An otherwise intelligent but hopeless wingnut at work thinks it will only take a couple of years for all the abandoned and empty foreclosures to fall into total disrepair and then prosperity will return when people bulldoze them down, thereby solving the "real" problem - housing oversupply.
I'd like to propose a conservative solution. One that conserves our resources, preserves the tax base, helps people who have served our country, are disabled or homeless. It even has a good shot at paying back the investment.
For a whole lot less than the trillions we are committing to the black hole of debt bailout the Federal Government could buy every foreclosure. All the mortgages in the US are only $11 trillion. Most of them are OK. All of them would be much better when demand starts back up. They should immediately be turned over to local HUD offices to be given away to local people who need them and are willing to maintain them and pay taxes. Make it a lottery. Veterans and disabled get 10 tickets for free, homeless get 2, Apartment dwellers and homeowners can spend $10 to buy a ticket but they have to move in.
Here's the payback and the reward for people who improve their property value. If you can sell the house on the market you give back what the government paid plus half profit. The homeowner keeps the other half.
This plan immediately restores community tax bases, encourages restoration of dilapidated properties and shelters people most in need. It does not reward those who made poor decisions in their purchases but they've got just as good a chance of getting a new deal as anyone else. It puts power in the hands of local government and should actually create a significant revenue stream within a few years. If hyperinflation hits and house prices follow it ensures the wealth goes to the homeowner and the government rather than slum lords.
Inflation is a lot scarier than deflation. At only 100% a year minimum wage would be $6,700/hr in just 10 years. Try buying a $1,000 carton of milk with your monthly pension check. At Zimbabwean rate of inflation of 11,000,000% you could buy the copper in a 1981 penny for just under 1 cent. In a year it would cost you $2,600. If the government invests a trillion in these foreclosures and inflation causes house prices to double they should get back $1.5 trillion and the homeowners walk away with $500 billion. If we have got to give money away to bail us out lets give it to the right people.
Happy Thanksgiving.