♪ captioning funded by cbs and ford-- built for the road ahead. >> everybody stay on the sidewalk. >> kroft: there's one thing unusual about the man who built the times square car bomb. he's an american citizen who is able to travel freely to pakistan for explosives training and return home on his american passport. it's a case of home-grown terrorism, and it's an alarming trend. was this guy on anybody's radar? >> it doesn't appear that way. >> kroft: anything remarkable about him that would lead you to believe he might do something this? >> no, and that's a good word-- "unremarkable." these are unremarkable young men who made a decision to kill

innocent people in their own country. >> we've made it very clear that if, heaven forbid, an attack like this that we can trace back to pakistan were to have been successful, there would be very severe consequences. >> pelley: we met with secretary of state clinton at the state department on friday morning. but we've had rare access to her for the last several months. after you. >> thank you. >> pelley: it is your airplane. on her travels from the white house to the united nations to the cradle of terrorism. >> amazingly, we have 16 out of the 44 houses on the street have foreclosed over the last year. >> safer: yours over here? >> mine will be number 17. >> safer: chris deaner's house will be in foreclosure not because he can't afford the payments. he can pay, but he won't. he's walking away from his mortgage because his house has lost almost half its value.

and there are thousands of people across the country doing the same thing. cutting their losses, leaving the banks holding thousands of houses nobody wants. so you don't feel any responsibility for it? >> unfortunately no. i don't. >> i'm steve kroft. >> i'm lesley stahl. >> i'm bob simon. >> i'm morley safer. >> i'm lara logan. >> i'm scott pelley. those stories and andy rooney tonight on "60 minutes." we'd been wanting a dog for a while. so we searched local shelters and fell in love with bailey. we took millions of photos. and of course, introduced her to all of our friends. found dog-friendly parks nearby. and when we couldn't take her with us,

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>> kroft: after john walker lindh was captured fighting alongside taliban troops in afghanistan shortly after 9/11, counterterrorism forces here in the u.s. spent a decade worrying about a hypothetical. what if other american citizens joined forces with terrorist groups, and began carrying out terrorist attacks here in the u.s.? well, as last weekend's failed times square car bombing clearly demonstrated, that concern is no longer hypothetical, it's becoming a reality. just last year, 41 americans were accused of aiding terrorist groups or plotting terrorist attacks against the u.s. or its allies. department of homeland security secretary janet napolitano said earlier this year home grown terrorism is here, and now part of the threat picture we have to confront. >> everybody stay on the sidewalk across the street. >> kroft: the explosive-laden vehicle that was discovered in

times square was something that new yorkers and their police department had been expecting; they had been waiting and on the lookout for years. car bombs have to be one of your things that worry you the most? >> commissioner ray kelly: yeah, absolutely. i mean, they're... they're mobile. they're relatively easy to... to put together. you don't need much space. you can do it by yourself. >> kroft: we were lucky. >> kelly: yes. a lot of good investigative work here, but we were lucky, no question about that. >> kroft: new york police commissioner raymond kelly says the poorly constructed device might have killed hundreds of people if it had gone off. instead, it took the nypd and the joint terrorism task force just 53 hours to identify and arrest the man who built it. according to the complaint, 30- year-old faisal shahzad, a freshly minted u.s. citizen who had lived here for a decade, slipped off to his native pakistan, where he received explosives training, and returned here on his american

passport to carry out the attack. >> kelly: that is sort of a gold standard. that's what al qaeda and their surrogates look for-- someone who can travel, someone who has clean paper, someone who can go to pakistan, come back and get into the united states because they're a citizen or have... have resident cards that get them back into this country. that gives them tremendous flexibility. >> kroft: was this guy on anybody's radar? >> kelly: no, it does... it doesn't appear that way. >> kroft: anything remarkable about him that would lead you to believe he might do something like this? >> kelly: no, that's a good word-- "unremarkable." these are unremarkable young men who make a decision to kill innocent people in their own country. >> kroft: what has shahzad said about his motives, about why he did this? >> kelly: he made a general statement that he did it because his religion was under attack. >> kroft: it is all very similar to the story of najibullah zazi...

