"You know, he'd be a pretty good warrior if he had a better head for numbers."

Character Background: Agnarr

Today I'm posting the first entry in the campaign journal for Ptolus: In the Shadow of the Spire. It takes the form of the character background for a character named Agnarr (created by David Blackmer).

The common view of character creation is often that of a solo affair: The player creates their character and then brings it to the game. But I've always viewed the creation of a player character as a collaborative process.

STEP 0: THE CAMPAIGN CONCEPT

Before any character is created there's the campaign concept. This can be roughly broken down as the answer to three questions: Who are the characters? What do they do? Where do they do it?

One of the traditional advantages D&D has enjoyed over many other roleplaying games is that it comes with a flexible but clear-cut concept: 99 out of 100 D&D campaigns are about a group of adventurers exploring dungeons and slaying dragons in a Tolkienesque fantasy setting. If someone says, "Hey, you want to play D&D?" You've already got a pretty good idea what that campaign is going to look like.

On the other hand, if someone says, "Hey, you want to play Heavy Gear?" The only question that answers is, "Where do they do it?" (The planet Terra Nova in the seventh millennium.) It leaves completely unanswered the questions of who the characters are and what they do: They could be members of a Saragossan terrorist cell; they could be soldiers in a military strike team; they could be mercenaries in the Badlands; they could be arena gladiators; and so forth.

And, of course, if someone says, "Hey, do you want to play GURPS?" They haven't told you anything about the campaign concept. You could be playing anything from anthropomorphic cavemen to transhuman cyber hackers.

The creation of a campaign concept can, in itself, be a collaborative process. The question, "What do you guys want to play next?" is basically the most simplistic form of that. But in addition to answering the three basic questions (Who? What? Where?), the GM can also create a discussion about specific themes and even events that the players would like to explore.

Even with D&D, it's still a good idea to communicate a more specific campaign concept. There is a difference, for example, between the characters who will be effective in urban, rural, and subterranean environments. (And, of course, even larger differences are also possible.) You shouldn't bring a knife to a gunfight, and your players will have more fun if they don't bring a woodland druid loaded up with Knowledge (nature) and Survival skills to an all-urban campaign with nary a tree in sight.

In the case of In the Shadow of the Spire, the entire central structure of the campaign is based around a major mystery. That mystery is literally launched in the very first moment of the campaign, and I didn't want to spoil that initial moment of surprise. This made it difficult to discuss the deeper campaign concept with the players, but I was still able to tell them the big picture:

The entire campaign will take place within the city of Ptolus -- a major city-state that serves as Arathia's only port on the Southern Sea. It's a cosmopolitan city. There are elven enclaves from the Teeth of Light; a large dwarven population descended from the refugees of the Kingdoms of the East; a rare population of centaurs; and even that strange and enigmatic litorians. In recent years, vast subterranean complexes, laden with treasure, have been discovered beneath the streets of the city. A gold rush of sorts has erupted around the exploration and looting of these complexes.

From a more abstract point of view: In the Shadow of the Spire will be a combination of urban adventures and dungeoneering. There will be a good mix of standard dungeon-crawling, diplomatic intrigue, and complex investigation.

Now, with this campaign concept in hand, it's time to start working on the actual characters.

To be continued...

Character Background: Tithenmamiwen

Today I'm posting the character background for the elven maid Tithenmamiwen, the second main character from In the Shadow of the Spire. I'm also continuing my discussion of the collaborative process of character creation.

STEP 1: THE PLAYER'S CONCEPT

Once the players know what the campaign concept is, I generally turn them loose to create whatever they want to create.

In some cases the strictures of the campaign concept will tightly curtail their options. For example, if the campaign is about a group of teenagers who have manifested psychic abilities and been drafted into a government secret-ops team... well, then I'm expecting to get back characters who are teenagers with psychic abilties.

In the case of In the Shadow of the Spire, the players were pretty much given carte blanche with their character concepts. There were basically only two instructions: First, I wanted the characters to be newcomers to Ptolus. Second, I didn't want the players to try to explain why they had come to Ptolus (that would be handled at the beginning of the campaign).

