Ben Bernanke says he can’t refinance his house. With his book advance and speaking fees, why does the former Federal Reserve chairman even want a mortgage?
Even for the wealthiest Americans who can afford to buy their houses outright, mortgages come with a double benefit: Interest rates low enough that returns on investments can beat them, and a tax subsidy that covers nearly half the interest cost.
A 15-year loan carries a 3.36 percent interest rate this week, according to Freddie Mac. And at the top federal and Washington, D.C., tax rates of 39.6 percent and 8.95 percent, the mortgage interest deduction reduces Bernanke’s real cost of borrowing even further.
Bernanke’s situation highlights a flaw in the tax code, said Harry Stein, associate director for fiscal policy at the Center for American Progress, a Washington group typically aligned with Democrats.
Ben Bernanke. (Bloomberg)
“He can do better investing the speaking fees in the stock market than using them to pay his mortgage and own his house outright,” he said. “I can’t imagine the public policy case for subsidizing leveraged investment for affluent people and there’s just no world in which that makes sense.”
Speaking at a conference Friday in Chicago, Bernanke lamented tighter credit rules and said he’d been unsuccessful in trying to refinance his own home loan. “I’m not making that up,” he said when the audience reacted with laughter.
Bernanke, 60, didn’t explain why he wants a new mortgage or elaborate. D.J. Nordquist, a spokeswoman at the Brookings Institution, where Bernanke is now a fellow-in-residence, said he was traveling and unavailable for comment.
As of Dec. 31, Bernanke had a 30-year loan with a 4.25 percent interest rate, according to a disclosure form he filed this year as he was leaving the Fed. He and his wife, Anna, took out that $672,000 loan in 2011 on their Capitol Hill rowhouse, which is assessed for tax purposes at $906,490.
With a net worth of $1.1 million to $2.3 million, income of $150,000 to $1.1 million from textbook royalties in 2013, the speaking fees he’s earned since leaving office and a book advance, Bernanke probably could pay off his mortgage and be debt-free. (Bloomberg)
