McCain Would Buy Bad Mortgages

(AP)  Republican presidential candidate John McCain announced Tuesday he would order the federal government to spend $300 billion in federal funds to buy up bad home mortgages and allow financially troubled homeowners to keep their houses.

McCain's proposal, which he announced during Tuesday's presidential debate, would use nearly half the $700 billion from the recent bailout package to assist Americans directly, instead of indirectly by rescuing the nation's financial markets.

Democratic nominee Barack Obama last month sounded a similar theme, proposing that the government consider taking such a step.

But McCain's approach was far more categorical.

"I would order the secretary of the Treasury to immediately buy up the bad home-loan mortgages in America and renegotiate at the new value of those homes - at the diminished values of those homes and let people be able to make those payments and stay in their homes," he said.

The proposal, which he called the American Homeownership Resurgence Plan, is as much a policy plan for the future as it is a political tactic for the present.

The economy has been a key factor in helping Obama pull ahead of McCain nationally and in key battleground states. What's more, Americans reacted with helpless outrage at the need for a $700 billion rescue for the country's financial institutions.

Many Republicans voted against the package, objecting to its size and to government intervention in the free market economy. McCain's step would represent an even greater role for government and potentially an even greater financial loss.

McCain made clear he would use the plan to distinguish himself not only from his rival but also from President Bush, an increasingly unpopular figure as the economy sinks.

"It's my proposal," McCain said. "It's not Sen. Obama's proposal. It's not President Bush's proposal."

As conceived by Treasury Secretary Henry Paulson and as passed by Congress, the rescue package would be used primarily to purchase mortgage-backed securities. It would allow, but not require direct purchase of mortgages. Under McCain's plan, the Treasury would be required to rework mortgages directly with homeowners whose houses were losing value.

It was unclear - either from McCain's remarks or from the backup materials provided by the campaign - how such a massive plan would be administered. Though McCain, a budget hawk and critic of rising federal spending, did concede one point. "Is it expensive? Yes," he said.

Under the plan, the government would buy failing mortgages from homeowners and provide new fixed-rate mortgages.

A background paper provided by the campaign said the plan "could be implemented quickly as a result of the authorities provided in the stabilization bill, the recent housing bill, and the U.S. government's conservatorship of Fannie Mae and Freddie Mac."

It also said it could require Congress to raise the government's borrowing limit.

The Treasury's current plans for the money, however, could be well under way by the time a new administration is sworn in next year, leaving fewer options for a new administration.

During the congressional debate over the rescue package, liberal Democrats failed in an effort to give judges the power to modify mortgage terms for people who have filed for bankruptcy. They also were unable to get approval for part of any profits the government might receive to go to help people facing mortgage defaults.

The bailout package gives the secretary of the Treasury great latitude to deal with financial markets and address the current credit crunch. Ostensibly, the department would have the authority to intervene directly and help homeowners.

In fact, at a news conference on Sept. 24, Obama said, "we should consider giving the government the authority to purchase mortgages directly instead of simply purchasing mortgage-backed securities."

Days later, in a news release, he said he would "encourage Treasury to study the option of buying individual mortgages like we did successfully in the 1930s."

McCain has tried to portray himself as an activist in the midst of the financial crisis. He temporarily suspended his campaign to return to Washington and has depicted Obama as a more timid leader.

"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 get some trust and confidence back to America," McCain said.

[johnlute]

I am an independent voter and finally had enough! If McCain wants the government to buy faltering mortgages and recast the principle owed, then fine but only under the condition that the Republicans finally take the responsibility and levy the taxes necessary to pay for this insanity on their own party''s registered voters. Leave me out of it. The Republican party has lost my vote.

[oldguy4truth]

That''s the flavor of the day on McCains ecconomic policy.... So sad to see the poor guy just blowing in the breeze like that. He''s like a one legged Maverick in an a-- kicking contest. Just too many.. He is overwhelmed.

[ioweign]

McCain Loses It: Calls Americans ''My Fellow Prisoners''

This is the kind of mental mixup that really makes you wonder what is truly going on inside of John McCain''s mind. Here he is, campaigning in Pennsylvania, accidentally calling Americans "my fellow prisoners"...

[mollybee5]

He scares me

[notopennshut]

You know it is a bad idea when McSame says that the government should buy back the bad mortgages. So he will get them back for a pittance, but unable to unload them to anyone, then sell them for half-a-pittance to his lobbyists friends, who then resell them to banks with a zillion% profit. So these banks are still holding these same mortgages which they had first unloaded to the government, and on paper, they have assets in the billions, but in reality, they are only worth half-a-pittance!! Who wins? The same lobbyists who bought them from McSame''s government. Who loses??? We, the citizens, because in the end, we will AGAIN be asked to bail out these financial entities that have assets on paper only, but in fact worthless. SO BE CAREFUL WHAT YOU ASK FOR: McSame is again trying the same old tactics to scam us more than we have already paid. NO MORE TO BUYING OUT BAD MORTGAGES AS PROPOSED BY MCSHAME!!!

[bobnjersey]

[So the idiots get a pass, the Wall Street ***** walk away with their pockets full and those of us who played by the rules and sacraficed get the bill. What kind of deal is that?]
[Posted by Element51 at 01:53 PM : Oct 08, 2008]

it''s a monty hall deal ... one w/ a goat behind one of the doors.

[mystysin]

After watching the debate, and the high interest in McCain`s BIG idea on buying up the bad mortgages,My instant thoughts were, Hum, he`s pulling new tricks out his hat to sway voters, after seeing his standings dwindling away amidst the "mudslingings". The folks at McCain & Co. said,we gotta get something new out there on the table!! Just my idea, what does everyone else think?

[bobnjersey]

["It''s my proposal," McCain said. "It''s not Sen. Obama''s proposal. It''s not President Bush''s proposal." ]

john ... did you come up with this on your own ... or did you possibly hear others proposing this ... and decided to make it your own?

[lordmi]

if to think - the idea is not bad at all, but except money it will ask for Government''s agences or other institutions to handle it an in huge quantity. Big question to make it practical and fast.
But certainly - that is not Mccains plan, not his idea.

[downtowner97]

The US has been a little bit Socialist since the New Deal, but this is a very overtly Socialist move. I am not comfortable with the idea of the United States Treasury calling me and asking me why my mortgage payment is a little late.

I''m also not comfortable with the idea of the government owning houses on my street when the owners continue to be unable to pay their mortgages due to unemployment. Will US soldiers be deployed to mow the lawns of those houses, and to make sure they aren''t vandalized?

Detroit, Michigan has been a preview to what the entire country will look like soon. There you can see thousands of decaying houses that were abandoned when jobs went away. There are far more houses in this country than there are families. As unemployment continues to climb, and pensions continue to shrink, people with multiple homes will be forced to let some of them go.

This will not be over quickly. We will not enjoy it.