Once I get a character concept back from my players, the next step is integrating that concept into the campaign. There are actually two parts to this process, which I'll refer to as public and private.

STEP 2: PUBLIC INTEGRATION

The public integration is a collaborative process where I try to work the character more deeply into the cultural and historical aspects of the campaign world. There are two reasons for doing this: First, I find that the collaboration tends to encourage more deeply imagined characters. Second, my players rarely know as much about the campaign setting as I do (even if it's a published campaign setting). So this collaboration is both a way to take advantage of the deeply detailed settings I like to use and a way of introducing the player to the setting.

The actual process of collaboration will vary quite a bit.

In the case of Agnarr, for example, the player gave me a 1st-level barbarian and a very simple character concept: "A northern barbarian / fighter." A nice, clear-cut archetype. I asked several qualifying questions, and eventually wrote up a complete character background (which also included the hook for the beginning of the campaign). Because the player was mostly interested in that clear-cut archetype, the final result just hints at some cultural content that could be used to play up that archetype.

In the case of Tithenmamiwen (Tee), on the other hand, the player had a very specific concept of the character as a young elf girl with dead-or-missing parents; a desire to find her own identity; a rebellious streak; and a deep desire to unravel secrets. The player was very interested in the cultural details I was giving her, and so the final character background was rich with those details.

In terms of process, there's no right or wrong here. And it's not about me, as the GM, trying to impose my concept of the character. Rather, I have two goals:

First, I want to realize the player's character within the context of the game world. Basically, I try to assume a permissive stance. If the player comes to me with a concept, my primary goal is to find some way of making that concept work.

Second, I want to find ways to use the depth of the game world to enrich the character concept. This may sound complex or overtly literary, but it's really just a matter of figuring out how to link the character into the world. In fact, you're probably doing it already. When the player says, "I want to play the priest of a god of war." You say, "The god of war is Itor."

Of course, you can also make it more than that. You can add details about how the church of Itor operates; what the history of the church is; what the religious uniforms of the church are; what the holy symbol of the god is; and so forth.

I also like to take this integration process as an invitation to become creative myself. When a player comes to me wanting to play a knight, for example, I might take that opportunity to write up a couple of pages describing the philosophy of the Order of the Holy Sword.

One the flip-side, you shouldn't think of this as a one-sided process. If the player wants to develop a knightly order for their character to belong to, I think it's foolish not to take advantage of that creative work. (The collaboration now becomes a matter of how that knightly order can be integrated into the wider campaign world.)

Similarly, I always try to leave the final say with the player. (Because, again, it's about developing their original character concept -- not changing it.) For example, if they come to me with a knight and I send them back a couple pages describing the philosophy of the Order of the Holy Sword, I'll try to make a point of asking, "Does that sound right?"

If it isn't, we'll try to figure out where I misinterpreted the character concept and try to find a solution that works. And maybe that means that they're a member of some other knightly order.

STEP 3: PRIVATE INTEGRATION

For all intents and purposes, the character is now ready to go. But as a GM, I'm not finished. At this point, I'll start figuring out how to hook the character into the larger structure of the campaign.

Is there a major villain in the second act? Make it the long-lost brother of one of the PCs.

Is there a kidnap victim in the third adventure? Make it the mentor of one of the PCs.

Was I planning to have a corrupt order of wizards? Give one of the PCs a chance to join it.

And so forth. It's about figuring out how to make the campaign about the characters instead of just involving the characters.

STEP 4: MAKING THE PARTY

Technically this isn't a separate step. It's something that should be taken under consideration throughout the entire character creation process.

What binds these disparate characters together?

I like to consider myself as being fairly skilled at handling situations where the PCs split up, but even I don't think it's a good idea to run a campaign where the PCs don't have some sort of cohesion.

D&D, again, has a traditional advantage in that it provides a baseline answer to that problem: We're here for the loot. But it's usually a good idea to figure out a better explanation for how the group came together and why they'll stay together. Either providing a common, meaningful goal or having them all part of the same organization are usually the best way to accomplish that.

