Paulson, Banks in Talks to Stem Surge in Foreclosures

http://www.bloomberg.com/apps/news?pid=20601087&sid=a77cuIGt2b9I&refer=home

Nov. 30 (Bloomberg) -- U.S. Treasury Secretary Henry Paulson is negotiating an agreement with banks to stem a surge in foreclosures by fixing interest rates on loans to subprime borrowers, according to people familiar with a meeting he led yesterday.

And here is the reason why any "fix" is a bad idea:

Rewriting contracts also risks moral hazard -- encouraging borrowers to take on more debt in the expectation of being bailed out if needed later.

Exactly the thing that got us to this point in the first place: encouraging borrowers to take on more debt than they can actually afford to pay back (at any interest rate, including 0%).