The average user of the Obama administration’s flagship homeowner-assistance programme owes their mortgage lender150% of the property’s value.

A Government report in late June 24 stuck the figure in a quiet corner, but US journalist Shahien Nasiripour dug it out and published it today.

Not only is the high number of Government-assisted borrowers in negative equity shocking, research done by Federal Reserve economists shows that heavily indebted homeowners who average negative 50 percent home equity are far more likely to default willingly; that is, throw the keys back and walk away. Nasiripour writes:

‘This revelation underscores the problems with the path taken by the Treasury Department to help homeowners, who merited federal attention only after the government gifted Wall Street banks with hundreds of billions of taxpayer dollars to survive a financial meltdown largely of their own making. Rather than designing a program exclusively focused on homeowners, the administration chose to set up an initiative that seeks to balance the needs of homeowners with the interests of lenders and investors.’

Whatever one makes of that conclusion, it shows only too well (like the Slog US retail story last week) how badly the US is struggling. As one might expect, the Republicans are putting the Administration under huge pressure, suggesting that aid to such no-hope mortgagees is simply throwing good money after bad.

But one can’t help feeling that, while Obama’s Presidency seems to be big on promise and low on delivery, the very precepts of capitalism in America must be questioned if the country can bail out a few thousand very rich and incredibly stupid people in Manhattan….but not the millions of ordinary citizens who owe those idiots money…..especially as the bankers were bailed out by those very same people who….owe the idiots money.

Is it me, or is this whole system mad beyond belief? Or is it just that the US has a Democrat President who can’t punch his weight beyond foreign oilcos?

Related story: US debt to China…Beijing allays fears.