A pilot program currently under development could mean relief for distressed credit card borrowers:

Big banks have formed an unusual alliance with consumer advocates to urge the government to allow huge portions of credit card debt to be forgiven, a turnabout from recent years when the banking industry lobbied strenuously to make it harder for consumers to erase their credit card debts in bankruptcy.

The new pilot program — which the banks hope will become permanent — could involve as many as 50,000 people struggling with credit card debt. On an individual basis, the amount of debt to be forgiven would rise according to the severity of the borrower’s financial situation, up to a maximum of 40 percent.

It would have been nice if they’d come around to this way of thinking three years ago, but any relief is welcome, I guess.

Incidentally, if you’re wondering why the banks can’t just institute this program themselves without asking the government to get involved, it’s because they can’t:

Current government rules don’t allow lenders to offer repayment plans that reduce the amount of principal owed and borrowers to repay the balance over a period of several years. In cases where the principal can be reduced, under credit card settlements, borrowers normally are required to pay off the remainder over months rather than years.

From Bloomberg:

Former Federal Reserve Chairman Alan Greenspan said a “once-in-a-century credit tsunami” has engulfed financial markets and conceded that his free-market ideology shunning regulation was flawed.

“Yes, I found a flaw,” Greenspan said in response to grilling from the House Committee on Oversight and Government Reform. “That is precisely the reason I was shocked because I’d been going for 40 years or more with very considerable evidence that it was working exceptionally well.”

I know I said that blogging would resume several days ago, but these are hectic times for someone in my line of work, as you might expect, and I’m still catching up from my week off. For now, let me just mention that I will be appearing monthly on About the Money with Josephine Cheng on KCTS-9 to discuss bankruptcy, debt, and personal finance topics. My first segment, in which Josephine and I will be discussing (surprise!) the housing crisis, is due to air in tonight’s episode, which begins at 7:30. Enjoy.