This is probably an opportune time to point out that the collaborative process of character creation doesn't have to be limited to a conversation between the GM and the player -- it can involve the entire table. It can often be a good idea to have a special session for character creation. It can allow for open discussion of what the game should be; who the characters should be; and how they're interconnected. That didn't happen as much with In the Shadow of the Spire because it was being run online, but it's a valuable technique.

Prelude 1A: The Lost Vaults

Now we get to the start of the actual campaign journal -- the chronicling of what actually happened at the (virtual) game table.

Writing the campaign journal is actually the most time-consuming part of running a game for me. I spend more time maintaining the campaign journal than I do prepping the adventures or running them. So why do I bother?

(1) The campaign journal is an invaluble reference tool for both me and the players while the campaign is actually running. In the Shadow of the Spire, for example, started in February 2007. Events that happened in those very first sessions continue to be relevant a year and a half later. So being able to quickly reference those events is important.

(2) I have a finely tuned sense of nostalgia. Any RPG session results in a unique story created by the GM and the players. These stories don't function particularly well as narrative constructs, but when viewed as a chronicle of events I think they can actually be quite fascinating. I have many fond memories from the gaming table and, when a campaign is all said and done, I enjoy going back to read the campaign journals and having those memories refreshed. The campaign journal may take a lot of time in its own right, but it also greatly extends the long-term enjoyment to be gleaned from the campaign.

The desire for a reference tool and the concept that a campaign journal is a chronicle of events have come to shape the format I use for my journals. Most notably, I use bullet-pointed paragraphs. This evolved out of my earlier campaign journals (which were literally just bullet-point lists of events that would read something like "Talbar went to the temple" without any kind of supporting detail; the journals were more like cheat sheets for the session designed to jog our faulty memories). But I've also found it to be a useful psychological trick: If I'm writing in standard paragraphs, I tend to slip into trying to structure events into a narrative. This is more difficult and time-consuming. It also tends to distort events.

(For example, when Shakespeare wrote Henry V he didn't try to record what Henry did every day. Instead he distilled those events into a compelling narrative structure. When I'm writing a campaign journal, on the other hand, I am trying to record what the PCs did every day.)

Which brings us to the next question: How accurate is this recounting of events?

Lots of camapign journals will try to polish or jazz up what actually took place at the gaming table. Events will end up being just a little bit more dramatic; dialogue will be a little more eloquent; and everything will come off just a little bit cooler.

For the most part, I try to avoid that temptation. Partly, again, because I'm shooting for an accurate reference tool. But also because I like to humor myself into thinking that we're plenty awesome without needing to revise the historical record.

Which isn't to say that there isn't an editorial process: Routine shopping trips will frequently hit the cutting room floor. Lengthy conversations will be summarized or edited down to the salient points. But virtually all of this takes the form of deciding what not to write about, rather than altering anything. Basically, if you read it in the journal than that actually happened at my gaming table.

(And even with the editorial process I'll err on the side of conservation. If I had a nickel for every time the PCs suddenly decided to make contact with the scribe they hired 10 sessions ago... Well, I'd have a nickel. But you get the point.)

SPOILERS: It should go without saying that the journal will contain various spoilers for the Ptolus sourcebook. However, other chunks of the campaign are drawn from various published modules. When that happens, a spoiler warning identifying the source will be affixed to the top of the relevant journal entry.

PICTURES: Pictures featured in the campaign journal are almost always pillaged from other sources. Whenever possible, these pictures are hyperlinked to the original source. For example, the map of Stonemarten Village in today's journal entry was pulled from Grailquest 2: Den of Dragons.

THE PRINCESS BRIDE - 4th Edition

The Man in Black switches his sword hand. The duel continues.

The duel continues. The Man in Black disarms Inigo Montoya.

The Man in Black slits Inigo Montoya's throat.

This is not as entirely random as it might appear at first glance. Yesterday one of the groups I was playtesting Keep on the Shadowfell with managed to get back together following an interminable three months of mutually incompatible schedules. And this actually happened at the gaming table.

