Monetary Policy

Subprime Nation

Uncle Sam's mortgage

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In January the financial website creditloan.com asked, "What would happen if Uncle Sam applied for a loan at his local bank?" What sort of deal could he expect to get on a 30-year, fixed-rate mortgage?

The site's number crunchers then calculated the country's FICO score, the most widely used measurement of creditworthiness. Based on an income of $2.7 trillion in annual taxes collected and a total debt of $10.5 trillion, creditloan.com concluded that the "debt load" component of the calculation—which amounts to 30 percent of a FICO score—was "very bad." Still, thanks to the government's ability to use force in collecting taxes, its "payment history" (35 percent of FICO) was "very good." Tipping the balance was the 10 percent consideration of "new credit/inquiries," which, given "recent spending sprees" and other bailout- and stimulus-related phenomena, was judged "bad."

The final credit score was an unimpressive 645, or "fair." The authors' conclusion: "If Uncle Sam wanted to buy a house, he would get a rate of 7.836% for a 30 Year Fixed rate." That technically "would put the United States in the subprime category."