Who Is Defending McCain's Mortgage Proposal?

Brad DeLong argues that McCain's mortgage relief plan (as best anyone can decipher it - see Business Week, Newsweek, NY Magazine, Stephen Spruiell of NRO, McCain's website) is a huge giveaway to lending banks.  But his broader conclusion is that the idea is so poorly thought-through and so poorly presented that it demonstrates McCain's lack of Presidential character.

Troubling.  McCain does have a shoot-from-the-hip style.  And he often lacks nuance, seeing problems in terms of good guys and bad guys rather than something more complicated (e.g., it was xenophobes that opposed his immigration plan).

I can't defend his mortgage plan but if anyone cares to either do that or explain why the plan is silly yet does not reflect poorly on McCain's judgment and management style, please step up.

Comments

[Rick Ballard]

C'mon, the list of participating bidders in the auction of the Lehman whorehouse is online:

LIST OF PARTICIPATING BIDDERS IN 2008 LEHMAN CDS AUCTION:

* Banc of America Securities LLC
* Barclays Bank PLC
* BNP Paribas
* Citigroup Global Markets Inc.
* Credit Suisse Securities (USA) LLC
* Deutsche Bank AG
* Dresdner Bank AG
* Goldman Sachs & Co
* HSBC Bank USA, National Association
* JPMorgan Chase Bank, National Association
* Morgan Stanley & Co. Incorporated
* The Royal Bank of Scotland PLC
* UBS Securities LLC

They hold the "scrotum of trust" for the whole enchilada. If they don't play then the whole whimsical fantasy disappears in a cloud of pixie dust.

And then, those who have arms consider their proper usage and the bien pissants seek to cover their trails.

It only takess 33% with a firm conviction and - viola - the Second Constitutional Convention.

[TexasToast]

A stirring defense there, Rick.

[Thomas Collins]

McCain is a Republican. When the financial markets go awry, more folks blame Republicans than Dems. Also, enough folks think that Republicans don't care about the common person in a crunch that they will vote for a Dem they might not ordinarily support. So McCain needed to say something to show he cared. It's that simple.

If he wins, McCain will do what he thinks is best on the basis of conditions when he takes office. He won't feel bound to this mortgage plan any more than Clinton felt bound to his middle class tax cut.

[clarice]

Don't you think this article is a defense of his plan?

http://blogs.wsj.com/deals/2008/10/08/mccains-300-billion-mortgage-plan-better-than-the-700-billion-rescue/?mod=yahoo_hs>Feldstein's plan

[Barney Frank]

Hotair has a good">http://hotair.com/archives/2008/10/08/the-home-mortgage-buy-up-has-already-been-approved/">good thread on this topic. Worth a look.

[Rick Ballard]

Texas Toast,

Senator McCain is a politician, Senator Obama is a whore. I concede your inability to distinguish between the two, given your political inclination, but Senator McCain is the more likely to achieve an approximation of my 'desired state of governance'.

Senator Obama's election will result in the manifestation of groups seeking a return to the conditions preceding the first revolution.

You really won't like the second revolution, nor do I suggest that it is necessary, given Senator Obama's defeat.

Don't think for an instant that the American military possesses the will to act against fellow Americans. Theoretically it might be a trump card but you have to recognize the fact that they may refuse to leave the barracks.

Which leaves you dead.

[Rick Ballard]

Clarice,

Aside from "moral hazard" (ridiculous on its face), the plan fulfills everything which the muddle desires. It does not affix blame (a truly horrible thing in the muddle universe) it provides hope (vide sopra) and it lets the game continue.

Politically, I believe it to be a winner.

[All ethical and moral considerations have been sidelined by current events - you breathe, you win]

[Alan Gunn]

They're both awful. Maybe if the dems win, they'll get some of the blame they (and most republicans, too) so richly deserve. At least that's the hope, although FDR, who did so much to exacerbate and prolong the depression, is still seen as a savior in some quarters. But, on this particular question, McCain's plan is indefensible. So is Obama's non-plan.

Too many people see this election as raising the question "which of these people is better (or less bad)?" The real question is why do we have such a sorry slate of presidential prospects: not just McCain and Obama, but just about all the other candidates, too. And what, if anything, can be done to improve the situation?

[hrtshpdbox]

"And what, if anything, can be done to improve the situation?"

Ask Putin for advice! Oh, wait, if oil drops another 15 dollar they're bust over there, too.

[sylvia]

Sounds good in principle to me. What's the point of kicking out thousdands of people out of their homes if you can only find a buyer at greatly reduced prices. Then you have to add on all the administrative costs. You might as well keep the people who are there, paying the rate the banks are going to get anyway and spare all the trouble.

