Not Nearly Enough

A few weeks back, I wrote about the $20 billion contemplated agreement between AGs and the banksters, which you should cheer because the banksters think it's a terrible idea and will bring Economic World War III. Ezra Klein writes the following about this idea:

The hope is that they can get something capable of stabilizing the housing market. For all that the economy is improving, housing remains a huge drag, with legitimate estimates suggesting we've still got as many as 11 million foreclosures in the pipeline. "The number one reason for nervousness about the economy in the next six to nine months is the foreclosure crisis," Moody's economist Mark Zandi told me last week.

With Congress no longer interested in acting to ease the foreclosure crisis -- or, it seems, the jobs crisis -- this settlement is perhaps our last shot at stabilizing the housing market. The big thing that advocates are looking for is "principal modification": a process in which borrowers who are underwater on their homes would see the amount they owe to the bank reduced. That looks to be in the proposed settlement, but the devil is in the details -- how much does the principal get reduced by, and under what circumstances? But if you can get those details right, a lot of experts think they could provide substantial relief. "I do think principle writedown would be very effective. If you could get $20 billion in a fund, you could provide half a million in very solid modifications," Zandi says.

I completely agree that principal reduction is necessary and the only way to right the housing market. The current situation is obviously unsustainable and more or less leaves homeowners indebted for the rest of their lives, as home values are unlikely to ever return to their bubble-era levels. But I still think that $20 billion is a pittance compared to the overall problem:

WASHINGTON — The number of Americans who owe more on their mortgages than their homes are worth rose at the end of last year, preventing many people from selling their homes in an already weak housing market.

About 11.1 million households, or 23.1 percent of all mortgaged homes, were underwater in the October-December quarter, according to report released Tuesday by housing data firm CoreLogic. That's up from 22.5 percent, or 10.8 million households, in the July-September quarter.

The number of underwater mortgages had fallen in the previous three quarters. But that was mostly because more homes had fallen into foreclosure.

11 million or more mortgages underwater, and we're looking at fighting to get funds for principal reductions on maybe 500,000 of those. That sounds about on par with the stated goal vs. actual success rate of HAMP, which is not a good thing.

And in conclusion, obligatory snide reference to the fact that we couldn't act fast enough, couldn't appropriate enough emergency funds to throw at Wall Street post avoidable financial crisis economic blow-up, at which point they promptly went back to profitability and paying outsized bonuses and telling middle America to fuck itself when we try to get any sort of regulation, damages, or corrective actions in place, and that any said reforms would cause the economy to implode, which is ironically the very reason they used when begging for their bailouts in the first place.