John McCain’s plan to buy underwater mortgages at taxpayer expense gets brutalized in today’s Wall Street Journal. They’re trying to be polite, since obviously the Editorial Page writers prefer McCain to Barack Obama, but you can tell they can barely conceal their sneer.
“Mr. McCain’s plan to transform Treasury into a major mortgage lender, and running the operation at a potential $300 billion loss, raises more questions than it answers,” the Journal’s edit page says. Translation: this thing is the worst idea we’ve heard in a long, long time.
The Journal misses out on at least one potential upside of McCain’s proposal: it promises full employment for the troubled real estate industry. Basically, all those people who helped get us into this mess and now face long years toiling under the soft tyranny of diminished financial expectations will be able to get jobs from the government.
Let’s start with property assessors. We’re going to need plenty of these in order to determine which mortgages are underwater. You can’t trust either the homeowners or mortgage providers, as both have incentives to claim a mortgage is underwater so it will be bought by the government. Of course, the assessors will also be incentivized to claim as many mortgages are underwater as possible in order to re-start the real estate market so they can go back to making bundles in private employment.
Don’t forget the mortgage servicers. Once we own 10 or 20 million mortgages, we’re going to need an army of mortgage servicers to process mortgage payments, send out bills, follow-up on deliquencies. There’s absolutely no way you can overestimate the vast bureaucracy it will take to service all these mortgages.
We’ll also need real estate agents or at least federal auctioneers to sell the properties on which we foreclose, of course. We’re probably overlooking a few other people we’ll need to make this work.
The point is that this is the WPA for the mortgage-real estate complex. They dug the hole, and now they’ll get to fill it in.