George Stephanopolous was back to being a serious journalist in his probing interview of McCain this morning. He repeatedly pointed out that he could not reduce taxes as he now proposes, and still meet his pledge to end the deficit during his first term. The New York Times also had an editorialwhere they castigated McCain for the same reasons.
Both of these media, while criticizing his proposal to further decrease taxation, missed the most important aspect of his economic policy speech last week, his turnaround on the Housing-Foreclosure bills being developed in congress.
First let me clearly state my position on this. The housing bubble, and the associated proliferation of misleading mortgages was an avoidable but tragic event. There were those who were classic victims of what is rightly called "predatory mortgage agents," who were told they could lower their outstanding high interest credit card interest by using the equity in their homes to pay them off.
They were naive enough not to realize the consequences of increases on home prices ending, and were told that the small print about the maximum adjustment was just so much "boilerplate" that the nice mortgage company would never activate. I have tremendous sympathy for these people, who may end up losing their homes.
This brings into question a basic tenet of contract law, that the signed written document makes any verbal assertion void. So, in the absence of a fiduciary responsibility to act in the client's interest, which is only mandated in a few states, the lenders were often flagrantly mislead, without any legal recourse.
This must be changed.
Yet, every bailout, from the most absurd by Hillary Clinton, to freeze interest at the teaser rates, to the latest, by none other than conservative Republican John McCain, are both economically and morally untenable.
Let's see what McCain said in his speech last week:
These reforms must wait on the next election, but to help our workers and our economy we must also act in the here and now. And we must start with the subprime mortgage crisis, with the hundreds of thousands of citizens who played by the rules, yet now fear losing their houses. Under the HOME plan I have proposed, our government will offer these Americans direct and immediate help that can make all the difference:
Get that, when he wants to prevent universal health care it is the TAXPAYERS who will fund it, but the GOVERNMENT provide the help to homeowners.
If you can't make your payments, and you're in danger of foreclosure, you will be able to go to any Post Office and pick up a form for a new HOME loan. In place of your flawed mortgage loan, you'll be eligible for a new, 30-year fixed-rate loan backed by the United States government. Citizens will keep their homes, lenders will cut their losses, and everyone will move on -- following the sounder practices that should have been observed in the first place.
He hopes that no one notices that the proceeds from the new mortgage will be remitted to the financial firms and mortgage companies that engineered this scam. The goal is that they will remain solvent and prices of homes will remain high.
So his plan is good for those who bought into the bubble, but not so good for those who didn't and who will be co-signing the notes for these new GOVERNMENT mortgages. Got that, these are backed by the GOVERNMENT not taxpayers and they will help the, good homeowner CITIZENs.
There is no guarantee that prices will not fall below the value of these new taxpayer (oops I mean GOVERNMENT) backed mortgages, a value not set by the Republican free market, but by the very bureaucrats that they love to hate. If this happens then the Gov....oh crap, you and me will simply make up the loss with our.....new painless FAIRTAX, I guess.
With this speech, fiscal conservative Republican John McCain is adopting the major element of Hillary Clinton's bailout proposal. Both, under the guise of helping the poor homeowner, will have us bail out the financiers who orchestrated this disaster.
And if it prevents a lowering of house prices to more affordable levels, it will price out working people who do not have family wealth, along with those who will have to rent, sometimes from the very people whose homes they are underwriting with their taxes.
I eagerly await the details of Senator Obama's stand on this issue, one that will define our housing policy for the next generation.
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References:
Text of Economic speech speechfrom the McCain Website.
NY Times Articlehow unconscionable mortgage penalty fees traps lenders
Washington Post OpEddissecting current Senate Housing-foreclosure bill