John McCain's Mortgage Bailout Plan

The Los Angeles Times reports on McCain's plan to  help "well-meaning, deserving homeowners who are facing foreclosure" .

The Republican nominee called for a Justice Department investigation into possible "criminal wrongdoing" by unscrupulous lenders.

How efficiently can the government determine which homeowners are well-meaning and deserving? It can't do it with any efficiency. Only the free market can.

Should we bail out people for their student loans and credit cards and car loans if they're deserving?

This is the basest whoring for votes.

The proposals marked a shift in tone from McCain's admonition two weeks ago against adopting a mortgage plan that would be "a multibillion-dollar bailout for big banks and speculators." That set the Arizona senator apart from his Democratic rivals in the presidential contest, Sens. Hillary Rodham Clinton of New York and Barack Obama of Illinois, who have both said there is a need for government intervention to fight the nation's wave of home mortgage foreclosures and overall economic slowdown.

 

McCain, in a campaign stop at a windows business in Brooklyn, said, "There is nothing more important than keeping alive the American dream to own your home, and priority No. 1 is to keep well-meaning, deserving homeowners who are facing foreclosure in their homes."

In advance of his plan to spell out more details about his economic proposals next week, McCain also cited rising gas prices and other hardships for small-business owners and their employees.

"Today our economy is weakening, and as I travel this country and meet and talk with people, I can see how things are getting tougher for many Americans," he said before sitting down with half a dozen small-business owners to hear their concerns.

McCain's aides said his home mortgage plan could help 200,000 to 400,000 people and cost $3 billion to $10 billion. That would be far less than the proposals offered by Clinton and Obama, but McCain aides said it would be bigger than the efforts envisioned by the Bush administration.

The plan would retire old loans that homeowners no longer can pay and replace them with less expensive, 30-year, fixed-rate mortgages that are federally guaranteed. McCain said families would gain "the opportunity to trade a burdensome mortgage for a manageable loan that reflects the market value of their home."

In line with his concern about bailing out speculators, McCain's proposal would apply only to homeowners who took out sub-prime mortgages after 2005 for homes that are their main residence. They would need to have proved they were credit-worthy at the time of the loan.

"The taxpayer gets something back for their guarantee of the mortgage; the lender gets something back for having taken a haircut . . . and the [homeowner] gives up something, which is some increase in the value of the house," said Douglas Holtz-Eakin, a McCain economics advisor. "You've got to sacrifice to get some help."

McCain offered tepid support for the bipartisan homeowners-relief measures moving through Congress, but Holtz-Eakin said McCain found many aspects of the legislation "disappointing."