>> najibullah zazi: i have nothing to do with al qaeda. >> kroft: ...an immigrant from afghanistan who spent much of his life in the united states, leading what seemed like a perfectly normal existence until he traveled to pakistan in 2008 for explosives training, and was later arrested here for plotting to set off bombs in the new york city subway system. >> art folsom: this is somebody that has lived here for ten years, loved playing basketball with his friends. he's a... a big baseball fan. >> kroft: art folsom was zazi's lawyer when he began his plea negotiations with the fbi, and he says his client told them that he wanted to retaliate against the u.s. military for the innocent civilians that had been killed in his native country. did you or anybody ask him, if you had these feelings about the death of innocent civilians in afghanistan, why didn't you just speak out against it? >> folsom: he actually did bring that up. he said that if he just sat there and wrote letters to the editor, who was going to listen to him? but if he walked into a wal-mart with an explosive strapped to

him and blew it up, then people were going to pay attention to what it was he had to say. >> kroft: but zazi didn't reach that conclusion all by himself. he had originally gone to pakistan to try and hook up with the taliban to fight american troops in afghanistan, but once there, he was recruited by al qaeda, and they had bigger plans for him. >> folsom: they realized they could do more with him in the united states, and i think that they're probably very good at taking people who already have some... some anger or some passion about something, and taking that and twisting it to... to go in the direction they want it to go. >> kroft: all of this is new. for much of the past decade, the muslim community in the united states has been well assimilated and prosperous enough to sidestep the radicalization and violence that has infected other western countries. but now, there are a few troubling exceptions. >> omar hammami: it all started out in afghanistan when we fight the oppressors straight off the land. >> kroft: you're watching a youtube clip about omar hammami,

a u.s. citizen born and bred in the american south, who is now a leader of a terrorist organization affiliated with al qaeda that's fighting in somalia. this recruiting video, aimed at young muslims in america and the west, is accessible worldwide on the internet; sometimes, straight from the battlefield. >> hammami: we're planning to always put them in an ambush. try to blow up as many of their vehicles as we can, and kill as many of them as we can and take everything they've got. god willing. ( laughs ) >> kroft: hammami was raised by a syrian father and an american mother in this middle-class home in daphne, alabama, where he once attended a baptist church, before converting to a radical form of islam, and began, in his words, "pointing a sword" at the united states. >> hammami: one of the things we seek in this life is to die as martyrs. >> kroft: and there is adam gadahn, a muslim convert who left his jewish grandfather and his parents' goat farm in

california a decade ago to become a spokesman and senior operative for al qaeda. he is now a fugitive who is wanted for treason. >> adam gadahn: i will now destroy my american passport. >> kroft: that clip has also been all over the internet, along with the fiery preachings of anwar al al-awlaki, an influential american cleric now living in yemen, who has been linked not only to the underwear bomber, but to army major nidal hasan, who is charged with killing 13 fellow soldiers at ft. hood, texas. >> kelly: you can get these radical web sites that... and these people will refer to them when they're... when they're taking into custody. and they'll talk about these web sites. we monitor these web sites, quite frankly. we monitor them with our own people who have, you know, language skills, that... we've been able to use and... and build on. >> phillip mudd: what we're facing here is not an episodic series of terrorist events. what we're facing is a group of people who see themselves as revolutionaries. >> kroft: until he retired a few months ago, philip mudd was the senior intelligence advisor to the fbi, and its director. he is an authority on homegrown

terrorism, and believes the recent activity has been poorly organized and executed by lone wolfs, or clusters of individuals who aren't part of an organized network or a terrorist cell. instead, they see themselves as part of a global movement that is being facilitated by the internet. >> mudd: the internet often is not the initial spark, but it helps them go down a path. >> kroft: and what are they seeing on the internet? >> mudd: they're seeing images, for example, of children and women in place like palestine and iraq. they're seeing sermons of people who explain in simple, compelling and, in some cases, magnetic terms why it's important that they join the jihad. they're seeing images and messages that confirm a path that they're already thinking of taking. >> kroft: and they're seeing all this in english. >> mudd: yes, that's correct. >> kroft: those internet messages are believed to be one of the reasons why a dental student, a tennis player pursuing a degree in business, and three friends from a mosque in alexandria, virginia, abandoned their middle class existence without telling their

