Wikinvest Wire

Just pay off everone's damn mortgage!

Tuesday, February 10, 2009

With this headline that just flashed across my screen --

-- it's become clear that, if the U.S. government really wants to solve the current economic crisis, they ought to just do what John S. suggested a while ago in the comments section of yesterday's post titled "Ten trillion dollars dollars to save the world":
Wouldn't it be cheaper to just simply pay off every mortgage in America? Then all those mortgage backed funky financial instruments would become sound. And relieving everyone of their mortgage payments means we can restart the the consumption bubble.
Not a bad idea - removing the uncertainty about souring Alt-A loans and the next wave of foreclosures would stop home prices from falling immediately.

In fact, since many of the problems with derivatives these days involve insuring mortgage debt that is either going bad or about to go bad, paying off everyone's mortgage would make a big chunk of the derivative mess just disappear.

AIG could be back in business insuring all the stuff they used to insure before they took a header into the mortgage backed securities business.

With today's potential $3 trillion addition to the previous $8 trillion in purchases, guarantees, and sundry bailouts (give or take a trillion or two), you could pay off every mortgage in the U.S. and we could start all over again!

Of course, this would probably favor the rich since they have bigger mortgages.

And renters would have to be compensated in some way.

Commercial real estate would still be in trouble until spending starts up again.

It would set a horrible precedent, but, who cares - fighting fires, water damage, etc.

It would hurt the bankers, since no one would be servicing mortgage debt for a while.

Other than that (and probably about a hundred more), it sounds like a plan!


donna said...

Better yet, pay off the mortgages of those of us who didn't go buy a big new house, let those who bought too much move into our homes, and let us take over the big houses since we know how to manage our money. Give us a bank or two to manage while we're at it, too!

Shouldn't those of us who have been fiscally responsible get something out of this deal, since we have to pay for it all?

Expat said...

One trillion dollar payment to every American with no conditions and no restrictions.

That'll work. Then cancel the dollar and make a law saying leaves are the new currency. Inflation? Burn down most of the forests. (Thanks, Douglass Adams)

Tom K said...

No this would not work because if they did this then everyone would just go buy a bigger house and default and then they would have to do it again only bigger..

But heres a plan and a good one why doesn't the govt just mandate that everyone gets a forced raise equal to the local income to current median home price. Like here in Ventura County about 1.5 x current salary would be about right. This way home prices stop falling, the state would take in a ton more revenue from the higher taxes budget problem solved. Oh I forgot to mention no raises for any union workers they are excluded. And we take the TARP money and increase the social security payments for the elderly so they don't get hosed by the plan. This would work?

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