Monday, February 09, 2009

Hey Mister, Want to Help? Simple, We'll Just Double Your Mortgage

According to Bloomberg, the Federal intervention in the economy totals $9.7 trillion dollars, every cent of it borrowed. Bloomberg has done the math to report that $9.7 trillion is enough to pay off the mortgages on nearly every house in the country.

Question: Wouldn't it be maximally stimulative to just use the money to actually pay off all those mortgages, every single mortgage in the country? The benefits:

  1. No more "toxic assets" weighing down bankers and secondary markets. This would free up investable funds for other uses, right?
  2. No more mortgage payments burdening consumers, freeing up hundreds of billions of dollars each and every year for other uses that would produce additional jobs.
  3. It would instantly match up the housing supply with demand. Without doing any harm to current owners, suddenly unburdened of their borrowings, housing prices could fall to levels where millions more could afford to purchase.
This approach beats the current plan by miles. Currently, the administration intends to spend the $9.7 trillion stimulating consumption and send us the bill, effectively doubling the mortgage on every American's house. The worst of all worlds.

Of course, this is all Obamanomics, which bears the same relationship to reality as does the Mad Hatter. The better approach? Let's ask the political class to take a month or two off, take a vacation and a deep breath. That way, we can all get to work doing what we do best.

1 comment:

Anonymous said...

Don't buy the Mortgages outright from the banks have the US Treasury (not the fed) buy the mortgages of owner occupied homes at say a 20% discount from the banks. (Don't borrow money from the fed just send crisp printed pallets of dollars directly to the bank.

Now send a bill to the homeowner setting the mortgage payment at 1 point over prime fixed at no more than say 3%..

Every month when the money comes in it goes directly into the US Treasury again not the FED.

Reducing the cost of housing and filling our US Treasury with cash..

Not Bad ... Not bad at all..