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I never thought I'd be doing a post praising John McCain's wisdom, but here goes.In the midst of calls from members of both parties for a big government intervention in the mortgage crisis, John McCain said in a speech in Los Angeles that "it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers."
Exactly -- Senator McCain is saying what needs to be said but isn't being said because of election-year politics. Democrats and some Republicans appear to be making a bet that you will win very few votes by saying that some people should lose their homes.
He added that "Some Americans bought homes they couldn't afford, betting that rising prices would make it easier to refinance later at more affordable rates ... Of those 80 million homeowners, only 55 million have a mortgage at all, and 51 million homeowners are doing what is necessary - working a second job, skipping a vacation and managing their budgets to make their payments on time. That leaves us with a puzzling situation: how could 4 million mortgages cause this much trouble for us all?"
Taking the focus off of homeowners and onto Wall Street, McCain said that "Capital markets work best when there is both accountability and transparency. In the case of our current crisis, both were lacking."
Of course, Senator McCain is right, and I wonder what he thinks of the taxpayer-financed Bear Stearns (NYSE: BSC) bailout that will stuff over $1 billion into the pockets of investors who bought a bad stock.
McCain's honesty here is refreshing -- I have to wonder what Washington would be doing if this crisis hadn't happened in an election year. My hunch is that we'd see more rational behavior focused on fixing problems, not appearing to be compassionate while bailing out people who made bad decisions.
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Reader Comments (Page 1 of 1)
3-26-2008 @ 6:51PM
laura said...
Thank you for the honest commentary on John McCain. I have a hard time believing that people think the fix for the housing mess is government assistance, just where do people think that the government is going to get the money? It will cut programs that are necessary ie. Medicare/Medicaid and increase taxes for all. I truly hope that we dont have to learn the hard way this election year. We are not a Socialist Nation. Yet.
3-26-2008 @ 8:06PM
Stop said...
What courage to face the mess right on!!!!!!!! Most homeowners new they couldn't afford their pick your interest vrm. But the big mess was late night TV investor's 100% financing---sorry irresponsible. The return was too good to be true and the hedge funds needed to bring caution.
3-26-2008 @ 8:39PM
BigJohn547 said...
Maybe McCain should jump right in the Illegal Alien problem in the United States!!!
3-26-2008 @ 9:13PM
Badabing said...
He right. To a point. But for a small borrower its tougher. The lenders have the advantage; pages and pages of legal info on contracts no one reads, pre pay penalties so your stuck with the loan, etc.
When your desperate to own or refi, you do what you can, and the lenders will do anything to sell you a loan. No bailing the banks out of loans, I agree, and no bailing out the borrower either. The borrower and the banks need to work together. No one wants to lose their home, and I don't think the bank wants it either, but if either plays hard ball, then thats the party that should lose.
3-27-2008 @ 12:05AM
Greg said...
I bought a home that I COULD afford on a 30 year fixed mortgage. My company transferred me to another city 1100 miles away and I was unable to sell my home and am facing foreclosure. There are those who are suffering from this crisis THROUGH NO FAULT OF THEIR OWN!!! Additionally, property values in my neighborhood have fallen by 30-40% BECAUSE THE LOCAL SCHOOL DISTRICT HAS BEEN OVERRUN BY ILLEGAL ALIENS. 85% of the children cannot read or speak English and are on public assistance. Bad schools depress home values!!! Even if I could sell my home I would lose $40,000!!
3-27-2008 @ 1:23AM
R said...
Mortgage brokers are at also fault. They knew when people didn't actually qualify for a loan and used "stated/liar" loans to get them approved. Often when people complained about the loan and or terms, they were told by their broker.....you can refinance...don't worry about it. We need a lot more regulation in the mortgage industry. I am ashamed to say I am a mortgage broker. This industry, it's worse than used car sales!!
3-27-2008 @ 4:17AM
Susan said...
The crisis was easily foreseeable by the Congress and the Advisors to the President which included such "creative" financing options to "help" people buy homes or refinance etc...who was protecting the American public from this? The Republicans were in power and they failed to protect us.
3-27-2008 @ 7:38AM
Michael Schneider said...
Greg (above) makes a good point that there would be some foreclosure situations even if we did not have a subprime mess and sometimes these considerations involve local issues (I don't share his view toward blaming illegal children though). To have a free market means you have inequities but it is frustrating to see government bailing out those who made bad and overly risky decisions and ignoring some who acted responsibly. The Fed is focused on keeping it's finger in the dike though-- a position they should never have been in.
If we have a deep recession there will be more foreclosures that are not related to overborrowing or bad mortgages but rather are related to general economic conditions and job loss. The Fed is taking action to try to contain the crisis and the result is some people are helped more than others. It is not a situation the Fed should be in really and I agree with John McCain's sentiment but at this stage the alternative at this point might be financial crisis. The trade off may be that more oversight is needed beforehand so that this kind of situation would not get out of hand-- Wall Street Journal had an item about this recently. Government is in deeper than many people would like in this but it is a case perhaps of not having the ounce of prevention and now needing a pound or maybe 10 pounds of cure. At least there is a sense now that the Fed is on top of the situation and a crisis can be limited.