Dean, how much money does the typical home owner, in trouble with her mortgage, donate to congressional campaigns? And, how much do banks donate and, through their lobbyists, simply give the congressmen? Isn't there a teeny little hint hidden in there?

The typical homeowner has one vote to give to her congressman. With that and $5 she might be able to buy a cup of coffee.

About 67% of housholds own homes, while the rest rent.

About 70% of homeowners have mortgages, while the rest own their homes free and clear.

Of the mortgages, about half are "underwater", where the mortgages (first, second and home equity loans) total more than the value of the property.

Therefore, about 23% of the homeowners would benefit from the strategy that you are proposing. This doesn't make a majority. It doesn't even make a majority of one party, since you have a mix of low income people lured into mortgages they can't afford after resets, no-doc mortgages taken by small business owners to invest in their businesses, enterprising real estate people who invested in multiple properties, etc.

The matter is further complicated by how state law treats mortgage foreclosures, by the securitization of pools of mortgages into multiple tranches, and by whether the HELOCs are treated similarly to first mortgages or not.

Dean,

I wrote a post just last week suggesting we get the for profit middleman out of the way and get the money right to the homeowners. We get more bang for the buck that way.

John W1141: No need for hysteria. The only label I claim is constitutionalist. Please identify language in the Constitution that authorizes bailing out banks or citizens.

I'm as unhappy as you about Pentagon waste. Moreover, I oppose any unconstitutional military activity, including the Iraq and Afghan wars. But defense spending is definitely authorized by the Constitution.

I'm glad you mentioned religion for, indeed, charity is a religious function, but not a legitimate federal government function. (Note: state governments retain the power to provide charity, per the 10th Amendment.)

As Grover Cleveland wrote when he vetoed the Texas Seed Bill in 1887, "I can find no warrant for such an appropriation in the Constitution; and I do not believe that the power and duty of the General Government ought to be extended to the relief of individual suffering which is in no manner properly related to the public service or benefit. A prevalent tendency to disregard the limited mission of this power and duty should, I think, be steadily resisted, to the end that the lesson should be constantly enforced that, though the people support the Government, the Government should not support the people."

Take the time to read and understand the Constitution, then urge your congressional delegation to do likewise.

I rent my apartment. Can I get a handout too? Give me $50k.

Given the number of houses in this country with mortgage values exceeding the current property values, and the number of financial institutions holding those mortgages, doing nothing is a sure way to force the country into a depression. I can't see where the federal government has a choice other than spending massive amounts of money in an attempt to at least partially alleviate this situation.

Just because some one is a renter, or owns his home outright, doesn't mean he is not at risk if we end up in a depression. Furthermore, if our country ends up in a depression the entire world economy will soon follow. And, when a situation like that erupts extreme nationalism soon follows, which leads to major wars.

I think we will have to accept that whatever is done now will be unfair to at least half of us, or will at least seem unfair. This is the Bush legacy - it's time to acknowledge that.

. . . we could employ the economist's solution . . . . Dean Baker

An oxymoron if I ever heard one.

Gentlemen, Ladies:

So far there has been two industries who have received "Bailout" funds:.

1. The Financial Sector.
These banks and financial institutions wrote sub-prime mortgages, packaged them and sold them (for a profit) to other financial institutions who repackaged them and sold them to other financial institutions (for a profit), This continued until the packaged mortgages were priced to where no financial institution would continue to buy them. It was like a very profitable game of musical chairs until those repackaged sub-prime mortgages were so inflated that no financial institution was interested in buying them. At that point, the financial institutions concocted a plan to sell those packaged sub-prime mortgages to the American taxpayer at their inflated prices. The governmnent's solution - to borrow money from Americans to give to the financial institutions so Americans can borrow more money.

2. The automotive companies.
These corporations overproduced cars, trucks, and SUV's way beyone the capacity of the American public to buy them. Just look at all the vehicles on used car lots which are not being sold becuase the market for additional vehicles just isn't there. The solution by government economists is to borrow money from Americans to make it available for Americans to borrow so they can purchase cars, trucks, and SUV's they don't want or need.

The largest two reasons for the economic downturn was the deficit spending by the Federal Government and the deficit spending by Americans.

The government's solution - to borrow more money from Americans to make it available for borrowing by Americans just doesn't make any sense at all.
.

Good grief, I leave for a couple of weeks and all hell breaks loose. Dean is talking about handing people 50k and Dickens is back in style.

