Capital Markets

Either a Borrower or a Lender Be

Under John McCain's mortgage plan, you'd better not be a taxpayer.


John McCain calls his promise to help millions of Americans with their mortgages the McCain Resurgence Plan. Ostensibly, the "resurgence" has something to do with home values, but his poll numbers are what he really has in mind.

This desperate ploy, unveiled at last week's presidential debate, speaks volumes about McCain's readiness to forsake his avowed principles and his supposed commitment to candor. Meant to bribe swing voters with taxpayers' money, it should repel anyone who considers its rationale, its fairness, and its fiscal implications.

Responding to a debate question about the economic insecurity of "retired and older citizens and workers," McCain said: "Home values of retirees continue to decline, and people are no longer able to afford their mortgage payments. As president…I would order the secretary of the treasury to immediately buy up the bad home loan mortgages in America and renegotiate…at the diminished value of those homes and let people be able to make…those payments and stay in their homes."

McCain thus conflated two distinct issues: declining home values and foreclosures. If a home you bought for $300,000 can now fetch only $200,000, that in itself does not affect your ability to make your monthly payment. You may not like paying off a loan that's higher than the current market value of your house, but that's the chance you took when you invested in this particular asset.

If you used an adjustable-rate mortgage to buy the house and the rate has risen, you may now have difficulty making your payments. But that's the chance you took when you picked a lower initial rate over a higher but stable rate.

McCain says he would "buy up the bad home loan mortgages." Bad from whose perspective? Does he mean mortgages that exceed the current value of the homes they were used to buy (which are bad from the borrowers' perspective) or mortgages on which the homeowners have started to miss payments (which are also bad from the lenders' perspective)?

Since preventing foreclosures is one of McCain's aims, you might think he has the latter sort of loan in mind. But according to The New York Times, McCain's chief economic adviser "noted that about 10 million Americans had mortgages that exceeded their homes' value." He said "literally millions of people" could benefit from McCain's plan, adding, "The question is how many people pick up the phone."

That suggests anyone with negative equity would be eligible, regardless of his financial position or payment history. If so, a multimillionaire whose mansion is worth less than it was when he bought it could get a fixed-rate, 30-year mortgage at 5 percent, with the principal based on the home's current value.

That's better than my mortgage, and I bet it's better than yours (especially the part where you can reduce the principal you owe). Can you get in on this deal? Only if your purchase and/or financing decisions were particularly ill-advised.

Under McCain's plan, neither the borrowers nor the lenders bear the cost of their risky choices. Taxpayers do, to the tune of $300 billion or so—his estimate of the difference between what the government will pay to buy mortgages at their face value and what it will get back at the McCain-discounted value, assuming borrowers who have already shown themselves to be bad credit risks pay off their new loans.

McCain concedes his plan will be "expensive" but says it's necessary to "stabilize home values in America." Somehow McCain knows the market price for homes is not the correct price, so he plans to artificially prop up the value of these assets, benefiting one group of Americans at the expense of others. The straight-talking maverick thereby abandons any pretense of fiscal conservatism, devotion to free market principles, or opposition to pork barrel politics—all to restore "some trust and confidence back to America."

You know, I do feel a resurgence coming. But I think it's my breakfast.

© Copyright 2008 by Creators Syndicate Inc.

NEXT: Cop Out

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  1. Maybe all those people yelling "KILL HIM!" at McCain rallies were just fiscally responsible people who had just been told about his plan. That's about the reaction I had when I read it.

  2. That's it. If *either* the Dem or the Repub win this election I am leaving the country!

  3. I don't know which way to go. We're getting fucked badly either way. Though, maybe if Obama gets in to office, his bullshit will be so overwhelming that it'll cause a massive backlash. Combined with a decent GOP or LP candidate, perhaps we can finally be rid of him, McCain and their ilk.

    Yeah, I know I'm fucking dreaming. I have too. It's the only think keeping me sane or from buying a few shipping containers and moving out to the middle of the desert.

  4. How can people vote for either of these losers? Is major party & biased media endorsement THAT important to them at this point?? My vote said "fuck you" to various parties AND the media, and I'm happy about it even if it pisses off my friends in major parties. Respect is a 2 way street, or at least, it was...

