McCain Says He Can Tackle The Economy

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Since slipping behind in the polls, Republican hopeful John McCain has been intensifying his attacks on Democrat Barack Obama. Mindful that the economy is uppermost in voters' minds, McCain repeated Wednesday the proposal he floated in Tuesday's debate: having the government come directly to the aid of people whose homes have lost value and who can't meet their monthly payments.

SCOTT HORSLEY: And I'm Scott Horsley with the McCain campaign. At a rally outside Cleveland yesterday, John McCain was met with a variety of political signs. One said "McCain Equals Hero," another "Vote Pro-life." And then there was a sign that Debbie Hollick(ph) was holding. It said "Democrat for McCain."

Ms. DEBBIE HOLLICK: Obama has absolutely no experience. He is an empty suit. And I don't want him as my president. No way.

HORSLEY: And that is exactly the argument McCain was making at campaign rallies in Ohio and Pennsylvania, that Obama isn't ready for the responsibilities of the Oval Office.

Senator JOHN MCCAIN (Republican, Arizona; Republican Presidential Candidate): We've all heard what he's said. But it's less clear what he has done or what he will do.

HORSLEY: McCain told supporters he has the experience, not only to serve as commander in chief, but also to tackle the economy. Mindful that pocketbook issues are now uppermost in voter's minds, McCain repeated the proposal he floated in Tuesday night's debate, having the government come directly to the aid of people whose homes have lost value and who cannot meet their monthly payments.

Senator MCCAIN: The United States government will purchase mortgages directly from homeowners and mortgage services, and replace them with manageable mortgages. The dream of owning a home should not be crushed under the weight of a bad mortgage.

HORSLEY: The Treasury secretary already has the authority to buy mortgages as part of the financial rescue plan approved last week. But here, as in other parts of the rescue plan, a key question is how much the government would pay. Critics say if the government pays full price for the mortgages, as McCain's top economic adviser suggests, it would be rewarding lenders who made bad loans while sticking taxpayers with the bill.

(Soundbite of song "Danger Zone")

Mr. KENNY LOGGINS: (Singing) Highway to the danger zone.

HORSLEY: McCain's rallies have all the excitement of a campaign's final weeks with Hollywood music and big, boisterous crowds. But the GOP nominee is treading on dangerous ground. Trailing in national polls and in key battlegrounds, McCain is fighting to hold states that George Bush won easily four and eight years ago, states where Obama is now tied or ahead. Now that President Bush is no longer popular, McCain must count on running mate Sarah Palin to help him rally the disenchanted GOP base. The two campaigned together yesterday, and Palin argued that voters face a stark choice in November.

Governor SARAH PALIN (Republican, Alaska; Republican Vice Presidential Candidate): The choice is between a politician who puts his faith in government and a leader who puts his faith in you.

(Soundbite of crowd ovation)

HORSLEY: Palin also looked past President Bush to invoke a less tarnished Republican icon, Ronald Reagan.

Governor PALIN: And we believe that with the right kind of leadership, we can once again be that shining city on a hill. And Ronald Reagan spoke of that so many years ago. One man has the wisdom and the experience to get us there. That man is John McCain.

(Soundbite of crowd ovation)

HORSLEY: McCain was introduced at the Ohio rally by Cleveland Browns quarterback Brady Quinn. The former Notre Dame star noted that his father, like McCain, is a veteran of the Vietnam War.

Mr. BRADY QUINN (Quarterback, Cleveland Browns): You know, too oftentimes we label people heroes and get caught up in the moment. But tonight we have a real hero amongst us.

(Soundbite of crowd ovation)

HORSLEY: Today, the McCain-Palin team moves on to other Great Lakes states. They need to win to counter Obama's inroads in what had been Bush country. The first stop is Wisconsin where Bush fell short twice and where Republicans need a turnaround and a takeaway win in November. Scott Horsley, NPR News, with the McCain campaign in Milwaukee.

