by Teh Nutroots | Economist Brad DeLong comments on McCain's plan, as described by Douglas Holtz-Eakin. Douglas Holtz-Eakin says, this morning:
[W]e would in fact be taking the negative equity position and putting it on the taxpayers books instead of putting it on the private lenders books or the homeowners books. We think the balance of risk has shifted to the point where this is the way to go...
What does this mean? It means that John McCain wants to give $100 billion of taxpayers' money to America's worst-behaving mortgage financiers.
Ha ha, though I am a mere economoron my instincts were right! Man, who'd've thought the day would arrive when William Kristol and I would be in agreement?
. McCain's plan is for the government to buy up $300 billion of distressed mortgages not at current market value but at full face value....
The McCain plan is:
- Take $300 billion.
- Pay double current market value to banks that have troubled mortgages on their books, thus:
- Give a present of $100 billion to the bankers who made the loans.
- Acquire and regularize the mortgages of only two-thirds as many homeowners as could have been accomplished if the $300 billion were invested wisely.
....I would say that this is unbelievable, but I do believe it. (Grasping Reality with Both Hands)
And...why? Why now? You know the answer already.
Why propose this now? Holtz-Eakin said that to have done so during the middle of the debate would have injected an element of instability and potentially compromised the rescue plan's passage. The proposal certainly seemed to have caught even McCain's surrogates off guard; they had not been prepped to answer questions about it. The media didn't quite know what to think, and there hasn't been too much attention paid to this yet, even though it's a bold and expensive idea. If McCain can sell this cleanly, it's a real opportunity for him to get economically anxious voters to associate something positive with his candidacy. If not, it'll have been a waste. Last night, wags were referring off-handedly to the plan as the McCain Campaign Resurgence Plan -- a last ditch goodie bag that undermines his message about spending discipline. (Marc Ambinder)
Ben Smith, quoted in this piece, quotes from a letter by The Politico's Victoria McGrane:
Details provided to reporters by senior adviser Doug Holtz-Eakin Wednesday morning make one thing clear: Taxpayers would directly pick up the tab for the difference in cost between a homeowner’s old, too-expensive mortgage and the cheaper one provided by the government.
This is something that congressional lawmakers, led by House Financial Services Chairman Barney Frank (D-Mass.) specifically avoided when they crafted their own landmark housing bill, which became law July 31 and took effect Oct. 1.
Says an Obama adviser: "This is a big gift to financial institutions, and the more irresponsible you've been, the more money you'll get from it. It's a bad way to help homeowners, a bad way to recapitalize banks, and it totally ignores the principle I thought McCain and Obama agreed to about protecting taxpayers."
At MoJo Blog, Kevin Drum says, "Somebody needs to ask McCain some very hard questions about the details of this plan."
Talk about "nailing Jell-O to a wall," to quote one of McCain "jokes" about Obama last night.
In other news, Paul Krugman says there's "trouble at mill."
The only thing we have to fear is fear itself. Fear and negative equity … The two things we have to fear are fear itself and negative equity, and the depleted capital of financial institutions … Amongst the things we have to fear are fear itself, negative equity, and the depleted capital of financial institutions.
Meanwhile, John McCain’s bailout plan manages to take everything that’s wrong with the Paulson plan and make it worse. I’ll outsource the explanation to Brad.
[See above]
The laconic Atrios laconically says:
More free money for irresponsible rich people.
Awesome!
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