Coastal california will be the last shoe to drop. Imagine a $20 billion extended cut in the California State Budget.

The government is incapable of nationalizing the lending industry. It takes money away from all other social programs that Obama wants or the wars McCain wants to prosecute. They will alllow interest rates to rise to allow market forces to function.

Interest rates from 6% to 9% will marginally affect housing in Dallas or North Dakota. It can put a Texas size hole in the California market.