David Frum
David Frum - 
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KAI RYSSDAL: For all the buzz out there that the economy might be able to skate by without going into recession, we've got just one word for you today: foreclosure. RealtyTrac.com reports the number of foreclosure notices rose 65 percent in April over a year ago.

And the gloomy housing market's not sparing anybody. The New York Post reported this week more than 100 homeowners in East Hampton and Southhampton -- where upper-crust New Yorkers go to get away from it all -- they're gotten nasty letters from their banks, too.

Commentator David Frum says trouble in the Hamptoms underscores the hazards of an asset bubble.

DAVID FRUM: A sudden upsurge of home foreclosures in the Hamptons, the posh playground of the ultra rich... The New York Post took malicious pleasure in the story, identifying defaultees by name and giving their street and town for good measure. Tough town, New York.

But this is more than just a kick-'em-when-they're-down story.

The mortgage crisis is not only a crisis of the small borrower. Big borrowers also made use of adjustable-rate mortgages, interest-deferred mortgages, convertible mortgages and all the other instruments that enabled Americans in the '00s to buy more house with less money.

In one way, big borrowers were even more vulnerable than small: They paid higher interest rates.

Until March of this year, the federal mortgage insurance corporations did not cover loans bigger than $417,000. Jumbo loans, as they are called, could cost substantially more. And in today's panicky market, the rate on a jumbo loan has at times spiked as much as a point-and-a-quarter higher than a smaller loan.

Result? In California, only about 15.5 percent of homes sold in February 2008 were financed with jumbo loans, down from almost 40 percent in February 2007.

These conditions have triggered an accelerating decline at the top of the home market. And that decline in turn could -- stress "could" -- severely weaken the balance sheets of upper- as well as lower-income households.

The economic expansion of the 2000s concentrated its benefits on upper-income Americans. Median incomes at the expansion's end had only just caught up to where they stood in the year 2000. This was an asset boom, not an income boom -- and now the value of the most important category of assets is dropping. Could make for choppy times ahead, for if the fun of the boom was enjoyed by only a few, the pain of the bust may soon be shared by all.

David Frum is a resident fellow at the American Enterprise Institute. His latest book is called "Comeback: Conservatism That Can Win Again."

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