Thursday, October 02, 2008

Paper Napkin Bailout Estimate


This is from an email my math lovin' engineer brother sent me.

"I thought I would send everyone a paper napkin bailout estimate to put things into perspective. This is purely a financial estimate... no politics involved.

According to the year 2000 US Population Census and an extrapolation to the current month/year (September 2008) there is somewhere between 308 to 340 million people in the US. Also according to the 2005 US Census on housing, there are approximately 125 million housing units (in terms of the current date). Only 75 million homes are occupied by their owners, but this is normal for any economic climate.

According to a report on Yahoo news (admittedly, I cannot verify this data), 4% of all US homes have gone into foreclosure. This means the bank now owns these homes. With the average home price of $206,000 (again, I cannot verify this number), this means we would need a bailout package worth $1,030,000,000,000. That is $1.03 trillion! Or, $430 billion more than the $700 billion bail-out plan!

If we assume the banks will recoup the losses from these foreclosed homes (and they will, although it may take 5 years or more) then giving them $700 billion now will give them an extra $700 billion to play with.

I think we should give them 1.03 trillion and nationalize all of the foreclosed homes to keep the bankers from making any gains on all these "bad assets". No one would be responsible for paying taxes on these homes as the taxes would be paid to ourselves anyway. I think this makes more sense than just simply giving the banks our hard earned tax dollars.


Just my two cents,

Sam"

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