The banks have two options if they want to do that, either give people a special reduced intererest rate, like a foreclosure rate", or keep the same interest rates, but lower the amount they owe to market rates.

I say banks should have the flexibilty to kick out the worst cases or the ones from the houses they think they will get the most value for. If there is someone who has a generally good history, but the bank deems the house vauable, they should be able to offer a temporary low interest rate, that way the bank can hold onto the house and the amount owed. If there is a place where the payer had generally good behaviour, and they can't get much for the property anyway, they should reduce the debt.

[clarice]

"The real question is why do we have such a sorry slate of presidential prospects: not just McCain and Obama, but just about all the other candidates, too. And what, if anything, can be done to improve the situation?"
Because talented people (a) have better things to do with their lives, things more personally and financially rewarding and(b) when some bright folks like Scooter Libby or Paul Wolfowitz or Cheney or Rumsfeld do make the sacrifice for us, we* treat them like dirt and do everything in our power to destroy them.(*We meaning an ignorant public manipulated by a rotten media and an opposition party utterly lacking in scruples.)

[clarice]

Well, of course, Rick...and remember, no one understands the muddle better than McCain does.

[TCO]

shananana...hey hey...goodbye. Fucking old RINO. You're not my standard bearer. You were a bottom of the barrel daddy's boy at the boat school. Go sell insurance or something.

[Thomas Collins]

If we have a deep recession, I could see states passing mortgage moratorium and forgiveness statutes. If this happens, the banks might be clamoring for a McCain type plan in the hope that the Feds would pay more than the house's FMV for the mortgage (I read somewhere that under the McCain plan, the Feds would be paying par for the mortgage, but I haven't found an actual copy of the McCain plan to be able to verify this).

[TCO]

And you toad sucker, moron's Bush pole smokers make me sick. Grow some conservative principles.

Like maybe being against lying, Clarice. Libby is a hack.

[Jane Whitman]

TCO,

We have voted you off the island too. Time to find greener pastures. I recommend The Democrat underground.

[Barney Frank]

Toad sucker?
TCO, have you and Don been having internet sex again?

[bgates]

The best thing about McCain's plan is that it will only pass if McCain is elected, and the best thing about McCain being elected is it means Obama isn't.

[kim]

Hey, TCO, go check out Spencer's latest bomb on Tamino on the Spencer's Folly thread at Open Mind and at Spencer's homepage. Anthony Watts has it too. It's all about the sensitivity.
=====================================

[Rick Ballard]

"If we have a deep recession, I could see states passing mortgage moratorium and forgiveness statutes."

Thomas Collins,

I can't. The revenue flow would be disrupted.

Look at it this way - you operate a brothel and derive a significant portion of your income from regular Johns, employed by Plant X. The local paper declares that due to economic conditions, Z% of the workforce of the Xco plant will be "laid off" due to economic conditions.

As a brothel keeper, what is the best solution to resolving anticipated revenue problems? Fire whores? [impossible - vide United Hooker's v Local Gov]. Raise taxes? Plan X? [no details are available for Plan X]

Aye - there's the rub. Raising taxes on a running (away, away) base is the rub. How much whoredom will any group tolerate?

Watch Obama's core constituency and see.

[glasater]

It only takess 33% with a firm conviction and - viola - the Second Constitutional Convention

Well there you go--that would involve an economic dictatorship for sure if the idiots start mucking around with changing our laws.

Some of Cavuto's panel this PM suggest that the reason the stock market is in the tank is the fear that Zero becomes prez. I see some logic there.

[matt]

the Cook County sheriff has already stated they will not enforce eviction notices on the grounds they don't know if the occupants may be renters or not. First jurisdiction in the country where I've seen that. However, it may come into greater play until a new sheriff is elected or the legal consequences to the individual sheriffs are so high they have to enfore the law. Last depression, that didn't work too well.

Aas to McCain, he needs a foot in mouth protector. Maybe the solution is to extend the mortgages by 5 years to reduce the payments and give peoplebreathing room, but freebies? No way. The scumbuckets who got us into this mess will find ways to take advantage.

Already, FHA is requiring new buyers in some places to come up with 30% down.They are concerned that, with deflating values and many homeowners upside down, those owners may try to buy a new place down the street at the new, lower prices before they go into forclosure, and then let the old place go and just move down the street into a new home at a much lower price. After 7 years, their credit is okay once again. Unethical, but it was legal and do-able until the increased down payment requirement.

