The write downs so far are a drop in the ocean. The banks know...

The write downs so far are a drop in the ocean. The banks know it. why do you think they've stopped lending to each other? The low Fed funds rate has contibuted to this, too. If I'm a bank and I can only get $55K for loaning out $1B overnight, why in the hell would I chance it? Of course allowing the risk to be properly priced would kill even more homeowners causing more of a problem.

Unless $700B is enough to clear out every corpse and everyone KNOWS, this will not fix the problem. That's the key problem with the plan: nothing is laid bare. This is intentional because it lets the criminals off the hook.