parents and set off for the wilds of pakistan, leaving behind a farewell video. they were arrested there a short time later on terrorism charges after trying to make contact with a man pakistani authorities say is an al qaeda commander. they are now on trial facing life in prison. their parents claim they're innocent. >> mudd: i think they went over with some clear intent in mind, and that wasn't to have a vacation. >> kroft: they left behind a video. >> mudd: uh-huh. >> kroft: have you seen it? >> mudd: yes, i have. >> kroft: what can you tell me about it? >> mudd: they're very serious, very well thought out, very smart and very committed. >> kroft: and that concerns you? >> mudd: yes. >> kroft: because? >> mudd: these aren't kids who read a comic book and said, "let me go fight the way i see fighting in a comic book." these are kids who have seen a sophisticated magnetic ideology, and said, "i want to sign up." >> kroft: but by far, the most troubling situation is in minneapolis, home to more than 50,000 refugees from somalia who were settled here after fleeing their country's ongoing civil war. over the past two years, more

than 20 young men have disappeared from their homes and turned up fighting in somalia, with a terrorist group called al shabab, the same al qaeda affiliate in which alabama-bred omar hammami is a leader. >> ♪ mortar by mortar shell by shell ♪ only going to stop when i send them to hell. ♪ >> kroft: abdirizak bihi is a community activist in the minneapolis neighborhood known as "little mogadishu," where many of the young men lived. he is also the uncle of burhan hassan, a high-achieving high school student who had once hoped to go to harvard. but on the same day that barack obama was elected president, he failed to return to his family apartment. did you discuss with him the situation in somalia? >> abdirizak bihi: not really. he didn't even speak somali. >> kroft: did he go for political reasons? did he go for religious reasons? >> bihi: he didn't have any political at all. his politics might lie in the championship of the n.b.a. or

the n.f.l. >> kroft: hassan and many of the other young men who left for somalia spent a lot of time at the local mosque, and bihi believes that that's where al shabab recruiters found them and won them over with extreme religious ideology. >> bihi: he was brainwashed by the very institution we have trust him with. >> kroft: which institution? >> bihi: abubakar as-saddique islamic center. >> kroft: abu-bakar is the largest somali mosque in minnesota. the imam, sheik abdirahaman sheikh omar ahmed, was placed on the no-fly list, but his name has since been removed and he denies any involvement in recruiting any young men to fight along side al qaeda in somalia. well, where do you think these... these 20 young men got the idea to leave their parents and go off to somalia and fight with this terrorist organization? >> sheikh abdirahman: the world is very, very small today, so open to any ideology, ideology

that comes in... in one place in the world, you... you read it, immediately, on your internet. you know the youth, nobody can control their minds >> kroft: but someone helped the young men get passports, plane tickets, visas, even rides to the airport. they departed in small groups, so as not to arouse suspicion. this looks to me like it was pretty carefully planned. >> bihi: the level of sophistication of this process is highly underestimated. one of the minneapolis recruits, according to the fbi, has the distinction of being the first american suicide bomber. shirwa ahmed blew himself up while driving an explosive- filled truck like this one into a somali government intelligence office. >> kroft: abdirizak bihi says his nephew, the one who hoped to go to harvard, is also dead-- killed, he believes, by the people who recruited him, for wanting to go home. you think he was murdered. >> bihi: yes. >> kroft: by al-shabab. >> bihi: by al-shabab. once you join, once you go over there, it's a one-way ticket.

>> kroft: in all, seven of the minneapolis recruits are believed to be dead. 12 people have been charged with aiding a terrorist group, including a former janitor at the mosque who is fighting extradition from the netherlands. but stevan weine, a professor at the university of illinois chicago who has spent more than a year here studying the situation, believes that a lot more than 20 young american muslim men have gone off to fight in somalia, their identities unknown to authorities. and that there may be others who have been indoctrinated who are still here. what do you think is going on here, in the broader sense, that we should be worried about? >> stevan weine: what's going on here is that young people in the refugee community are at risk for being recruited by terrorists. we have recruiters from a terrorist organization working on the ground here. we have hundreds of youth who have been radicalized. we have no policy answers to

deal with those issues as a country. >> kroft: it's possible that some of the young american muslims who have gone off to fight in somalia will come back-- just as faisal shahzad and najibullah zazi did when they returned from pakistan,more dangerous than when they left. >> mudd: every day, we can't be confident we've caught every one of them. >> kroft: all it takes is one or two that get through the net. >> mudd: that's correct. we can't miss. the international monetary fund approved an extra $40 million to bail out greece. the white house see no, sir sign of a cyberattack in wall street's dive. regulators doubt it was caused by a trader's mistake. and "ironman 2" raked in more than $133 million at the box office.

i'm russ mitchell, "cbs evening news."