Well, not with Inigo Montoya and the Man in Black, obviously. But the PCs had forced a goblin to surrender by making an Intimidate check, tied him up, and questioned him. Once they had gotten all the information they needed from him, the group fell into a debate about what to do with him. ("You said you were going to let me go!" "Shut up. We're talking here.") Half the group wanted to just knock him out and show him some mercy. The other half wanted to make sure there wasn't any chance of him coming back to cause them any problems.

The debate was resolved when we checked the rulebook and discovered that, in the Land of 4th Edition, anyone who has been knocked unconscious wakes up after taking a short rest. A short rest is 5 minutes. Ergo, they couldn't knock the goblin out for more than 5 minutes.

And so they slit his throat and headed for the Keep.

Poor little guy. If it had been 3rd Edition he probably would have woken up a few hours later with a headache and skedaddled back to his homelands in the Stonemarches.

Prelude 1B: The Lost Vaults

Before our first proper session of In the Shadow of the Spire, I offered to run prelude sessions for any players who were interested. I had never done this before, but I had several reasons for trying it now:

(1) We had some scheduling problems which meant that there was about a three week gap between creating the PCs and starting the campaign. It wasn't that people weren't available to play -- it was just that we were never all available to play at the same time.

(2) I knew that the campaign was going to start as the PCs woke up with partial amnesia and a period of lost time. I felt this might have a larger impact if the players had actually spent some time playing their characters -- in other words, if they actually lost the time.

Because without that first-hand experience, there isn't that much difference between a character background that ends with the line "... and then you go to the Adventurers 'R Us Tavern" and one that ends with "... and then you wake up in a bed you don't know."

(3) Because most of us were new to the online tools we were using for our virtual gaming table, I thought it might be advantageous to tackle them with smaller groups and work out the kinks.

This experiment with preludes was something of a mixed success. On the one hand, I was mostly right: The smaller groups let us work out the kinks of using the virtual gaming table, the preludes let us get some gaming into a gap when we would have otherwise been idle, and those who participated did feel the effects of the lost time more personally than those who didn't. (In fact, when one of the players realized what I was doing at the end of the prelude session, they spontaneously exclaimed, "Son of a bitch!")

On the other hand, only the prelude featuring Tee and Agnarr actually happened. The scheduling for the others just never worked out. Some of the material from those preludes was worked into the character backgrounds of the other characters, but most of it wasn't.

The prelude had a few other notable effects:

First, it meant that Tee and Agnarr started the campaign at 3rd-level while the others started at 1st-level.

Second, it created a meaningful chemistry between Tee and Agnarr that the other characters didn't have at the beginning of the campaign. All of the characters (and players) quickly bonded, but I think the instant Tee-Agnarr alliance helped propell Tee into a stronger leadership position.

The original plan had been for two other characters to similarly share an adventure together. Some of that survived into the character backgrounds and, from there, into the actual campaign, but there really is a difference between something that you write up in a character background and something that you've "lived" in play. I suspect that if the other preludes had taken place, there would have been a second strong pairing and the group dynamic would have been very different for the rest of the campaign.

SARAH PALIN - THE EXPECTATIONS GAME

Immediately after the first Bush/Gore debate in 2000, preliminary polling showed that Gore had won the debate (56% to 42%). But Bush's surrogates hit the airwaves like a hurricano: Bush had performed well considering that he sucked at debating. And did you notice how Gore was sighing a lot? How disrespectful!

By the end of the week, Gore's debate win had been flipped and he found himself completely on the defensive going into the second debate.

It's hardly shocking to point out that televised Presidential debates have always been about more than making strong and compelling arguments based in fact. You don't have to look any further than the poll results which showed that people listening to the Kennedy/Nixon debate on the radio thought Nixon had won while people watching the same debate on television thought that Kennedy had won. And while that poll has been disputed, the belief that visual presentation is an important factor has nevertheless shaped the media's coverage of the debates.

