McCain Believes in Nothing

I am increasingly convinced that John McCain believes in nothing, or at least believes in nothing strong enough that he can't turn a 180 on the issue if the polling numbers move the meter hard enough

The plan would retire old
loans that homeowners no longer can pay and replace them with less
expensive, 30-year, fixed-rate mortgages that are federally guaranteed.
McCain said families would gain "the opportunity to trade a burdensome
mortgage for a manageable loan that reflects the market value of their
home."

In line with
his concern about bailing out speculators, McCain's proposal would
apply only to homeowners who took out sub-prime mortgages after 2005
for homes that are their main residence. They would need to have proved
they were credit-worthy at the time of the loan.

I hope everyone else is enjoying the notion of "sub-prime mortgages" where the borrowers were "credit-worthy at the time of the loan." 

  • dearieme

    On the doctrine of the Lesser Evil, I wonder whether you may have to settle for Obama. Interesting times.

  • Dale

    I'm not sure the lesser evil isn't really Hillary. Man...Did I really say that?

  • morganovich

    this is the scariest quote from his press release:

    "My plan follows the sound economic principle that when markets decline dramatically, debts must be restructured."

    WHAT!?!

    on what planet is that a sound principal? losing gambles get reduced? is there an 800 number for this? i have a stock portfolio i'd like to discuss with them...

  • http://comuse.blogspot.com Allen

    Reminds me of a lady they were interviewing on Colorado Matters, a Colorado Public Radio show, that had ran into tough times making payments. I forget how but she had an ARM and - suprise, suprise - that ARM that can change did. Her reasoning was that she hadn't done anything wrong. She knew she didn't have great credit but she wasn't going out and buying fancy stuff.... just going to Russia and adopting some kid. And funny how that made things tight financially (I'm assuming not only for the monthly budget but also in spending a large chunk of savings to pay for the adoption). Is it really that hard for people to face up to that they weren't credit worthy and that they were a bigger risk and that they're running into trouble now is proof of that?

  • nicole

    As a libertarian and SANE PERSON it makes me pretty darn angry that everyone and their brother is running around trying to keep people in houses they couldn't afford to begin with. But as a young professional who will possibly be looking to get a mortgage in the coming years, it makes me furious! Right now, renting, I am a saver, and interest rates on my savings have been halved in that past year. Then, when I am ready to buy a home, it will be impossible to get a reasonable rate because banks will be worried judges can just step in and restructure my loan if I don't feel like paying on time.

  • http://geistbear.blogware.com Thomas

    He believes in which way the wind is blowing.

  • Jon

    The only thing sadder is how Hillary and Obama came out, after reading the plan, decrying it for being way too small and not helping 'American families' enough.

    I suppose I've gotten used to these things, and tend to believe their first position. I honestly don't think McCain believes this crap. But, if he doesn't do anything, he'll be cast as an evil white man who doesn't believe in the plight of the poor American family.

    I suppose you could argue that a better candidate could talk his way out of having to propose a program like this. Not sure that I've seen one yet.

  • GU

    Hear Hear Nicole! This is basically a big F*ck You! to young, responsible people who want to buy property in the near future.

    Landsburg had a great article along these lines in Slate recently:

    http://www.slate.com/id/2185303/

  • John III

    Oh, I dont know. This seems to me to be the exact kind of thing I want from my political leaders.

    Strong on feel good retoric, with a nice little disclaimer that keeps the cost down to next to nothing. ( credit worthy ARM's applicants... heh )

    This is a serious problem, but all these politicians screaming about how to fix it are ignoring that it is precisely these "fixes" that come back and bite the economy in the ass 10 years, and conveniently, 2 elections, later! How is this Sub - Prime Morgage problem not a result of government mandates forcing banks to make these loans to creditless people in the first place?

    Ever hear the term "red-lining"? It WAS the bank policy of blanket rejection of morgage applications to specific neighborhoods, on the grounds that they were less likely to be able to pay back the loans. The Government put a stop to that, claiming several "isms" were actually involved. And now, we have all these Creditless individuals crying foul because they cant pay thier morgages. Can you guess where they live? The Formerly "Redlined" Districts. Imagine that.

  • Dr. T

    John III is mistaken. The current mortgage problem was not due to the US Government holding guns to the heads of lenders and telling them to loan $400,000 to creditless Joe and Jane Blackpersons so they could buy a house. The problem was greedy mortgage brokers and lenders and foolish buyers.

    Many mortgages are made by small brokers who work for lenders with no local presence. The brokers are paid a fee for each mortgage. It is to their benefit to encourage barely qualified folks to buy the most expensive house they can. To make this feasible, the lenders used ARMs with the first few years of payments set so low that the borrowers got deeper into debt: the monthly payments were less than the mortgage interest + escrow.

    I see no reason for taxpayers to shell out money to bail out greedy business people and foolish buyers.

  • Scott Wiggins

    The bailouts have been there for decades... The VA and HUD have been picking up the tab for tens of thousands if not millions of foreclosures for many decades now. The principal problem is that the government has a mission statement to help get Americans into homes...Unfortunately, these agencies are enablers who help non-qualified or barely qualified buyers into homes which are easy to walk away from down the road as these owners put little or no money down on these properties...To add insult to taxpayer injury, these government agencies re-hab these properties and carry the notes until they are auctioned to buyers. Guess who are the top priority buyers? You guessed it, those same folks who are under-qualified or barely qualified and who will put little or no money down. And so, the cycle continues...This new so-called housing crisis is nothing new it just gets more press than the incredibly wasteful HUD and VA programs.

