In some of these markets, California, Washington, Oregon, Washington DC, home prices were so freaking high that most of the population couldn't  have qualified for a traditional income. And not all of the markets that non traditional mortgages are popular are having foreclosure problems either or even falling property values, the last three listed are not having any problems at all.

For the most part, I agree with you that the borrower and the lending institution should and have taken the brunt of the cost. Bear Stearns sold for 2 bucks a share and JP Morgan wouldn't have looked at them for that if the Feds hadn't agreed to guarantee some of the loans. I'm still of the opinion that when you are looking at losing someone this big completely, the chances that it would take down the rest of the money market with it probably justifies the intervention that we have seen so far. As far as I can tell, no one is getting rich from any of these transations, just trying to keep their businesses afloat.