Underwater

Americans may be asking what the Charlatan is smoking in the relative safety of the rent free bunker on Pennsylvania Avenue, as households in record numbers are financially sinking. Moody's, the bond rating company, reports that 10.3% of homeowners are "underwater" or owe more on their homes than they are worth. That is about 8.8 million owners according to Moody's chief economist. You have to go back to the Great Depression to find a number that large. Foreclosures have also hit record highs. The Mortgage Bankers Association said the delinquency rate for all loans is at 5.59% in the third quarter, the highest rate since it's survey began in 1986. ARMs had the highest rate of foreclosures (4.72%) and late payments (18.81%). By the end of 2008 as many as 15 million households will be in the red. So many insolvent consumers will have a large impact on the economy as a whole. The Joint Economic Committee report released by congressional Democrats estimates that there will be $100 billion in losses to the economy by the end of 2009. Property tax revenues will also be hard hit. The estimate is $917 million in total lost tax revenue. Undoubtedly, the lost tax revenue will have to be recovered in some other way. Current proposals to help insolvent homeowners are widely viewed as too little, too late. The two plans offered by the Regime only help 15 to 20% of the households in danger of loosing the home. State governors in Washington, DC for their winter meeting called on the Regime last week to offer a comprehensive solution to the growing subprime mortgage crisis.