mad anthony

Rants, politics, and thoughts on politics, technology, life,
and stuff from a generally politically conservative Baltimoron.

Saturday, October 11, 2008

Trying to figure out the math of a mortgage bailout for homeowners...

I commented a few days ago that I would love to hear a politician talk about why homeowners who bought too much house shouldn't get a bailout. I was reading some comments on a PJM article today that echoed this sentiment - that if McCain had said something to that effect he wouldn't be behind in the polls.

What puzzles me isn't the numbers of the bailout, but why both presidential candidates are behind it. When I talk of bailout, I'm not talking about credit-market stuff like the government buying questionable mortgage-backed securities, but doing things like McCain's proposed readjustment of government-owned mortgages - stuff not aimed at helping the broad market, but rather specific homeowners.

What puzzles me is why politicians think this is a winning point of view. I'm going to throw out some numbers here - they are completely from memory, and are probably not accurate. However, unless they are off by a factor of 10, the point still makes sense.

I think something around 65% of the population are homeowners. That means 35% are renters (or possibly in other situations, like living with relatives). A homeowner bailout doesn't help them. Of those 65% of the population, some don't have mortgages, but own their houses outright - I had no idea what this number was, so I actually did google it, and came up with 40% of homeowners owning their homes outright as of 2k1. If that figure is still close to the same, it means that 26% of the population has a paid-off mortgage, which would mean that 39% has mortgages. Of these, somewhere around 9% are in foreclosure, which means that about 3.7% of the population as a whole is in foreclosure.

Which would seem to suggest that 96.3% of Americans aren't currently eligible or in need of a government bailout, and you would think that a significant number of these people would resent paying to bail out the <4% who are. Which would suggest that a homeowner bailout is a political loser, not a winner.

Which makes it even more puzzling that no major candidate is against it.


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