  5. I am not kidding!

    But I should still have intertubes access.

  6. How can people vote for either of these losers?

    A) They believe.


    B) They think it's their duty.

    I'm not sure which group is more dangerous.
    I just hope I'm dead before the check arrives.

  7. ed,

    I just hope I'm dead before the check arrives.

    You only get to vote Dem after death.

  8. My friends,
    Right now we must set aside our partisan differences and ideologies and get to work for the American people. We must put our country first, and that means admitting that any belief in markets creating better or more ethical outcomes than command economies was a mere charade to get votes from people who believed the same. But don't worry, we'll go back to pretending that as soon as I come up for re-election in 2012, that is, if the economy is doing well enough.

  9. I long ago concluded that the overwhelming majority of GOP politicians are lying when they claim to oppose government intervention in the economy.

    But even given that fact, John McCain is probably the worst possible man even among this pathetic group to be the GOP nominee at this moment in history. When faced with Democrat claims that "deregulation and greed" caused the real estate bubble, and not monetary and fiscal policy, McCain's Peronist temperament means that he can't wait to jump up and shout, "You're absolutely right! It WAS deregulation and greed! Gosh you're so smart! Excuse me while I propose policies that are a carbon copy of yours!"

    McCain's contempt for all sectors of life outside of the barracks and the city hall is constantly seeking an outlet, and it found one in the recent crisis.

  10. It's absolutely amazing that McCain failed to see his winning angle in all this: fiscal conservatism. It was his way of differentiating himself from Obama, his way of being MAVRICK, and his way to appeal to all the people in this country who oppose the bailout. And he just flat-out blew it.

    Maybe Fluffy is right and his temperament didn't allow him to think this way, but isn't anyone on his staff not a fucking moron?

    This election was in his grasp with the right move, and he epically choked. I sure wouldn't want him on my team during a sudden death penalty kick finale.

  11. The McCain camp couldn't advocate a laissez faire approach. They were scared of the Obama/Klein "Bush's totally free markits did this" line of attack. Since everyone in the McCampaign is Keynesian, they'd have no effective rebuttal. It's what they believe, too.

    The spectre of S&L's contributed, too. The last thing McCain wanted was to be seen as soft on those evil, evil bankers who wrote bad loans. I would have to imagine the Obamaites were salivating to produce campaign ads showing McCain hugging Charles Keating.

    Finally, there's general temperment. McCain is a hothead. Standing around doing nothing is not as emotionally rewarding as bombing someplace or its financial equivalent.

  12. Epi --

    If the markets tanked anyway, he would have gotten *blamed* for it. Politically, that's much worse than riding in the very same boat as your opponent.

  13. Anyone on McCain's staff who was ACTUALLY fiscally conservative was no doubt purged long ago. And the political problem with riding in the same boat as Obama is that even an obvious statist like McCain can't out-socialist Obama.

  14. Polar Bears are drowning and all you people can talk about is a federal election?

  15. LMNOP, sometimes you have to roll the dice. Pathetically following his opponent's lead on this is a loser move. He should have taken the risk with the potential for a massive payoff, and instead he played it safe.

    He deserves to lose for that.

    Finally, there's general temperment. McCain is a hothead. Standing around doing nothing is not as emotionally rewarding as bombing someplace or its financial equivalent.

    True, but he could have unloaded on Wall Street or Congress or even Bush instead.

    He blew it. Epically. He doesn't have the balls to win. He should stay away from the poker table too.

  16. This should put to rest any notion that McCain is a conservative. The GOP deserves what they get for nominating him.

  17. I agree with Epi

    The man was 5+ points behind in national polling and losing ground fast at the time the crisis started. Riding in the same boat as your opponent can't produce gains. Where was he expecting to pick up the votes he needed?

  18. Epi --

    I agree. I'm just saying it's pretty obvious *why* he didn't.

    And, BTW, if he had, I think it would have just been read as a "crazy mavrick stunt". In a crisis nobody wants to hear about hands-off the market, even if it is the right thing to do.

  19. Give him a break. He's just doing what the Viet Cong tell him to do. Wait until spring, when he unveils the "rationalization" of farming. You'll like it in the rice paddies.

