First, staunch the loss

At what point do you stop pumping blood into a body that's bled out from self-inflicted wounds?

Story #1:

Banks' losses from the U.S. subprime crisis and the ensuing credit crunch crossed the $500 billion mark as writedowns spread to more asset types.

Story #2:

The Federal Reserve has auctioned another $25 billion in loans to the nation's banks and given them more time to pay the money back in an effort to combat a serious credit squeeze.

The Fed announced Tuesday that the money would be loaned at a rate of 2.754 percent. In the latest auction, the Fed offered the loans for an extended period of 84 days, rather than the 28-day period for the previous loans. with the cash it needs to combat a serious credit crisis stemming from mounting mortgage loan losses.

Meanwhile, where do you think this transfusion of cash is coming from? Uncle Sam has only two options: tax revenue, or printing money, thus devaluing the dollars of the average Joe who's already put himself in dire straits:

Almost one-third of U.S. homeowners who bought in the last five years now owe more on their mortgages than their properties are worth, according to Zillow.com, an Internet provider of home valuations.

So... the banks encourage people to borrow more than they can afford, thus signing on to upside down mortgages. When some inevitably begin to default, the banks lean on Uncle Sam to make up the difference, putting more pressure on those who are at least trying to live up to their obligations, however unwisely they may have been assumed in the first place. In other words, homeowners must (rightfully) face the music for ill-advised choices while the financial wizards escape the consequences of their predatory lending.

All this will only encourage continued corporate financial recklessness, until the system simply seizes up. Even Uncle Sam is finding out he doesn't have bottomless pockets.