The reason that the federal government doesn’t subsidize earthquake insurance but does subsidize flood insurance has to do with politics. Some states receive lots more handouts (subsidies) while others receive far fewer handouts. If you are in a state that the politicians want to court, then your state will get lots of subsidies.
The states that win in this little game are those with few voters per electoral vote, and those that have close elections between democrats and republicans. California, where the earthquake insurance would be needed, is neither of these. We have way too many voters per electoral vote and we overwhelmingly vote democrat. That’s also why the republicans hardly campaign at all in California in the presidential elections.
This also leads me to believe that many politicians (particularly senators) are not going to be very inclined to bail out the SoCal housing market. There’s just nothing in it for them. They may allow lots of speeches and they might nod their heads approvingly, but getting something through the senate that helps mainly california is a tough task.