  20. Consider: McCain plays craps (guaranteed house advantage) and not poker (house RAKE, but playing against HUMANS, not the house). His gambling habits probably say more about him than most things. And BTW, I've heard Obama's a decent poker player, and I'd REALLY love to play with him sometime to see if it's true. But my bottom line is that how people gamble & on-what says a LOT about them. McCain relies on luck against the odds. Obama plays a game based on both luck and SKILL. Think about it.

  21. JMR --

    Psychoanalyzing candidates through their gambling habits is about as dicey as determining their foreign policy by looking at what they eat for dinner.

    Some people just like throwing dice, and can't hold a hand of cards up for long because they got their shoulders fucked up in the Hanoi Hilton.

  22. Psychoanalyzing candidates through their gambling habits is about as dicey as determining their foreign policy by looking at what they eat for dinner

    Psychoanalyzing someone through gambling habits is...a gambler's habit.

  23. And she was blinded by the light
    Cut loose like a deuce another runner in the night
    Blinded by the light
    She got down but she never got tight, but she'll make it alright

    "There's no loofas, there's no douches and there's no whatever the hell you said either!"

  24. Holy shit, NutraSweet, a Vacant Lot reference. WELL FUCKING DONE.

  25. Epi's right, I do gamble. But I don't like craps, and I'm not MITsmart enough to count cards effectively at BJ, so I only play poker because I'm a pretty good judge of when people are stupid/lying. Anyway, how one gambles isn't the end-all and be-all of what that person is, but IMO a poker game amongst the candidates would tell voters a shitload more than yet-another staged "debate" controlled by the media. A poker game would tell us what kind of winner and what kind of loser the person is, as well as what kind of risk taker. A similar situation with craps would only tell us how lucky the candidates are relative to eachother. I've said for years I'd prefer chess and poker games to the current "debates," and nobody listens.

  26. The vast majority of their skits are on YouTube. I used to have all six episodes, but the VHS tape crapped out a few years ago.

    Knee Slap

  27. I play roulette becuase I'm pretty good at doing the necessary calculations in my head to predict within 1/6 of the wheel which field the ball will fall. As I start drinking I get worse, but I start having more fun. I like games with "pretend" skill as they are way better drunk than trying to have real skill.

    Can this anecdotal observation be applied to modern political issues?

    I sincerely hope not.

  28. No, no, it's been the electoral strategy for many moons, you have to keep the people divided by offering candidates so offensive to the other side that voters end up voting against the other guy rather than for what they actually want, otherwise they might start voting for other parties.

  29. In holdem, the cards mostly stay on the table, and someone with McCain's movement limitations would, if anything, have more difficulty throwing dice. I think his physical limitations involve lifting his arms over his head, and unless you're a "pro" like Helmuth or Matusow that's not a part of the game. 🙂

  30. Psychoanalyzing candidates through their gambling habits is about as dicey as determining their foreign policy by looking at what they eat for dinner.

    Let me just say that I'd prefer the poker player and would not vote for a vegitarian. That said, Kucinich is pretty ballsy for someone who doesn't eat meat.

  31. Let me just say that I'd prefer the poker player and would not vote for a vegitarian. That said, Kucinich is pretty ballsy for someone who doesn't eat meat.

    He must take supplements.

  32. In holdem, the cards mostly stay on the table, and someone with McCain's movement limitations would, if anything, have more difficulty throwing dice.

    That's certainly true, and I was being hyperbolic with the Hanoi Hilton comment. My point, however, was that there could be any number of reasons for a person preferring craps over poker, and only a few of those reasons would be in any way relevatory of some deeper character attribute. Since none of us are in a position to suss out exactly why McCain prefers craps to poker, I submit simply that there are too many confounding factors to reach a legitimate conclusion from the simple preference alone.

    That said, my gut says you're probably right that he favors the vagaries of luck over contests of skill. There was some article somewhere recently (Salon, perhaps? Maybe Slate...) about his penchant for superstition.

  33. It doesn't matter who wins. They are both pawns of the Illuminati. The GOP and DEMs are two sides of the same coin. They are both leading us to the New World Order. Which is really the Old World Order of feudalism and serfdom.

