7 Reasons Why the Mortgage Crisis Is Dragging Down the Entire Economy

The mortgage crisis in this country doesn't get much attention in Washington these days, but it's huge. It's so huge, in fact, that it dwarfs most of the economic issues that have Washington in their grip. It's so huge that it's dragging down our entire economy. It's so huge that the numbers can be difficult to picture.

The scale of the crisis is, in a word, staggering.

Here are seven charts (and another that was borrowed from the Wall Street Journal) along with some facts and figures that will help sketch out the scope of the problem. The numbers that follow are most likely understated, if anything, because we've left out some forms of reduced spending (like that which takes place when homeowners who have paid off their mortgages lose home value.)

The budget cutters push the idea that there's a dichotomy between the heart and the brain, and that they're on the "brain" side. But the numbers don't lie: Ignoring the foreclosure crisis is both heartless and brainless.

See for yourself.

By the time you read this ...

How big is the mortgage crisis? Pick an adjective: astronomic, colossal, enormous, gigantic, ginormous, humongous, jumbo, mammoth, massive, monstrous, mastadonic, monumental, prodigious, tremendous, vast, very big, very large, whopping. Here's how big it is. Let's assume that you're reading these words one day after I wrote them. That means that:

By the time you read this, there will have been approximately 8,500 foreclosure actions in this country [1] - more than one thousand every hour during the working day.

By the time you read this, homes in the United States will have lost more than $13 million dollars in value. [2] During a 24-hour day, this figure comes out to more than $500,000 an hour.

By the time you read this, homeowners will have paid $750 million in mortgage payments for non-existent housing value- that is, the amount on their mortgages that disappeared when the bubble burst - according to our estimate. [3]

By the time you read this, the nation's bankers will have earned nearly $400 million, of which $56 million will be bonus money. [4] Bankers like to say they work 24/7. (They don't, but let's say they did.) That means they will have collectively earned more than $16 million in salary and more than $2 million in bonuses during each and every one of the 24 hours hours before you read these words - morning, noon, and night.

And all of these figures for the last 24 hours will be reached again during the next 24.

Federal Spending vs. the Mortgage Crisis

How do the deficit and the mortgage crisis compare economically?

Here's a fact for you: The amount of wealth American homeowners have lost over the least three years is much larger than this year's entire Federal budget.

Even our conservative estimate shows that the debt that homeowners are paying off to the banks for no-longer-existing home value - "money for nothing" - is greater than the entire projected Federal deficit for 2011. [5]

Those figures could be a little misleading, since they compare a multi-year problem with a single year's Federal budget. So let's look at the mortgage crisis and its impact on 2011. This year's estimated "money for nothing" payments dwarf the annual spending cuts that Washington's fighting over right now:

They're greater than this year's projected savings from the President's spending freeze, and much greater than the $30 billion in additional spending cuts which House Republicans initially demanded (and which they're likely to get.)

What is the "Homeowner Bank Bailout"?

The first column represents my quite rough (but very conservative) estimate of the payments that consumers will make to banks in 2011 for home value that's evaporated. That's money to repay loans which banks often knew were likely to go bad when they issued. (If they didn't know, they should have.) After their generous bailout (which was must costlier than has been acknowledged), the banks are still collecting payments for that portion of the loan that covers assets which no longer "exist."