Mortgage Math Doesn't Add Up

I am no Nobel Prize winning economist like Paul Krugman. I didn’t go to Harvard or Dartmouth like the president and his economic brain trust of Geithner and Paulson. I did, however pass seventh grade math at Holy Family School in Ashland, Kentucky and the way I see it, something doesn’t add up.

Way back in October, (you remember October, it was when the Worlds Series was going on), the President was saying unless we slapped down seven or eight hundred billion dollars to get rid of bad mortgages and other “toxic assets” we were going to slide down into the abyss of economic ugliness from which there was no return. We needed to do it, right then! Now! Today! Wait, is this a four day weekend? Ok, we’ll do it Monday. Do you remember? So we ponied up the dough and that solved the problem, right?

Then change came to Washington and there was change! The new President said that unless we plunked down another nine billion to one trillion were going to slide down into an economic abyss from which there was no return. We needed to do it today, now…I think you get the picture. Do you see the change? It’s subtle, but it’s there, the amount went up by about two hundred billion! That’s change I can believe in.

Now the Wizard of Odd, Tim Geithner says that he wants the private sector to put up another trillion or so to get rid of “toxic assets.” He’s saying that private money is needed to get credit flowing again.

Don’t forget somewhere in there was a budget for everything else that came in around 1.2 trillion and another four or five hundred billion for walking around money.

So here is how I see it from a seventh grade math perspective. To get rid of toxic assets we have put out about to two trillion seven hundred million dollars. To make the math easy, let’s say the average mortgage is 200,000. So, 200,000 divided into 2,700,000,000,000 equals 13.5 million. Do I have that right?

There are roughly two hundred and seventy million Americans, so at an average of four to a household that equals roughly sixty-seven million households. Let’s say that, and I know this is a high estimate, 75% own a house, and so there would be just over 50 million mortgages in America meaning the government has bought up over one quarter of all of the houses in the country for that amount of money? I ain’t buying it! Where is the money going? Here’s the kicker, I don’t think anybody knows where all the money is going.

Maybe the way to handle the toxic assets is to say that any toxic waste is a problem for the EPA to handle and they could put some guys in bio sits and bury the lot of them somewhere in the Nevada desert. We could get Al Gore to issue a carbon credit and hope the 2010 elections get here before the bill comes due.