Housing Policy

Americans Should Be Outraged by the Bill I'm Voting For!

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John McCain has issued a curious response to the housing bailout bill. Here's how it begins:

Americans should be outraged at the latest sweetheart deal in Washington. Congress will put U.S. taxpayers on the hook for potentially hundreds of billions of dollars to bail out Fannie Mae and Freddie Mac.

With combined obligations of roughly $5-trillion, the rapid failure of Fannie and Freddie would be a threat to mortgage markets and financial markets as a whole. Because of that threat, I support taking the unfortunate but necessary steps needed to keep the financial troubles at these two companies from further squeezing American families.

This strikes me as a classic example of intervention's inescapable logic: We broke it, so we bought it, and now it's too big to fail, even though it all sucks in the first place.

On that latter point, McCain has some interesting things to say:

[I]f a dime of taxpayer money ends up being directly invested [in Fannie/Freddie], the management and the board should immediately be replaced, multimillion dollar salaries should be cut, and bonuses and other compensation should be eliminated. They should cease all lobbying activities and drop all payments to outside lobbyists. And taxpayers should be first in line for any repayments.

Even with those terms, sticking Main Street Americans with Wall Street's bill is a shame on Washington. If elected, I'll continue my crusade for the right reform of the institutions: making them go away. I will get real regulation that limits their ability to borrow, shrinks their size until they are no longer a threat to our economy, and privatizes and eliminates their links to the government.

What about Obama?

I'm heartened that the President has decided to support this bipartisan bill that will help ensure that mortgages remain affordable for American families and to prevent hundreds of thousands home foreclosures. In the months since this housing package was announced, nearly a million additional families have faced foreclosure, and our economy has continued to deteriorate. We cannot wait for a million more foreclosures before taking additional action to help struggling families and strengthen our economy. That's why I've also proposed a second stimulus of at least $50 billion with energy rebates for families struggling with high gas prices, relief for states facing budget cuts, and additional measures to protect homeowners from foreclosure.

Bob Barr? A bit like McCain (interview is 10 days old):

I think right now, doing nothing would not be advisable. As much as a Libertarian, we don't like to see ? and I don't like to see ? the government get further involved with yet another sector of the economy.

I think, because the government has caused this problem, similar to the savings and loan problem that the government caused a generation ago, it has to do something. […]

Yet, as long as it is done with the thought in mind that there has to be long-term congressional action here to restructure and reformulate the very way Freddie Mac and Fannie Mae operate, I think that would be an advisable solution, but not doing nothing. […]

But the ultimate goal, I think, has to be a very firm commitment to restructure Fannie Mae and Freddie Mac.