The media's coverage has two significant effects: First, it defines the criteria that people use to determine whether a debate was won or lost. Second, the media's "consensus narrative" of the result of the debate will reshape the opinions people have of the debate. (The Bush/Gore debates are the most pertinent example of that effect, but it's really a manifestation of the same psychological factors that contribute to peer pressure. Ever known someone who saw a movie and liked it, but then decided it sucked after discovering that Rotten Tomatoes rated it at 15%? Same thing.)

The recent conviction has been that Sarah Palin is destined for an epic failure when she goes to debate Joe Biden. But even if we assume that Palin's shortcomings in knowledge and experience on the national stage will manifest themselves, there are still three ways in which she could achieve a significant upset.

First, there's the Expectations Game. It seems absurd to me that the candidates should be graded on some kind of personalized curve, but that's nevertheless the reality of it. ("Well, Candidate A is clearly not as intelligent or insightful as Candidate B. But, frankly, Candidate A is a complete idiot and he did manage to walk to the podium without walking into a wall... so I think that's an A+ performance. Candidate B, on the other hand, mispronounced the name of a the Vice President of Paraguay, so I give him a C.")

And could expectations be any lower for Sarah Palin at this point?

The McCain campaign's decision to sequester Palin from the press has met with ridicule and criticism. The clear narrative that has developed is that the McCain campaign has decided that they can't let her answer questions because they don't believe she can answer them. And I've heard plenty of people express the idea that she must be "even worse than we think" because the McCain campaign apparently believes that the damage it's taking from sequestering her is better than the damage it would take if it didn't.

But it's also possible that the McCain campaign has simply decided that this is the best way to lower the expectations for Palin going into the debate.

Basically there is a strategic advantage to making Sarah Palin look like the Uwe Boll of politics. If you go to a Uwe Boll film you can easily find yourself saying, "Well, that wasn't so bad. I mean, it didn't make blood actually run from my eyes." Whereas if Steven Spielberg had made the same film, the words "that wasn't so bad" wouldn't have even crossed your mind.

Similarly, with expectations set so low, Sarah Palin has a pretty low hurdle to clear. They did the same with Bush in 2000: Set the bar as low as they possibly could and then deliver a decent debate that looks positively amazing compared to the expectations.

Second, there's the matter of Looking and Sounding Presidential. This has absolutely nothing to do with actually saying anything insightful or intelligent. It's a matter of visual presentation; a smooth speaking style; and not saying anything that's factually incorrect.

It's very clear that Sarah Palin is good at delivering a canned speech. But she's also apparently very good when it comes to political debates. Her opponent in the Alaskan gubernatorial debate cites her performance in that debate was the turning point in the campaign. And a large part of her success lay in delivering simple answers in an authoritative fashion.

The McCain campaign has forced changes in the format of the VP debates in order to simplify the questions and shorten the answers. You can rest assured that they are spending all of their free time coaching Palin in short, canned responses.

Finally, there's the Post-Debate Spin. This is where the campaign surrogates try to establish the narrative of what happened in the debate. And this is crucial because (a) more people will see this post-debate narrative than will actually see the debate itself and (b) as we've discussed, even people who actually saw the debate can have their opinion of it re-shaped by the media's narrative.

My point with all this? Simply that we shouldn't be setting our own expectations too high in hoping for a complete Palin meltdown at the debate. And that, in some ways, by exaggerating our own expectations of Palin's failure we end up feeding into the anti-intellectual process that Republicans use to "win" these debates.

I'm hopeful that we will see Palin screw-up and become an even bigger millstone around McCain's neck when it comes to independent voters. But I think that the growing consensus that this is some sort of guaranteed slam dunk certainty is about as naive as the certainty everyone had that Gore would use the debates to solidify his 3-5% lead over Bush in the national polls.

I'm actually much more hopeful about this Friday's debate on foreign policy between Obama and McCain. The expectations game favors Obama; Obama looks and sounds more presidential; and if Obama can win that debate it will end up establishing a narrative that will be almost impossible for McCain to overcome as they move towards the final debate on domestic policy.