>> pelley: after the car bomb was found in times square, we wanted to ask the secretary of state about the administration's efforts against terrorism in pakistan and afghanistan. we spoke with secretary clinton at the state department on friday. it was the last in a series of interviews that we've done with her, because over the past six months, we've been traveling with mrs. clinton to see how this surprising choice for secretary of state is engaging the world. we didn't expect such a far flung story would begin with questions about events in the heart of manhattan. is the times square bomber connected to a pakistani-based terrorist group? >> secretary hillary clinton: there are connections. exactly what they are, how deep they are, how long they've lasted, whether this was an operation encouraged or directed-- those are questions that are still in the process of being sorted out. >> pelley: the most likely

connection, she says, is to a group called the pakistani taliban. with the bomb in times square, i wonder what your message is to the pakistani government? >> clinton: it's very clear. this is a threat that we share; we have a common enemy. there is no time to waste in going after that common enemy as hard and fast as we can, and we cannot tolerate having people encouraged, directed, trained and sent from pakistan to attack us. >> pelley: secretary clinton was in pakistan, ironically, at the same time the alleged times square bomber was being trained there. on her trip, away from the cameras, she said something remarkable about the pakistani government, something she repeated to us. >> clinton: i'm not saying that they're at the highest levels, but i believe that somewhere in this government are people who know where osama bin laden and al qaeda is, where mullah omar and the leadership of the afghan taliban is. and we expect more cooperation to help us bring to justice,

capture or kill, those who attacked us on 9/11. >> pelley: but we're not getting that cooperation. >> clinton: well, we are. >> pelley: the question is why is this administration not pressuring pakistan to give up osama bin laden, his deputy, ayman al zawahiri. >> clinton: i have to stand up for the efforts the pakistani government is taking. they have done a very significant move toward going after the terrorists within their own country. >> pelley: even in light of the times square bomber, you are comfortable with the cooperation you are getting from the pakistani government? >> clinton: well, now, i didn't say that. i've said we've gotten more cooperation, and it's been a real sea change in the commitment we've seen from the pakistani government. we want more, we expect more. we've made it very clear that, if, heaven forbid, that an attack like this-- if we can trace back to pakistan-- were to have been successful, there would be very severe consequences. >> pelley: what do you mean exactly?

>> clinton: i think i'll let that speak for itself. >> pelley: developments to come. >> clinton: right. >> pelley: we met with hillary rodham clinton at the state department. if history had been president obama's guide, he wouldn't have chosen her. modern secretaries of state are almost never politicians, and not since lincoln has a president picked a fierce rival for the top post in his cabinet. in another of our interviews, we were surprised when she told us what she thought when she heard president obama was going to offer the job. >> clinton: just ridiculous. i absolutely did not believe it. >> pelley: not in a million years? >> clinton: not in a million years. and when he raised it, i said, "well, there are so many other people you should consider. i really don't think i want to do that. i'm not interested in doing it." >> pelley: you... you declined? >> clinton: i... well, i didn't want him even to ask me. i wanted to avoid the "being asked" part, because i really... i didn't think it was the right fit. i wasn't ready to try something new. i wanted to get back to what i was already doing.

but he turned out to be very persuasive. >> pelley: now, she's gone from "not interested" to an all- consuming global campaign in a time when the u.s. is the biggest debtor in the world, fighting two wars, and accused of abandoning its ideals to the struggle with terrorism. >> clinton: we had to tee up a lot. there was just so much when i walked in this door. there was not only these really high expectations about the president and, to some extent, myself about what that meant, but you just can't say, "okay, we're here. everybody... okay, change what you've been doing. immediately adopt a new positive view toward us." it takes a lot of hard work to make that real. >> pelley: right away, she found that america is in a crisis of credibility. >> clinton: all of a sudden, you've got countries who are explicitly saying to me, in private, "well, look, you know, we always looked to you because you had this great economy, and now, look, you're in the ditch. and you've dragged other people into the ditch." >> pelley: larry summers, the president's economic advisor, asked this question:

