One in ten homes is “under water” – worth less than their mortgages. 2 million homeowners are headed to foreclosure. The shadow banking system verges on collapse. Banks across world are shaken. The world fears global recession. Fearful of a catastrophic unraveling, the Federal Reserve has slashed interest rates. The Federal not only ponied up $29 billion to save one medium sized investment house – Bear Sterns — from bankruptcy, but also offered up $400 billion in credit for both regulated banks and unregulated investment houses.
So yesterday John McCain delivered what was billed as a major policy address on the crisis – and advocated….essentially doing nothing more. He called on mortgage holders to meet voluntarily to write down mortgages for worthy borrowers. The Treasury already has an elaborate plan for this and it has failed to make much difference. He called on accountants to meet to discuss how they assess the value of exotic assets with no apparent markets.
St McCain preferred posture over policy. “I will not play election year politics with the housing crisis,” he said. “It’s not the job of the government to bail out and reward those who act irresponsibly, whether they’re big banks or small borrowers.” “When we commit taxpayer dollars as assistance, it should be accompanied by reforms that ensure that we never face this problem again. Central to those reforms should be transparency and accountability. “
Great, as a principled conservative, McCain will let the market rip. Let the irresponsible banks and investment houses eat the losses from the ponzi schemes they created. If Bear Sterns or Lehman Brothers or Citigroup goes belly up, so be it.
Well, not exactly. McCain’s spokesman later stated that McCain supports the Fed bailout of Bear Sterns, an act that put up $29 billion in government money into saving one of the most irresponsible investment houses, without demanding anything – partial ownership, warrants for repayment if the stock rose – for taxpayers in return. And McCain supports the Feds’ agreement to take on hundreds of billions in dodgy mortgage backed securities for the shadow banking system, without requiring any “reforms,” any new “transparency and accountability,” much less any new reserve requirements.
St McCain, for all his moralizing, ended up basically endorsing what the Bush administration is already doing – supporting the Fed in bailing out the banks, and letting homeowners and community devastated by the irresponsible schemes of Wall Street take the hit. Under John McCain as under George Bush, the government will backstop the Wall Street players, deemed to big to fail, while Main Street and its homeowners will be left to the mercies of the market.
So what was that all that stuff about not bailing out the irresponsible big banks? That, my friends, was John McCain “playing election year politics with the housing crisis.” So much for straight talk.
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