For $3 trillion less than bailout, we could have paid off every U.S. mortgage!

According to Federal Reserve data, household-owned real estate was worth about $20.6 trillion dollars at the end of 2006. That $20.6 trillion was divided almost equally between household equity ($10.8 trillion) and mortgage debt ($9.8 trillion).

So, $9.8 trillion could have paid off all residential mortgage debt in America.

In a previous post, I noted that Bloomberg reports the Federal Government and Federal Reserve have already “spent, lent or committed $12.8 trillion.”

We’ve already spent $3 trillion more than it would have cost to pay off all mortgages in America! And banks still don’t have strong balance sheets and still aren’t lending much.

Why didn’t we address the root cause of our troubles? More than 1 ½ years into this crisis, Congress is still bickering over whether to allow judges to adjust mortgage terms for homeowners who can’t cover payments and whose houses are worth less than they still owe.

And how can things be so bad that even a bailout $3 trillion larger than the value of all residential mortgage debt can’t fix things? Have some banks gambled that much on housing credit default swaps? If so, couldn’t we have solved that problem too by paying off all mortgages?

Posted by James on Thursday, April 16, 2009