how long can the world's biggest borrower remain the world's greatest power? is america in decline? >> clinton: no, we're not. but it's a question that has to be answered. and i happen to believe it's one of the critical challenges before us. our nation has to be strong fiscally at home in order for us to be strong abroad. >> pelley: nowhere is her work abroad harder than the place where we met secretary clinton last november. >> clinton: hey, how are you, scott? >> pelley: i'm well. how are you, madame secretary? >> clinton: i'm excellent, thank you. >> pelley: it's a country that doesn't exist on any map, the land that policy insiders call "af-pak," the cradle of terrorism that lies along the border of afghanistan and pakistan. clinton came to bless the inauguration of afghan president hamid karzai, even though karzai was seen by many to have stolen the election through vote fraud. you're going to leave here now and go see president karzai. how frank are you going to be?

what are you going to tell him? >> clinton: we will have a very frank conversation, because i think it is in everyone's interest to make sure there are no misunderstanding, no misconceptions, about what we hope to see and what we expect from his second term. >> pelley: the obama administration has calculated that karzai is the best option among bad alternatives. getting american troops out will depend on pragmatism and compromise, exactly the skills of a politician like clinton. she played both good cop and bad cop, demanding reform behind closed doors. >> please get out, please. >> pelley: then saying what she had to in public. >> clinton: president karzai has won re-election. it was a legitimate election outcome. >> pelley: you just made a point of using the word, "legitimate." >> clinton: and i very much mean it. and now, it's up to him to demonstrate what he can do with that. >> pelley: many back in washington have more foreign policy experience than clinton, but she doesn't let anyone work

harder. the afghan trip was typically brutal. she spent 27 hours on the ground, had countless meetings, interviews and speeches. and then, on departure, she stopped to see the troops. >> clinton: you have something you want me to sign? >> yes, ma'am, i do. >> clinton: whoa, look at you. >> pelley: this is exactly what the president got in return for swallowing the bitterness of the campaign and reaching out to clinton. she's the only person in american politics with global star power close to his own. she can pack a room anywhere. a few secretaries of state have been famous; none has been a first-name celebrity like hillary. long way home. >> clinton: long way home. but, you know, at the end of a good day, you feel like it's, you know, worth going home and feeling positive about where we are in the world. >> pelley: after you. >> clinton: thank you. >> pelley: in 16 months, she's flown the equivalent of almost

12 times around the world; 54 countries, so far. her plane goes by the call sign "sam" for "special air mission." at night, leaving kabul, the windows were shaded to make sam less of a target. secure communications are wedged in. and across the aisle is the "burn bag" stuffed with national secrets, now reclassified trash. to see clinton today, selling obama's foreign policy... >> president barack obama: that is simply not true. >> pelley: ... you forget, two years ago, they were near each other's throats. >> clinton: i did not mention his name. >> obama: your husband did. >> clinton: well, i'm here, he's not. >> obama: i can't tell who i'm running against sometimes. >> clinton: we were campaigning hard against each other. i've lost track of how many debates we had where we stood within inches of each other and hammered each other. but that's a campaign. so, yes, i ran hard against him, he ran hard against me. he won, i lost. and then, he asked me to work with him on behalf of our country. >> pelley: and you've repaired all of that? >> clinton: oh, of course. yes.

and i mean we... we have a great relationship. >> pelley: but the obama-clinton duo has discovered the limits of celebrity. other world leaders are testing this team. personal diplomacy has not gotten them the results they wanted from afghanistan. relations with israel are the worst in decades. their biggest foreign policy success came just last month with russia and a treaty to reduce nuclear arsenals. at the state department, secretary clinton is credited with raising budgets and morale. she let ours be the first television cameras inside her office, which is filled with mementos of courageous women. >> clinton: eleanor roosevelt, one of my favorites. >> pelley: she's carved out women's rights as her own foreign policy priority. maybe that's why she accepted this office after losing the one she really wanted. from here, she still can reach places where women suffer. she went to the democratic republic of congo, where a quarter of a million women have

been raped in the war. and watch what happened in congo when she got this translated question from a man. >> translator: what does mr. clinton think through the mouth of mrs. clinton? >> you want me to tell you what my husband thinks? my husband is not the secretary of state, i am. you ask my opinion, i will tell you my opinion. i'm not going to be channeling my husband. >> pelley: you felt it was expressed from a viewpoint of gender bigotry, so to speak? >> clinton: that's the way i heard it, yes. and since i believe strongly that one of the great moral, economic, political and cultural challenges and unfinished business of the 21st century are the rights and aspirations of women and girls, i am going to stand up for that principle. we must declare with one voice that women's progress is human progress, and human progress is