(Soundbite of music)

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McCain Proposes $300 Billion Mortgage Buyout Plan

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Sen. John McCain i

During Tuesday's presidential debate, Sen. John McCain proposed a plan to renegotiate bad mortgages. Mark Wilson/Getty Images hide caption

itoggle caption Mark Wilson/Getty Images
Sen. John McCain

During Tuesday's presidential debate, Sen. John McCain proposed a plan to renegotiate bad mortgages.

Mark Wilson/Getty Images

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In Tuesday night's debate, Sen. John McCain proposed a plan to help millions of people around the country facing foreclosure by ordering the Treasury secretary to purchase and renegotiate faulty home loans.

Politicians from both parties have been talking about the possibility that the $700 billion bailout plan passed by Congress last week may not do anything to address the root of the current financial crisis — that is, the people who can't pay their loans and are losing their homes. McCain is now making this a front-and-center issue in his presidential campaign.

"As president of the United States, I would order the secretary of the Treasury to immediately buy up the bad home loans in America, renegotiate at the new value — diminished value — of their homes, and let people make their payments and stay in their homes," McCain said.

During the debate, McCain staffers released some more details. The plan is aimed at homeowners who owe more than their houses are worth or who are otherwise in danger of foreclosure. The government would use Fannie Mae, Freddie Mac and private mortgage brokers to pay off the troubled loans and refinance the homeowners, making their payments more affordable.

Although this would cost the government several hundred billion dollars, the McCain campaign said it would help millions of people while propping up the housing market.

"Is it expensive? Yes," McCain said at the debate. "But we all know, my friends, until we stabilize home values in America, we're never going to start turning around and creating jobs and fixing our economy. And we've got to give some trust and confidence back to America."

An Idea Gaining Supporters

In general, McCain's is not a new idea, although it has been gaining traction recently. Liberal and conservative economists alike have been calling for something along these lines.

Last week, Democratic Rep. Rush Holt of New Jersey called for the government to take similar action. He said that during the Great Depression, the government set up a federal corporation to restructure loans for homeowners.

"The Home Owners' Loan Corp. is a model that could be used today," Holt said. "This was a large-scale program, and it rescued more than a million homeowners' mortgages at that time."

The fact that this kind of aggressive proposal is emerging in the presidential race is encouraging to some people who have been calling for stronger measures like these.

"There's been a lot of talk but not enough action," said Robert Shiller, a housing economist at Yale University. "We're still seeing 10,000 foreclosures a day."

Shiller said he is intrigued by McCain's plan, even though the details are still fuzzy.

"It's unclear what the $300 billion means," he said. "But it sounds like it could help millions of people, and it sounds like it's going after this fundamental problem: Americans are suffering and in trouble and there's a panic in the housing market. It could alleviate an overshooting of the housing market on the downside."

McCain's plan looks similar to part of a proposal from Columbia University economist Chris Mayer. But Mayer said McCain's plan doesn't go far enough. Mayer has been calling for the government to offer 5 percent interest rates and 30-year fixed-rate loans to all Americans. He says that would give the housing market the shot in the arm it really needs.

"We are facing a problem where, if house prices keep falling, it really could have very devastating consequences," Mayer said. "That really requires drastic action on the part of the government that it's in a position to do, but that we haven't seen so far."

There are also other concerns and questions about the McCain plan: Who would be eligible? How would he pay for it? Would the government pay face value for these loans? Alan Blinder, a Princeton economist, said he doesn't want to see the government overpay if it buys problem loans.

"They're not worth face value, and this would hand a huge bill to the taxpayer," Blinder said.

Since McCain announced his plan, the Obama campaign has been raising this concern as well. A spokesperson said Obama is supportive of efforts to have the government restructure loans for struggling homeowners. But upon seeing the details that McCain has released thus far, the Obama camp said the McCain proposal would be a costly giveaway to the mortgage industry.

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