On Tue, Sep 23, 2008 at 9:56 AM, Julio Huato <[EMAIL PROTECTED]> wrote: > According to a 2007 study by the Chicago Fed authored by S. Agarwal > and C.T. Ho, the estimated face value of outstanding subprime loans in > 2007 was $1.5 trillion. (I've seen other estimates at around $1.3 > million, but let's not quibble with details.) According to same > Chicago Fed study, the delinquency rates nationally average 2.5% or > so. Let's be generous and say it is 5%. In other words, the exposed > portion of those outstanding subprime mortgages amounts to $75 > billion. Say, it is $80 billion. Add consumer credit in distress > (car loans, credit cards) of lower-income people to total, say, $100 > billion. The number of households involved is somewhere between > 300,000 and half a million people.
1) I like the idea but I don't think the numbers are right. The 2.5% average delinquency rate is I believe for *all outstanding mortgages*. The delinquency rate for subprimes is, I believe, substantially higher (closer to 25%). Even with that higher number the idea is still good because it works on the trickle up principle rather than the trickle down favored by Paulson/Bernanke. > Still, should the Treasury give away money to poor people who dared > dream own a house? I'd argue that doing so beats giving $700 billion > to the shareholders and creditors of banks and financial firms over at > least 2 years (I'm sure that the $700 billion would not be the end of > the Paulson plan, just like Wolfowitz's $60 billion cost of the war of > Iraq was just the beginning). According to the Paulson plan the $700B is a balance sheet number not an expenditure limit. If he keeps buying high and selling low, to keep his balance sheet under $700B, the plan imposes no limit whatsoever on how much he can spend. It really is a blank check. See for e.g.: http://www.nakedcapitalism.com/2008/09/why-you-should-hate-treasury-bailout.html It is incredibly sleazy that Paulson should try to disguise this aspect of his proposal but I guess nothing should surprise us coming from these guys.. -raghu. -- For people who like peace and quiet: A phoneless cord! _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