women's progress, once and for all. >> pelley: we were with her at the u.n., honoring international women's day, when we ran into madeleine albright, who became the first woman secretary of state under bill clinton. what did you tell her? >> madeleine albright: about being secretary of state? that it was the best job in the world. >> clinton: she did say that. >> pelley: do you agree, at this point? >> clinton: well, it's an extraordinary job. >> pelley: you didn't say "best". it's not the job she wanted, but it is the best of her career. >> michelle obama: my good friend senator clinton... uh, secretary clinton. i almost said "president clinton." >> pelley: whatever the title, "clinton" now means hillary, not bill, who stands in her shadow. walking into the west wing, now carrying only the foreign policy portfolio, her popularity is higher than her boss's. obama's approval rating is 51%;

she's at 77%. but continued success may very well depend on the plans of terrorists both overseas and here at home. >> clinton: nobody wants to see something tragic happen again. but we know that every single day, the bad guys are out there and they want to come after us. >> pelley: this is becoming a trend. people used to ask why they hadn't attacked us in the united states since 9/11. the answer is, "now, they are." and they're doing it every couple of months. and i wonder if there's anything about u.s. foreign policy that needs to change, in your estimation, to put more pressure on these terrorist groups where they live, like in pakistan. >> clinton: well, we are doing that. and we're... we're increasing it. we're expecting more from it. this is a global threat. we have probably the best police work in the world. but we are also the biggest target. and therefore, we just have to be better than everybody else.

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>> safer: despite some indications that the economy is recovering, the housing market remains a disaster area. currently about seven million homeowners are behind on their mortgages, and that number is only getting worse. banks, with the help of the government, are offering some relief to homeowners who've lost jobs and just can't meet their payments. but there's a growing number who can pay, but are simply walking away from houses that are now worth as little as half of what they paid for them. it's called "strategic default." people have done the math and decided making those monthly payments is just throwing money

away, leaving the mortgage holders-- the banks-- as zookeepers of an ever-growing parade of white elephants. in the past year, it's estimated that at least a million americans who can afford to stay in their homes simply walked away. among them-- chris deaner and his wife dana of sun city, arizona. west foothill drive has become a street of shattered dreams. >> deaner: amazingly, we have 16 out of the 44 houses on this street have foreclosed over the last year. >> safer: and yours over here? >> deaner: mine will be number 17. >> safer: when deaner, an auditor for a local university, bought his three-bedroom house in 2006 for $262,000, he thought he got a bargain. >> deaner: you know, first-time homebuyers, we don't know, you know, houses are overvalued. we just know we need to get in before it keeps going up and up and up. >> safer: and then... >> deaner: and then, boom. >> safer: the balloon burst.

so how much does he think he could get for that $262,000 house today? >> deaner: right now, about $142,000. >> safer: that's a big drop. >> deaner: big drop-- over 43%. >> safer: deaner and his house were, as they say, "underwater." with a mortgage of about a quarter of a million dollars on a home worth less than $150,000, he has one very expensive lemon. he says he tried to talk his bank into renegotiating his mortgage, but because he earns enough to keep paying, the bank said no deal. >> deaner: they refused to. they said it was going to affect my credit and they were going to take my house. and i pretty much said, "go for it." >> safer: but you could afford to stay here, correct? >> deaner: i could, yeah. >> safer: but he chose not to. he is walking away. that lemon of a house is now the bank's problem. >> deaner: it's almost like the in thing to do right now, it seems like. >> safer: and because deaner, like many americans, only made a 10% down payment on his home,

taking a hike is a lot easier. by law in arizona and nine other states, the bank cannot go after any of his other assets. but his credit rating will suffer. aren't you fearful that you're... you're going to get a reputation as being a deadbeat? >> deaner: yeah, but with the money savings that i will have in four to six years, i'm confident i'll have money to... to buy my way into a house, if i want to. >> safer: and you don't feel any... even a twinge of guilt? >> deaner: no, especially after dealing with my lender, trying to contact them. none at all. >> safer: neither do jean ellen schulik and danny kuehn. they bought their phoenix bungalow three years ago for nearly $400,000. the bank now values it at $85,000. even though they can afford the mortgage payments, they felt they were trying to bail out an ocean with a bucket. >> jean ellen schulik: no logical business person would do anything other than walk away. and so, there was a lot of soul searching.

