Wednesday, October 29, 2008

FDIC & Treasury

FDIC & US Treasury

Ok, so lets do some remedial math.
3,000,000 house debtors
Cost: $50 Billion

Cost per household : $50B / 3,000,000 = $16,000
So they are trying to say that bailing out 3 million households will only cost an average of $16K per household. Lets try some other calculations.

Lets assume 1/2 of these houses require principal reduction.
Lets also assume that the average reduction for these houses is $50,000.

Cost for House Debtor Bailout: $50,000 x 1,500,000 = $75,000,000,000

That is $75 Billion for a conservative estimate. In California, you'd need at least $100,000 per household to save house debtors. If all the household required $100K, that would bring the estimate to $150 Billion. And don't forget the additional 'moral hazard' this will introduce, but what the heck, we're not a capitalistic country anymore.

That number seems a bit more realistic than the $50B bullshit they're shoveling, below.

2008-10-29: Treasury, FDIC Crafting Plan to Rework Millions of Mortgages
Officials with the Treasury and the Federal Deposit Insurance Corp. are crafting a plan under which the government would guarantee the mortgages of as many as 3 million homeowners now struggling to avoid foreclosure, according to three sources familiar with the discussions.

Under the program being discussed, the lender would agree to reduce borrowers’ monthly payments, for example by lowering the interest rate or principal of a mortgage loan, based on the homeowner’s ability to pay. These reconfigured loans could help homeowners avert foreclosure.

It would cost between $40 billion and $50 billion, sources said. The program is being discussed as members of Congress are voicing frustrations that the $700 billion rescue program thusfar has been aimed at helping banks, but not homeowners.


s_baghaii said...

So let's just make up really big numbers and then do math and come up with much bigger numbers than the government made up?

Tyrone said...

Well, do you believe you can save each of these households for $16,000?