Here's my two cents--yes, there are a lot of people who need help and deserve it, but the reason to get the money to homeowners is that the root of the crisis is in housing. Or more specifically the mortgages people got from about 2001-2006 to pay for their housing. There's no problem with the housing, no problem with the people (despite the high-minded critique of their ineptitude and greed), the problem is with the mortgages, and people can't get out of their mortgages without tanking their credit for some time.

People losing their properties or walking away from their crazy mortgages is the epidemic, and if you want to fix this problem you have to separate the bad mortgages from the others. In my view, the best way is for the govt to start in the worst-hit neighborhoods and share the payments by up to 50%. People won't have to walk away from or lose their properties. And talk about stimulus.

The people who are worried about propping up housing prices that "ought to fall" can probably rest easy. Everyone knows at this point that the propped up mortgages wouldn't represent the "real" value of the houses. Sharing the payment would just be a way to keep the person in their house and their credit intact.

I need some help with Baker's $300K (mortgage balance), $200K (current fair market value of the mortgaged property), and $250K (current fair market value of the mortgage if sold by the bank to an investor).

Isn't that $250K kind of high? Seems to me the seller-bank would be lucky to get $180K for that mortgage in the market.

What's the explanation?

Most posters and most Americans (for differing reasons) can agree that TARP and the Fed multi-trillion dollar injections are not working, unfair and a bad idea all around. But without going to the heart of the problem will we get to the heart of a solution. The current reigning, post 1971, post Bretton Woods, floating exchange rate, Free Trade, Globalization regime is dead, bankrupt, collapsing in upon itself. No reforms to this dead system will work. Some of the ideas proffered by Volker and the incoming Obama people for re-regulation are good ideas, but are akin to closing the barn door after the barn and all the horses inside have been consumed by the fire. Throwing more TARP money and other monies on this fire is like trying to put it out by applying white phosphorous.

Every major bank in the world, indeed, the int'l monetary system itself is bankrupt. At the heart of the problem is the over a quadtrillion dollars of derivatives pile of worthless gambling debts. We must freeze the system, put the banks and the system thru bankruptcy reorg. Ultimately, the derivatives must be written off entirely or for pennies on the dollar. Obama must admit this is the case and begin the process soon to forestall a disaster worse than the 30's.

What the bankrupt int'l financial empire is attempting to do is to drain the treasuries of the world's nation states for 2 purposes - to prop up their dead system (and effect the rescue of their means of power in the world), and at the same time, destroy the power of the nation state system to regulate and restrain their power. The same economic royalists that FDR confronted and partially defeated thru the means of the Pecora Commission and subsequent regulatory reforms are the ones we must restrain, control and defeat today. They are very powerful, with tentacles everywhere, including within Obama's party (effectively controlling Pelosi, Dodd, Frank, etc.). Nothing worthwhile will be accomplished without offending these people. Their overriding concern is that Obama must not become FDR II. Yet, he must do exactly that or we are doomed.

The monetary system must serve the physical economy, not the other way around. Yet it HAS been the other way around for since at least 1971. Every FDR reform has been eviserated or destroyed. We must put the entire system thru bankruptcy reorg, freeze foreclosures, re-regulate, outlaw speculative activities such as derivatives and the like, and create a new Bretton Woods system of fixed exchange rates thru treaty arrangements between the US, Russia, China and India (and all other major and minor economies that want to join). Then we start over, issuing credits to restart the physical economy, with mult-trillion dollar investments in global infrastructure projects of 25, 50 and 100 year durations - power systems, water-management systems, electrified rail and maglev system to link up the entire world. Instead of bailing out the auto companies, recognize that the auto paradigm is over; there are too many auto companies and too much capacity in the world. Retool auto to build the power and train systems we need. This will create millions of high paying jobs in steel, concrete, construction and related feeder industries, which must be protected with a reasonable tariff policy. This is the American System, which Hamilton, Lincoln and FDR have utilized in the past to build the most powerful agro-industrial nation the world has ever known. We can and must employ these methods now to rebuild our nation and the world or we face a new dark age of collapsing trade, employment, resource wars and depopulation.

Tenants might well prefer to have our essential virtuousness recognized not by sticking it to our distressed homeowner neighbors, but by reforms that give us housing rights like rent control, just cause eviction and a housing tax break, as well as affordable rental housing for those of us who are paying 60-70% of our incomes for rent in the private market.