McCain Joins the Bailout Bunch

Regular readers of my blog saw this coming. As this AP headline from late yesterday puts it: "McCain Seeks Aid for Some Homeowners." First a few details from the AP and then my analysis:

McCain's plan would benefit the government and original lender by giving them certificates for part of the loan's original value. If the homeowner sold for more, he or she would benefit along with the government and the original lender....  In his new proposal, he says the home would have to be a primary residence and that the borrower would have to be able to afford a new mortgage.... "It is built on the reality that homeowners should have an equity capital stake in their home," he said. "Homeowners would end up with a 30-year mortgage and an equity stake in their home. The new lender would receive a federal guarantee of the mortgage.... There is nothing more important than keeping alive the American dream to own your home."

My take: When John McCain gave his housing speech a few weeks back, just about everyone in the MSM (for newcomers, that's the mainstream media) interpreted it wrongly but me . The typical take treated it as some sort of hyperlibertarian, "McCain to Homeowners: Drop Dead" kind of deal. But it wasn't.

McCain was merely making it clear that he was against the government cutting checks to every homeowner with a gripe about his mortgage. In fact, McCain advisers say they felt the whole debate—including the congressional Frank-Dodd bailout approach—showed movement toward the McCain position of favoring targeted aid, not some broad financial amnesty for everyone who took out too big a mortgage or bought his house at the peak of the market. Let me quote myself:

McCain economic adviser Douglas Holtz-Eakin said the campaign did not have a position on the homeowner bailout/assistance bills being pushed by Sen. Chris Dodd and Rep. Barney Frank—"as a general rule, we do not take positions on bills"—but added that McCain's recent statement of principles on housing help—that it should not help speculators, for instance—could be found in those bills. "They're certainly in there.... There are some taxpayer-backed guarantees so there is some commitment on the part of the taxpayers. It's a voluntary mechanism. It's not overreaching; it's targeted. It is supposed to involve the lender and the borrower both giving something up."