Character Background: Dominic Troya

With the first prelude concluded, we now move on to introducing the rest of the main characters for In the Shadow of the Spire, starting with an Imperial priest named Dominic Troya.

But while you're reading that, I'm going to back up and continue talking about the first prelude featuring Tee and Agnarr. This prelude was a modified version of The Lost Vault of Tsathzar Rho, an adventure by Mike Mearls.

One of the issues I faced in designing the prelude was the non-standard party composition: Agnarr was a 1st-level barbarian and Tee was a 1st-level rogue. A barbarian is obviously pretty interchangeable with a fighter, but that still left two of the four core roles -- cleric and wizard -- unfilled.

But, truth be told, I find the typical hand-wringing over the need for a "standard party" to be a trifle overwrought. I've played with lots of odd-sized and odd-classed parties in D&D before, and I've virtually never found it to be a problem.

The one exception I've found is the mostly immutable need for some form of magical healing. Combat in D&D is strongly designed around the hit-and-heal cycle: The game assumes that you're going to get hit and that you will then be healed.

Everything else, in my experience, is negotiable. Yes, if you're missing other key roles in the party they will be missed. Without the consistency of a fighter, adventuring days will probably be shorter. Without the firepower of an arcanist, more powerful enemies will need to be avoided. Without a rogue, traps will become far more dangerous. And so forth. But, as I talked about in Fetishizing Balance, this is just a matter of adjusting the difficulty of encounters and the style of gameplay to suit the characters that the players want to play.

In fact, I've even played in a couple of short adventures without magical healing. This isn't so much impossible as it is radically different. Without magical healing, combat in D&D almost instantly turns into a grim 'n gritty exercise. Wounds take days or weeks to heal and any kind of serious injury -- which can be almost trivial to receive -- will force the party into rehabilitation. Hit point inflation still makes it possible for higher level characters to pull off some amazing things, but they'll suffer for it.

In the case of the prelude, however, this grim 'n gritty environment wasn't what I was shooting for. (In no small part because I was using a published adventure as a foundation and I would have had to pretty much toss out the whole thing.) So I targeted the party's shortcoming -- magical healing -- and provided a healing totem that had been given to Agnarr by the shamans of his tribe.

Mechanically this was basically just a wand of cure light wounds that worked with a command word instead of a spell trigger (so that it could be used without having a cleric in the party). And, if you'll pardon the pun, it worked like a charm. Several encounters still needed to be adjusted due to the smaller group size, but with a large supply of magical healing available to them the barbarian and the rogue were still able to enjoy traditional-style romp through a dungeon crawl.

Here's the two-bit tour of the current financial crisis: In an attempt to cure the woes that led to the Great Depression, the banking industry was regulated. These regulations were designed to rein in unchecked greed from running us, lemming-like, off a financial precipice. Over the past thirty years, the Republican philosophy of de-regulation -- championed by conservative leaders like Reagan, Bush, and McCain -- systematically dismantled these protections. The warning flags were raised with the S&L crisis in the late '80s (which included significant scandals including George W. Bush's brother and John McCain himself). But, after the S&L bailout was paid, these warning signs were largely ignored and the Republicans continued on their de-regulating crusade.

Which brings us to today. With a significantly deregulated mortgage market, lenders issued riskier and riskier mortgages in the pursuit of more and more money. And because the banking industry had been deregulated, they were able to package these risky mortgages into unregulated securities... which could be sold to give them more money to make even riskier mortgages. In many ways it resembled a pyramid scheme and eventually, like all pyramid schemes, it collapsed as the risky mortgages started failing.

Today the value of these securities has completely flat-lined. They're worthless paper because nobody has any confidence in the value of the risky mortgages on which they're based. But our entire deregulated financial system is so heavily invested in these worthless mortgages as a result of the unregulated securities they were packaged into that the entire system is in danger of eminent collapse.

(Warning: The previous paragraphs contains gross over-simplification of a complex issue.)

