The Housing Chronicles Blog: McCain prefers a hands-off approach to the housing market

Wednesday, March 26, 2008

McCain prefers a hands-off approach to the housing market

As opposed to Democratic candidates Clinton and Barack, John McCain is continuing to insist that the government has no role in bailing out investors, lenders and homeowners who got in over their head (although admitting at the same time that the economy 'is not his strong suit.'). From a story:

Republican John McCain said Tuesday that government isn't in the business of saving and rewarding banks or small borrowers who behave irresponsibly though he offered few immediate alternatives to fixing the growing housing crisis.

"I will consider any and all proposals based on their cost and benefits," the certain GOP presidential nominee, who has acknowledged in the past that the economy is not his strong suit, told local business leaders south of Los Angeles.

Democrats accused McCain of lacking the skills needed to lead a country on the brink of recession.

"Instead of offering a concrete plan to address the crisis at all levels, McCain promised to take the same hands-off approach that President Bush used to lead us into this crisis," Democratic Party Chairman Howard Dean said in a statement...

On Monday, Democratic presidential candidate Sen. Hillary Rodham Clinton proposed several remedies to the home mortgage problems, including greater protections for lenders from possible lawsuits by investors, a variation of so-called tort reform.

McCain, in the midst of a weeklong western fundraising swing, focused on the home-financing crisis at an event in the Republican bastion of Orange County as he tried to rebut Democratic criticism of his economic credentials.

His pitch, though, offered little in the way of specific proposals to immediately address the crisis.

McCain said he wants to leave the door open to a wide array of proposals to address the problems and seemed to suggest he might even be open even to solutions that stray from the GOP line.

"I will not play election-year politics with the housing crisis," he said, adding he would evaluate all proposals. "I will not allow dogma to override commonsense."

But the small-government advocate and four-term Arizona senator also put restrictions on how far he was willing to go.

"I have always been committed to the principle that it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers," McCain said. "Government assistance to the banking system should be based solely on preventing systemic risk that would endanger the entire financial system and the economy."...

He said any government assistance to alleviate the housing crisis must be temporary and should be accompanied by reforms that aim to make the system more transparent and accountable to prevent a repeat of the crisis. He said no assistance should be given to speculators, or people who bought houses to rent or as second homes.

Ok, I'm all for regulatory reforms (a bit too late, yet better than never), but if people LIED about getting into loans they couldn't afford (that's why they were called "liar loans"), just how is a government that has demonstrated little competence in such matters of detail hoping to verify just who was a speculator, an investor or a second-home buyer? All any of them have to do is re-establish residency in the home in question to make that their principal home, unless the government plans to involve the IRS, the FHA or another group to conduct some forensic accounting to separate the needy from the greedy.

In the short term, he called for the country's accounting experts to meet to discuss current accounting systems and said the country's top mortgage lenders should pledge to do everything possible to help their cash-strapped but creditworthy customers.

"They've been asking the government to help them out," McCain said of lenders. "I'm now calling upon them to help their customers, and their nation, out."

Not gonna happen, Senator. We punish the drug dealers in the "War on Drugs" yet ask for voluntary compliance when the pushers are dealing with mortgages and not crack.

As a freshman senator, however, McCain took a different approach. In early 1991, the Senate's ethics committee concluded that McCain "exercised poor judgment in intervening with the regulators" on behalf of banker Charles Keating Jr. Keating was a wealthy Arizona real estate developer and owner of a California thrift that failed during a nationwide savings and loan crisis - when Keating and other bankers made risky investments with depositors' money.

McCain was known for accepting contributions from Keating, flying to the banker's home in the Bahamas on his company planes and taking up Keating's cause with U.S. financial regulators as they investigated him. Keating served more than four years in prison for fraud.

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