and i did a lot of crying, because i'm in love with this house. and... and every day, i would redo the math and think, "maybe we missed something. may... you know, this just can't be right." >> safer: but it was. the value of their house was dropping anywhere from $5,000 to $8,000 a month, so schulik and kuehn just felt it was time to walk away. >> schulik: i don't think we're villains. we fulfilled the parts of our contract that we have with the bank. we've let them know what we're doing. it's all legal. it's not anything i ever expected i would be doing, and it sure doesn't feel good. but it seems like it's the right thing to do. >> safer: what do your neighbors make of it? another empty house breaks down the value of everyone's house. >> danny kuehn: and we've seen that, here, i think they will be upset, and i understand that. >> safer: but you're hardly alone in phoenix right now, correct? >> schulik: that's true >> kuehn: yes, it's interesting the number of my coworkers who have approached me to say, "how are you doing this? because i need to do it." >> safer: the southwest has

become an inland ocean of bad mortgage debt. here in arizona, a full 50% of houses are underwater, and next door in nevada, it's even worse-- 65% of houses there are drowning and the rivers are rising. and it's not just the southwest. more than 11 million homeowners across the country are underwater. it's estimated that number could double in the next year, which means nearly half of all american mortgage holders will owe more on their homes than those homes are currently worth. >> david stevens: we've been through an event that none of us have ever experienced in this country since the depression. >> safer: to try and stem the tide of foreclosures, the commissioner of the federal housing administration, david stevens, says the obama administration has set aside billions to give banks incentive to help struggling and underwater borrowers with their

mortgages. but banks have been slow to modify the terms of those loans. >> stevens: the fact of the matter is these programs are designed to affect those who are most at risk who are unable to make their payments. and it does require the investor, the servicer to participate. >> safer: the decision to walk away from the sinking home by people who can afford to pay is spreading like a virus. because if one person in the street does it, the next door neighbor says, "what am i doing? why am i putting all this money into this almost worthless house?" >> stevens: the concern has to be for someone who's going to take that move is that they have to be so deeply in negative equity that they're willing to damage their credit, damage their financial reputation going forward. if you get foreclosed on in your home, you walk away from your mortgage when you could have afforded it, particularly, that's going to follow that family for years to come. >> chad ruyle: this is youwalkaway calling in response

to your on-line inquiry... >> safer: but chad ruyle, co- founder of a new business called youwalkaway.com, says fears of the consequences are overblown. >> chad ruyle: people think that, if they're late on their payment or they defaulted that a sheriff is going to come the next day and rip them out of the home. what we do is offer people a piece of mind right away that... that they know that's not going to happen. i'm going to be here for you throughout the entire time... >> safer: the web site urges underwater homeowners to "unshackle themselves" from their mortgage obligations and, for a price, walks them through the process of walking away. ruyle says his greatest challenge is convincing people that they are not immoral. >> ruyle: the biggest concern people have, our customers have, is the stigma of foreclosing, and what will the neighbors think? but as more and more people are foreclosing, that stigma is wearing off.

people are realizing now that... that there isn't shame in... in defaulting. the banks don't feel shame by foreclosing on a person's home. >> safer: so, you're saying we should all be acting like bankers? >> ruyle: sure. i mean, it's... it's a business transaction. >> safer: brent white, a law professor at the university of arizona, says the moral issue is besides the point. in a controversial academic paper, he wrote that government and the banks exploit people's sense of shame to keep them from defaulting. white says more people should be walking. >> brent white: you won't find a time in history where this many americans were underwater on their mortgage. you won't find a time where this many people's homes are worth half of what they paid for their homes. these are unique times, and things are different. >> safer: as a child of the depression, let me tell you that the most shameful thing that you could... that could happen to you was to lose your house. >> white: my argument is that, in fact, that people feel too shameful about letting go of their home.