  34. I love how our current economic crisis, which is just getting going by the way, is blamed on "the free market", which we've only had a semblance of since 1914, when Congress handed over our monetary and banking system to small group of politically well connected private bankers.

    How much of your paycheck is spent for you? After federal and state income taxes, medicare and social security taxes, property taxes, sales taxes, and a myriad of imposed fees (check out your phone bill for an example of this), I estimate that only about 45% of your pay is actually yours to spend or invest as you see fit. And still, government at all levels cannot balance its budget, so the difference is made up by creating more dollars, inflating away the value of any money you actually manage save and invest, after paying for your food, fuel, and other living expenses out of the 45% you get to keep.

    Now both parties intend to "fix" the economy by increasing the "regulation" of our "free market" economy, and by spending even more on bailing out any group that has enough political clout to push their way to the trough.

    I'm sure this will all work out just fine.

  35. I love how people keep claiming the "taxpayers" are paying for this bailout. Bull manure!!! No one is suggesting that we should raise taxes to clean up this mess. Rather, we are dumping the burden on future generations, as always.

    I am young, and I am furious. Unlike the middle-aged and elderly, I have every right to be.

    The baby boom generation has eaten not only my lunch but that of my children and grandchildren. I have no qualms about declaring open intergenerational-warfare and stripping these @#$#@holes of everything.

  36. Excellent article. I was beginning to think that I was the only one who picked up on this. McStains bull shit plan is the straw that broke the camels back, and the main reason why I'll be penciling in Ron Paul's name on the ballet this November.

  37. McCain's pandering BS mortgage proposal is as you all say. I agree totally on that point.

    All and still libertarians should support the McCain ticket. Here's why.

    Supreme Court appointments
    The majority of Republicans, including John McCain, have taken the position that the president gets his choice in Supreme Court nominees so long as they are qualified. That traditional approach strikes me as unfair, since the Democrats have not reciprocated, and indeed have gone so far as to filibuster Republican nominations. Bush finally did get to appoint Alito and Roberts, which I consider one of the high points of his presidency. McCain played a role in that, although he had to compromise with the Democrats in a way that not all conservatives agreed with.

    McCain's favorite justices are Alito and Roberts. Obama likes Ruth Bader Ginsberg and Stephen Breyer. The Messiah has said that he would judge candidates for Supreme Court justice by their compassion and their ability to relate to the problems of ordinary people. Knowledge of and respect for the Constitution is not required.

    That tells me that if Obama wins we would end up with a left-leaning Supreme Court that would take away many of our liberties in the name of "social justice".

    Secret ballots in union elections
    The Democrats want to do away with the secret ballot in union elections. The unions are one of the principal Democratic interest groups. Even if Obama doesn't agree, he will be hard put to defy the people who put him in power. The Democrats' program is to abolish the vestiges of the classical liberalism embodied in the Constitution and in traditional American political culture. They want instead a social democratic managerial state like those in France and Germany. Liberal academics of course love the idea. They will run the country, as opposed to those ignorant rednecks out there in Middle America.

    Income Redistribution
    Obama has openly called for the use of the tax system to redistribute income. He believes that he and other leftist politicians can better decide how to spend your and my money than we can. In the last debate McCain finally highlighted the difference between his and Obama's views on whether the market or the state should determine the allocation of resources. (McCain is not as consistent as he should be should be on this issue, but he is much better than Obama.)

    The war on Islamist terrorism
    In regard to the war on Islamist terrorism Obama threatens to undermine the considerable though underreported achievements of the Bush administration. In the last two years the administration has finally found the right strategy in Iraq. We are close to achieving our goal of a stable, non-hostile Iraq, but the situation could still come unraveled. The last thing we need is an arbitrary timetable for the withdrawal of Coalition forces from Iraq. We still have forces in Europe over sixty years after the end of World War II. We need to keep them there to protect the independence of our allies in Eastern Europe. We're not fighting there, but our presence plays an important geopolitical role.

