Last night, John McCain pulled something that has now become a bit of a debate trademark with him: announce in vague terms a solution to a major problem. Last time it was a spending freeze, announced and forgotten until last night when he repeated it again. But he added something last night, a proposal that the government buy up mortgages as a way of aiding homeowners. Of course, there was no way for Obama to respond; he had no idea what McCain was talking about. I was watching at headquarters and I remember blurting out that he had never said that before.
Per usual, the devil is in the details, and the details, which a McCain lackey dribbled out this morning, aren’t pretty. What might make sense is to have some sort of program to allow the homeowners to reduce the principal of their loan to market value. What doesn’t make sense is to have the government buy up the mortgages, thereby giving the banks who got us into this mess a bonanza. Of the two foregoing possibilities, guess which one McCain chose? Brad Delong explains:
The McCain plan is:
Take $300 billion.
Pay double current market value to banks that have troubled mortgages on their books, thus:
Give a present of $100 billion to the bankers who made the loans.Acquire and regularize the mortgages of only two-thirds as many homeowners as could have been accomplished if the $300 billion were invested wisely.
There’s a big difference here: Democrats want to prevent depression and support the financial markets by investing taxpayer money in banks with troubled assets. Republicans want to give taxpayers money away to the shareholders and managers of banks with troubled assets.
Another minor point that I noticed last night. McCain said we have to keep housing prices up. Housing prices are artificially high. It makes no sense to try to sustain an artificial situation.
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