McCain's Mortgage Plan Assailed From All Sides

This morning Barack Obama kicked off a two-day visit to Ohio with a speech in Dayton that assailed John McCain's new mortgage bailout proposal. The remarks pair with an ad the campaign released today that says McCain's plan will put "bad actors ahead of taxpayers."

Obama and McCain sparring over policy is no great surprise. But in this case, McCain is not getting backup from some elements of his own party. The plan simply puts too many taxpayer dollars at risk to sit well with fiscal conservatives. Here's a sampling of complaints from the right:

The Wall Street Journal editorial board:

We're all for thinking creatively to solve the country's housing correction, and Mr. McCain's obvious political intention is to show struggling homeowners that he cares. Perhaps the best argument for the McCain idea is that it is likely to be far less expensive than the Second New Deal that Barack Obama is likely to propose on January 20 if he wins. But Mr. McCain's plan to transform Treasury into a major mortgage lender, and running the operation at a potential $300 billion loss, raises more questions than it answers.

National Review's editorial board:

There is a big difference between Treasury's plan to buy mortgage-backed assets through a reverse auction and McCain's plan to buy the mortgages themselves at face value. It gets complicated, but here's the bottom line: There must be a limit to the level of reckless behavior we are prepared to reward in a given bailout, especially if we are only improving on previous bailouts in a marginal way.

And the eternally subtle Michelle Malkin:

I can't underscore enough what a rotten idea John McCain's ACORN-like government mortgage buy-up is. I said it during my liveblog. And I'll say it again: "HE WANTS TO EXPAND THE BAILOUT. He wants to do what ACORN wants to do. We're Screwed '08."

McCain's plan, as we explained this morning, would enable the government to buy troubled mortgages from lenders. They would then re-finance the homeowners' loans at a fixed, 30-year rate, based on the current value of the property -- even if that's less than the borrower now owes. Millions of homeowners could potentially take advantage of the plan, and taxpayers would eat the difference between the original mortgages and the new ones. The plan is dramatic and expensive, and could potentially prevent lots of mortgage defaults -- but the borrowers and lenders who got themselves into the mess in the first place would not be penalized. (In the housing bill Congress passed this summer, lenders take the haircut if the federal government re-finances an at-risk mortgage.)

In summary: three weeks before the election, McCain has proposed a populist, big-government economic plan that both his opponent and fiscal conservatives vociferously reject. That, friends? Is mavericky.

-- Evie Stone

1:36 PM ET | 10- 9-2008 | permalink

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