  • Scott Wiggins

    The bailouts have been there for decades... The VA and HUD have been picking up the tab for tens of thousands if not millions of foreclosures for many decades now. The principal problem is that the government has a mission statement to help get Americans into homes...Unfortunately, these agencies are enablers who help non-qualified or barely qualified buyers into homes which are easy to walk away from down the road as these owners put little or no money down on these properties...To add insult to taxpayer injury, these government agencies re-hab these properties and carry the notes until they are auctioned to buyers. Guess who are the top priority buyers? You guessed it, those same folks who are under-qualified or barely qualified and who will put little or no money down. And so, the cycle continues...This new so-called housing crisis is nothing new it just gets more press than the incredibly wasteful HUD and VA programs.

  • Scott Wiggins

    I think McCain has the right idea here as has been noted...The statement, and it's wonderfully crypted, "subprime borrowers who were credit-worthy at the time of purchase" should be translated as McCain agrees to let the housing markets balance themselves with little or no government intervention. Brillant...

  • Scott Wiggins

    I would like to know Fannie Mae's role in promoting lending practices which precipitated the current housing meltdown...It's easy to blame banks and brokers but the vast majority of loans were conforming to Fannie Mae guidelines so that they could be traded on the secondary mortgage markets. As we know now, many toxic loans were then packaged into collateralized debt instruments which were then sold to unsuspecting investors...Did Fannie Mae have an active role in driving lending standards down to the lowest common denominator?

  • http://www.tinyvital.com/blog John Moore

    Two comments...

    1) On the principal of lesser evils, McCain gets my vote. We can talk about economics all we want, but wait until the first smuggled nuke blows up in a US city or two. Then all the rest of this will be trivial (especially considering the economic effect of that nuke).

    National security is by far the most critical issue that people should be concerned about. There are hostile nuclear powers (China, Russia) that are against us for geopolitical and economic reasons. There is a world-wide Mahdiist Jihad that threatens our existence due to the unprecedented coexistence of suicidal terrorists, modern travel, modern mass media, and unimaginable destructive technology.

    McCain at least understands thatt issue. I don't know if he understands much else (other than honor - he is an honorable guy), but he understands the one that counts. Obama and Hillary manifestly do not, and even if they didn't have exactly the wrong instincts, the people they would appoint from the Democrat stable would be unable to handle these threats.

  • http://www.tinyvital.com/blog John Moore

    Second comment..

    The mortgage crisis was essentially caused by structural economic problems, resulting in incentives and ownership of capital being in conflict. As was pointed out, the people selling the mortgages did not themselves hold the debt, and hence had a perverse incentive to sell bad debt.

    Solution to prevent this in the future? Beats me.

    Solution for now... if necessary, have the central banks inject *temporary* liquidity so that the derivative ownership/value confusion can be unwound without an economic collapse.

  • MJ

    Oh, I wouldn't say McCain believes in nothing. He IS committed to keeping us in Iraq...for 100 years, if necessary.

  • markm

    The statement, and it's wonderfully crypted, "subprime borrowers who were credit-worthy at the time of purchase" should be translated as McCain agrees to let the housing markets balance themselves with little or no government intervention. Brillant...

    Scott, that's true when the purchaser has not suffered a (non-predictable) loss of income, but simply bought a house on an ARM where they could pay the teaser rate, but not enough to ever pay back the loan. However, I suspect that most of the bad mortgages were minimally credit-worthy, in that the buyer had barely the income to pay it back; they've now gone bad because the market value of the house has plummeted to far below the remaining amount owed, and either the buyers have lost their jobs and cannot keep making payments, or they have merely discovered that it makes financial sense to default on a non-recourse mortgage that's deeply underwater. McCain's proposal doesn't shut these ones out of the bailout.

  • http://maxedoutmama.blogspot.com MaxedOutMama

    Surprising as it seems, there actually were a substantial number of borrowers who were creditworthy (could have gotten loans that did qualify as prime or near prime). Lewis Ranieri, who had a lot to do with originally developing the market, did a survey and concluded that about 50% of the people in the pools he studied qualified for better loans.

    The lowest number I have seen is 30%, which I get from the results of various agencies that are out there trying to deal with these loans. That is certainly an undershoot because of the declining home values.

    But let's use the 30% number. How did these people get there? Well, the most common varieties of these loans were 2/28s, with an initial low payment but high underlying margins, and the commission paid to brokers for writing these was substantially above the commissions on near-prime or prime loans. The brokers maximized their profit, and the borrowers didn't realize what they were doing because the initial low payments made the loans look "prime".

  • Scott Wiggins

    In reading these comments and many others as well as listening to the media talking heads, the term "teaser rates" is used to describe unfair, or unethical lending practices. The fact is that truth in lending laws require lenders to disclose the costs of loans at initial interest rates as well as for the maximum rate possible. As an investor, I have seen this documentation on scores of loans which I have obtained over the years. The information is disclosed and it's not in the fine print...It's up front and personal...The vast majority of homeowners complaining about initial rates re-setting knew it was going to happen. They bet on selling the property at a higher price before the reset and/or making more money down the road. Now, they are complaing...Don't be fooled. They complain because they want the government aka taxpayers to help them out of a predicament that they themselves created. Let's stop blaming the lenders for providing flexible terms...It's mis-placed blame and masks the borrowers role in bringing on this so-called housing crisis.