"most likely because the loan is worth more than the house" ??? - I think you meant to write "because the house is worth less than the loan." Or maybe that should read "because the mortgage is for more than the house is worth." I can't imagine there are that many cases where someone would buy a mortgage from a bank and be willing to pay more than the underlying house is worth. Since the mortgage is worth what the market would pay for it, the statement seems off. Beyond that, this just seems like FM saying they're going to do what they can to recover their costs. Should we have expected otherwise? People who walk away will have their credit affected for seven years. And the story here is? Isn't this all just stating the obvious? It would be real news if they said anything different.

"But the Obama administration has created a new concept: institutions too big to be resolved, too big for capital markets to provide the necessary discipline." Um, last I checked, President Obama wasn't in office until January 20th, 2009. However, Lehman Bros. went under September 15th, 2008. The bank bailouts happened under Bush's watch as well. The current administration is now running those programs, but those problems happened on the previous administration's watch. Looks to me like the Bush Whitehouse created the TBTF concept, and the Obama administration, in its eight months in office, hasn't gotten to fixing that yet.