and in fact, people might be better off making economic decisions, rational decisions in their best interest. >> safer: white says big businesses make such bottom line decisions all the time. morgan stanley walked away from five san francisco office buildings they bought at the height of the boom. and real estate developer tishman speyer defaulted on the huge $5.4 billion stuyvesant town apartment complex in new york city earlier this year when its value fell by nearly half, making it one of the biggest walkaways in real estate history. it's a trend the banks fear could catch on with average homeowners. already, the ceo of citibank's mortgage unit estimates that one in five borrowers who default on their mortgages are able to pay. if that number rises, it could jeopardize any economic recovery. no bank we contacted would talk

publicly about strategic defaults, but all indicated they would be unwilling in most cases to help underwater homeowners who can afford to keep up their payments. and commissioner stevens agrees with the banks. >> stevens: to simply allow anybody who just decides they don't want to own a home anymore, who signed a contract to purchase a home, to walk away and get some sort of write-off with a program backed by a administration or a financial institution, creates a whole new set of standards that will live with us for years to come. the question is, "who pays that bill?" >> safer: for now, that bill is being paid by people like businessman tom hansen of scottsdale, arizona. he bought his dream house on gold dust avenue five years ago. much of the gold has evaporated, and he is left with a pile of dust. >> tom hansen: i paid $1.2 million for the house. >> safer: what's its value today? >> hansen: $850,000, if you can sell it.

>> safer: while his friends are urging him to unload that monkey on his back, hansen just can't bring himself to do it, yet. >> hansen: i just would not be comfortable walking away. and so, you know, maybe at some point in time, i will walk away. but right now, i'm not. >> safer: what you're saying is it really comes down to a conscience? >> hansen: i think it does. >> safer: you could probably rent a pretty grand house at a lower rent than you're paying right now in mortgage payments. >> hansen: absolutely could-- probably half. >> safer: i mean, you are attached to the house. >> hansen: oh, i am. yeah, i... i love the house. so, i'd have to go find a house that i liked better. >> safer: this is an expensive love affair. >> hansen: aren't they all? ( laughter ) >> safer: but the deaners, who stopped paying their mortgage five months ago, plan to stay in their house for free until the bank forecloses in july.

then, with all the money they save, they plan to rent a nicer, cheaper house for a few years while his credit recovers. you know, there are people saying, if everybody did what you're doing, the country would be in even bigger, deeper trouble than it is right now. >> deaner: if that starts happening, then that's for the professionals to figure out. >> safer: how did you used to feel about people who walked away? >> deaner: i thought, initially, it was immoral. my family raised me to believe that it... you should take care of your contract liabilities and your debt. that's how i was brought up to... to be. >> safer: live within your means? >> deaner: live within your means, yeah. and that's what i've done. >> safer: so, you don't feel any responsibility for it? >> deaner: unfortunately, no, i a few years ago i got a wake up call. a heart attack at 57. that was a rough time. my doctor told me i should've been doing more for my high cholesterol.

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>> stahl: now a few minutes with andy rooney. >> rooney: it may be what everyone thinks of themselves as, but i consider myself to be an absolutely dead center, normal average american. you'd think my experience growing up, going to school, serving in the army, getting married, having kids, buying a home, would make me perfect if hollywood was looking around for an average american male. the things i write and read on television are for regular, normal, average, everyday americans-- i mean, like myself. or so i think. my question then is this-- if i'm so average american, how come that i've never heard of

most of the musical groups that millions of other americans apparently are listening to? i've heard of sting and the rolling stones, but someone sent me "billboard" magazine, and i looked at a list of the top 200 performers and nobody i know is on that best-seller list. the singers i know have been replaced by performers like justin bieber, lady gaga and usher. i mean, who? they are selling millions of songs by singers that i've never heard of, and that must mean i'm out of the american mainstream and definitely not average. i know age is the obvious divider, but age doesn't separate americans in other areas. we all like comfort, beauty, ice cream, a sunny day, and a win for our favorite team. why should our tastes suddenly diverge when it comes to the sound of music?

i think of myself as a musical ignoramus who doesn't hear or like the nuances of sound that other people hear and do like. i don't know who lady gaga is, and kids today probably don't know who ella fitzgerald was. maybe we should call it even. >> stahl: i'm lesley stahl. we'll be back next week with thing as taking a chance? as having to decide to go for it? at the hartford, we help businesses of all kinds... feel confident doing what they do best. by protecting your business, your property, your people. you've counted on us for 200 years. let's embrace tomorrow. and with the hartford behind you, achieve what's ahead of you. ♪ .

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