I asked whether he saw the housing thing as a supplement to the Paulson plan or a replacement for it. A reader directed me to the transcript of his recent appearance on Charlie Rose:

ROSE: …What do you believe could and what do you believe will not get us out of this?
FELDSTEIN: Well, I think I’d come back to the issue that it’s being driven by the fall in house prices. That’s making people poor and forcing them to think twice about spending. It’s hurting the financial institutions. It’s obviously stopped construction. Housing starts are down 40 percent from a year ago. So if we don’t stop that rut, if we don’t stop that decay, it’s hard to see how this process stops.
House prices over shot in the up direction by some 60 percent. What’s to stop them from falling 60 percent below a normal level? Nothing, if we don’t find a way of stopping this process of default and foreclosure. So to me that is key to stopping this.
ROSE: And something that’s not being done so far.
FELDSTEIN: And something that’s not being done. I think that the Treasury proposal will help to take some of the bad impaired assets off the balance sheets. The Barney Frank-Chris Dodd legislation that was passed earlier will help some people with negative equity and are on the verge of defaulting. But none of that will stop this downward spiral in house prices that needs to be stopped. In addition to what has been done and what is proposed by the Treasury and the Congress, I think we need to do a third piece.

Also, here he is on how serious this situation is:

FELDSTEIN: I have not seen, in all of the time that I have watched the economy — I have not seen anything as frightening as this, because in the past — nobody likes a recession. They’re painful. But in the past, when we went into recession, it was pretty clear that we could come out by the Feds cutting interest rates, restarting the housing building and we’d come back out. So the last couple of recessions lasted 18 month, from peak to trough, and weren’t all that deep. They felt painful to the people who were involved, but we quickly got passed it. Now it’s very different.