    Obama claims that Afghanistan is more important strategically than Iraq. That strikes me as foolish. We need to shift forces to Afghanistan, and we're doing it, but it should not be at the expense of protecting what we have accomplished in Iraq at such an enormous cost in blood and treasure. People can argue until the cows come home about whether we should have invaded Iraq, but having done so we must avoid leaving a power vacuum for Al Qaeda and/or Iran to fill.

    Outside of Iraq the administration has scored significant victories against Islamist terrorisms. Attacks have declined, as has support for extremists in the Islamic world. This has not been achieved without some rough tactics. But the Democrats want to give terrorism suspects all the rights of American citizens. That could lead to the reversal of many the gains made in the last years.

    Medical insurance
    Obama denies it, but what he seeks as a solution to the alleged insurance crisis is a government takeover of medical care. American medicine is the best in the world, and we are the source of most innovations in medical care. How long would that last under a socialized system? If there is anything that history has taught us it is that government is far inferior to the private sector as a provider of goods and services. McCain's idea of giving people a refundable tax credit to help them purchase their own medical insurance is by far the superior approach.

    Some conservatives fear that Obama would be another Carter. Carter was an ineffectual president, but he was a centrist rather than a radical, and the damage he did was reversible. Socialized medicine would likely not be reversible, and like compulsory union membership it would inflict permanent harm on our economy and our society.

    Free Speech
    An Obama victory would be a threat to the First Amendment. The Democrats are talking about reviving the "fairness doctrine" which required equal time for opposing views on broadcast media. That would likely be the end of talk radio, since few people want to hear liberals on the radio, as the failed attempts at liberal talk radio have demonstrated.

    Free Trade
    Finally, the Democrats' protectionist tendencies are terrifying. They could lead to an end to the progress toward a higher standard of living that has been achieved in much of the world over the last thirty years. One thing virtually all economists agree on is that protectionism is stupid, irrational and destructive of human welfare.

    Any one of the above points is reason enough to support McCain. Together they should convince conservatives and moderates to put aside McCain's flaws and support him enthusiastically. Libertarians are less concerned about national security than are moderates and conservatives, but many of the points I have made should resonate with libertarians as well.

  38. Bulbman, you're absolutely f'ing wrong: if there is ANY year we need to vote party it's this year when the two candidates are competing over who is the bigger socialist.

    We HAVE to send a message that we won't tolerate socialist pro-amnesty McCain's betrayals.

    As this article which you obviously didn't read pointed out, McCain proposed a $300 billion bailout Obama wouldn't dream of OUTRIGHT suggesting. McCain is trying to out-socialist Obama.

    AS for Iraq, PUH-LEASE! You think it's conservative to waste trillions training muslim soldiers to kill us?

    shiite Iraq has signed a security pact with shiite Iran. When that happened months ago, not 1 more iraqi soldier should have been trained.

    We are now officially training a modern army for an ally, Iraq, of our "declared" enemy Iran. The 200,000 soldiers we trained WILL kill americans in the coming US vs. Iran and Arab vs. Israeli wars.

    I find it so curiously odd that christians, who understand muslim extremism comes from ISLAM itself, are promoting the idea of "muslim democracy" and training "muslim security forces" AKA armies.

    If we were just leveling muslim countries and preventing them from gaining power that's one thing. But we're TRAINING them in modern combat instead. We're handing Saudi Arabia our new X-35 jet fighters! We're giving the latest in equipment, officers, and training to both Afghanistan and Iraq which WILL turn on us.

    I have comrades still on the ground over there, and they all know it too. They say that while the muslims they work with seem like good people, they are too easily manipulated by clerics and would turn on us if commanded, which they certainly will be from the "religion of peace".

  39. Besides, I don't like Barr, but I still voted Libertarian.

    We might not WIN, but if we get 5% of the vote, very reachable, we can get matching funds. If we get 10-15% of the vote, we can the Libertarian party into the presidential debates!

    So vote third party! If we get 5% it's big news, if we get 15% we'd be able to forever change the dynamic of the political landscape away from the two-party monopoly, or atleast scare the GOP into acting more libertarian.

    If they see third party votes increasing, they will certainly cater to us over the REASON for it happening, and their lack of fiscal conservatism would disappear I'm sure, as with Gingrich and the contract.

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