08 October 2008

McCain's mortgage shopping spree...

So, I've been looking around most of the day to get a definitive explanation of the new mortgage plan that Mr. McCain touted last night. [He says he said it first, but it is part of the Tsar's just passed rescue, and Obama talked about it a couple of weeks ago as well as others - both Republicans and Democrats.]

When you go to the Mcpain website it's like walking one of the old British maze gardens to find something other than give us money in it. The Washington Post, the New York Times, and many other media members had stories. They were all fairly accurate but not that easy to understand.

I finally found something over at MSNBC.com that is not just fairly accurate buy also uses one of McCain's main economic advisers as a source.
Under McCain's plan, the government would spend $300 billion to purchase distressed loans and provide new, fixed-rate mortgages. Douglas Holtz-Eakin, the Arizona senator's economic adviser, said the plan would help stabilize the plunging values of mortgage-backed securities that are at the heart of the crisis in the financial markets.

To do so, the government would pay the full face-value of the distressed mortgages, Holtz-Eakin said.

Under that scenario, the government could buy a $200,000 subprime mortgage on a home now worth just $100,000, give the homeowner a 30-year, $90,000 loan with a 5 percent interest rate, and essentially eat the $110,000 difference

Ok, do you understand what he is saying?

McCain wants to buy the mortgages for the amount that the bank or lending agency holds it, determine the new value of the house, and give the homeowner a new loan at the new home value.

ummmm... there's a little problem here. Who is really, really reaping the reward?

yep... the bank or lending agency. They made the big mistake of financing properties that they actually knew were inflated but wanted to get rich by playing all kinds of games and reselling and refinancing with each other. Mr. McCain wants them to get all of their money, thereby enriching the bosses even more.

What I think would be fair is to first determine the actual current value of a property and then tell the bank, "This is how much we are going to give you: the actual worth of the house. We are not going to be responsible for your bad investments. Take it or leave it. Eat your losses and pay the consequences with your investors."

Why should you and I pay for the mistakes? Where is Mr. McCain planning on getting the money? Should we just start using Chinese yaun (¥)? Won't he have to raise taxes to pay for it?

there are just too many questions, and i'm just asking...

UPDATE - 10/9/08: Jared Bernstein and Gene Sperling over at Huffington posted this today - Ouch! McCain's Housing Solution Is a Gift from Taxpayers to Banks.

the money quote [pun intended]
That's right folks...it's private profits and social losses. Instead of an effort to safeguard taxpayers as Senator Obama has called for and the Frank-Dodd bill goes to great lengths to do, this plan takes from taxpayers to provide unjustifiable subsidies to financial institutions - even those who engaged in deceptive or outright fraudulent practices to induce people into homes they could not afford.

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