So, enter the bailout: The government will buy up these bad mortgages (although no one is sure exactly what they're worth), which will hopefully save the financial institutions which foolishly invested in them. If you think of the bad mortgages as a thug with his foot on the windpipe of the financial institutions, we're grabbing the thug and giving the financial institutions a chance to get back on their feet.

But there's a problem with this analogy: There is no thug and no innocent victim here. The financial institutions we're trying to help get back on their feet were the ones putting their feet on their own windpipes.

What's needed here is not a rescue. It's an intervention.

Here's a better analogy: Our financial institutions are cutters. They like to hurt themselves. It's not really their fault. It's just that, collectively, they're incapable of controlling their own greed. We need to get them help. And an important part of that help will be putting them in a straitjacket so that they can't keep hurting themselves.

The name of that straitjacket? Regulation.

And this is my primary objection to the Bush bailout plan: It throws money at a symptom without actually curing the disease. The fact that the symptom itself (the dead weight of these sub-prime mortgage securities) is bad enough that it needs to be addressed doesn't mean we should be ignoring the disease. And that means that part of this bailout needs to be a re-institution of the post-Depression regulations that were put in place to stop exactly this kind of disaster from happening again.

But there's also another problem to be addressed here: The bad mortgages.

The bailout is designed to buy up those bad mortgages, wave a magic wand over them, and make them disappear. (This looks like another analogy, but it isn't. The Treasury Department really has no idea what they're going to do with these mortgages once they buy them.)

But, again, that's just a crude attempt at treating the symptom. The problem is that these are bad mortgages. Just transferring ownership to the public isn't going to change that fact.

So why are these bad mortgages? Because (a) the people who borrowed money under these mortgages are likely to default on their payments and (b) the value of the property itself has been devalued so that foreclosure won't recoup the lender's investment.

And why are these people likely to default on their payments? It's not as if anyone wakes up one day and says, "You know what would be fun? Getting foreclosed and ruining my credit!"

Well, there are two primary reasons:

(1) They have lost the income that allowed them to make the payments on the mortgage. (They may have lost their job or the other costs of living may have risen to a point where they can no longer afford the payments.)

(2) The size of the payment has increased to the point where they can no longer afford the payment. (The result of an adjustable rate mortgage, a balloon payment mortgage, or similar "teaser rate" schemes.)

There's little that can be done about the former (short of strengthening our economy in general), but the latter is -- once again -- the direct result of deregulating the mortgage industry. The types of mortgages are predatory in nature, irresponsible for both lender and borrower, and (as we have seen) extremely dangerous for our economy.

It should be obvious to anyone looking at this crisis objectively that these types of loans need to be regulated out of existence. Like usury interest rates, there is no reason for them to exist.

But I would go one step further. We shouldn't just be getting rid of these loans going forward, we should be figuring out a way of retrofitting the existing loans so that the people currently holding these loans can continue making their monthly payments.

I'm not a mortgage expert, so I don't know the best way of accomplishing that. But we know that the homeowners with these mortgages were (and probably are) capable of making a reasonable monthly payment. The goal is to find a way to restructure these mortgages to lock in this reasonable monthly payment. And that may be offering a lower interest rate; extending the term of the loan; or any number of other things.

For the loans that we end up purchasing as part of this bailout, this type of retrofitting should be relatively easy to carry out under the auspices of a properly formulated agency. For other loans of this nature out on the market, we can probably offer incentives to encourage/bailout the financial institutions needing to restructure these "assets" on less favorable terms.

REHABILITATION PLAN

So instead of talking about a "bailout", let's instead talk about a Rehabilitation Plan based on three pillars:

(1) We will treat the immediate symptom of this crisis by buying up these bad loans, giving our financial institutions some breathing room.

(2) We will re-institute proper regulation of our financial system to insure our economic security in the future.

(3) We will retrofit existing ARMs and similar mortgages to reduce the foreclosure rate. This will benefit homeowners, help to stabilize these rocky segments of our financial markets, and reduce foreclosures (which will also help the real estate market recover and further stabilize the market).

SEPTEMBER 2008: 

PART 1 - PART 2 - PART 3

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