[Deagle]

I'm beginning to think that McCain is a closet socialist! Geez, with both parties trying their best to get government involved, is there anyone left to vote for?

Depressed, ha, might as well start digging my own fallout shelter...

[Amused bystander]

Clarice: Hear, hear.

Who in their right minds would put up with this vile onslaught. And they go after friends and family too.

One has to admire poepl like Dick Cheney.

THAT takes guts and patriotism.

[TCO]

I'm leaving for a year. bye.

[glasater]

DLTDHYOTBOTWO=Don't let the door hit you on the butt on the way out.

[Pofarmer]

It's been kind of head scratching hearing Obama Demagogue this plan today. He's almost trying to run to the right of McCain on this(which isn't that hard) but is certainly an odd position for Barack Hussein. All of a sudden it's like he's not a socialist. If he'd have thought of it, it would be the most brilliant plan imaginable, I'm sure.

[Tom Maguire]

(I read somewhere that under the McCain plan, the Feds would be paying par for the mortgage, but I haven't found an actual copy of the McCain plan to be able to verify this)

They do seem intent on buying the mortgages at par, which is absurd. McCain's website is not clear but this, from Business Week, was:

Given the way the sentence was phrased, it wasn't immediately clear what McCain meant—or what the financial implications of his idea might be. Was he saying the government should buy up every bad mortgage at its original value and then refinance the homeowner into a lower-priced, affordable mortgage? That would stick the government with the difference between the original loan values and current, much lower values. Or did McCain mean that the Treasury should negotiate first with the lenders or investors holding the mortgages to reduce the values of the original mortgages to realistic current values before buying them out and refinancing the loans? In that case, banks and investors currently holding the loans (or the mortgage-backed securities they've been packaged into) would have to agree to take that immediate loss in hopes of avoiding the greater loss that could come from foreclosure.

In a conference call Wednesday morning with reporters and in a follow-up call, McCain's top economic adviser, Douglas Holtz-Eakin, made clear that the Arizona Senator is proposing the first option. Under his plan, the government would buy the mortgages from banks and investors at the original value of the loan, no matter how overinflated that now appears to be. "We're [proposing] buying back the original mortgage at the original value and then giving [the homeowner] the new mortgages" at current values and more affordable interest rates, Holtz-Eakin told BusinessWeek. "Obviously the taxpayer is on the hook for the difference."

And as a bonus, this sentence was deleted from the McCain website but was in the original description:

Lenders in these cases must recognize the loss that they’ve already suffered.

As I said, that is not at McCain's website now but it was in the original press release cited by Ms. Malkin.

[kim]

Oh, please, someone change his mind. That one won't fly.
=================================

[Pofarmer]

Well, here's the problem with all these "plans". They are trying to pick assuming that the housing market has hit a bottom. It hasn't. Doing anything before that point is kinda futile.

[Repgoing dem]

McCain’s mortgage plan is crazy! It goes against all our principles. This like time conservative is sadly voting for the less erratic democrat. Please take the time to review the plan for yourself - reading the plan no right minded conservative would vote for McCain!

It’s a sad day….

[clarice]

Right--Nice blow hole you have there, Moby.

[bgates]

We're [proposing] buying back the original mortgage at the original value and then giving [the homeowner] the new mortgages" at current values and more affordable interest rates
Is that really fair? A lot of people put a lot of work into moving in to these houses - falsifying documents, tapping out equity to get big tvs and cars, and so on - and now they're going to end up with homes worth some kind of "market price" lower than what they think they have coming to them. Certainly they shouldn't have to pay vast amounts of money just because they have some kind of "signature" on some sort of "legal document", and I'm 100% in favor of reducing their payments (108% for Friends of Angelo). But what about the money they expected when they sold? Maybe the government should reduce their payments, but also guarantee a reasonable return (10-35%, depending on the region) on the original purchase price. My plan would work like this:
1) unemployed ex-con claims $300,000 income
2) bank approves $1.2M loan
3) through no fault of theirs, completely unforeseeable market conditions lower "market value" of property to $300k
4) McCain generously agrees to have us pay the bank $900k to reset the loan
5) one year later, the ex-con can only sell the house for the "market value" of $250k
6) McCain generously agrees to have us pay the seller $950k (difference between sale and purchase prices, representing equity seller thinks he's entitled to), plus $120-450k (appreciation seller thinks he's entitled to).

....
Does McCain have any idea how many illegal immigrants rent? Somebody should let him know his plan won't just harm American citizens and legal residents, it will harm his constituency as well.