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Wednesday, October 8

One Landlord Under God

John McCain Wants To Buy Your House!
That was weird last night when John McCain announced that, when he is president, which will be the 10th of Never, he will spend $300 billion purchasing America's troubled mortgages! Under the terms of the Treasury's bailout, this is actually totally possible—though it's not really clear what McCain meant he would do. (This was the second most shocking thing McCain said at the debate—the first was proposing that Meg Whitman, the former CEO of eBay, could become his secretary of the Treasury. This was horrifying, that a billionaire corporate marauder with little knowledge of finance could take such a position.) He sort of explains his plan on his website though!

"The McCain Resurgence Plan"—really, did we need to recall the surge?—"would purchase mortgages directly from homeowners and mortgage servicers, and replace them with manageable, fixed-rate mortgages that will keep families in their homes."
This plan is for primary residences only (duh) and also only for folks who "Can prove their creditworthiness at the time of the original loan (no falsifications and provided a down payment)."

So the government would become a giant state landlord. To prevent itself from losing money, it would also be in the position of evicting people, which will be fairly amusing. (One expects that Flint, Michigan, won't end up looking much different.) This would be one of the largest government bureaucracies ever created—though surely not as big as the U.S. Post Office, one of the nation's biggest employers.

So, of all of America's mortgages, about one-third are paid off. At the other end of the dial, last year 1.3 million homes were threatened with foreclosure. (Arizona, John McCain's state, had a 150 percent rise in foreclosure filings from 2006 to 2007.)

All told, there are $12 trillion worth of mortgages in the U.S.; nearly 10 percent of all mortgages are delinquent on payments or in foreclosure; about a trillion of those are "subprime."

What's more, as Matt Cooper points out in Portfolio, as many as 40 percent of homes are mortgaged at a clearly inflated value.

So, quite frighteningly, by the numbers $300 billion actually doesn't go very far—both because there are so many trouble mortgages and because those mortgages are for a value that the homes no longer carry.

Way back in February, Janet Morrissey wrote in Time that "Many believe the government will ultimately step in with a housing industry bailout to the tune of hundreds of billions of dollars before it would allow a major bank to collapse." That idea has finally been made a campaign talking point, which, for one thing, shows just how fast Washington insiders like McCain move.

And if the bailout itself provokes such unhappy sentiment in America, how will those third of homeowners who've paid off their mortgages feel about buying up all the troubled mortgages? What's more—how do you think all of the renter who've been unable to buy—and unwilling to buy at clearly false or idiotic terms—will feel? Answer: Not good at all.

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