage of high finance is the plight of low- and moderate-income home-owning families living in a house facing foreclosure. What of their lot? Will the invisible hand help them? Or do we instead need a visible helping hand to help responsible family homeowners stay in their homes?

Families need a helping hand from government because the invisible hand imposes high social costs in the face of multiple market failures. The analysis that follows, however, starts from a very different place than would usually be expected—detailing the fundamental philosophical and thus moral imperatives for helping low- and moderate-income homeowners keep a roof they own over their heads. This approach requires the swift exploration of several telling philosophical truisms; terms such as “human claims rights” and “goods of agency” and “human agency.”

Far from being arcane philosophical terms, these fundamental truths (as we shall see) underscore exactly why members of Congress have a moral obligation to help those homeowners who through no fault of their own face foreclosure and financial ruin due to housing and credit crises for which they bear little if any responsibility.

Read the full report (pdf)