McCain Spouts Policy Platitudes Instead Of Solutions To The Housing Crisis
McCain Spouts Policy Platitudes Instead Of Solutions To The Housing Crisis
Our guest blogger is Ed Paisley, Vice President of Editorial at the Center for American Progress Action Fund.
John McCain promises to put “America’s interests before political ambitions” in his first post on Forbes.com about what he considers the most important issue facing our nation — zeroing in on housing. Unfortunately, he then proceeds to offer up eight vaguely principled platitudes as substitutes for actual policy proposals.
In his piece, McCain argues:
America’s families are bearing a heavy burden from falling housing prices, mortgage delinquencies, foreclosures and a weak economy. It is important that those families who have worked hard enough to finance home ownership not have that dream crushed under the weight of the wrong mortgage.
No questioning that snap analysis as the subprime mortgage crisis cascades into the subprime and prime mortgage markets and then into the broader credit markets, reducing one of Wall Street’s storied investment banks to rubble and now threatening ever widening sectors of the economy.
Problem is, McCain’s solutions to the widening ramifications of the U.S. housing crisis rely “on sound principles” that in fact fail to advance any real solutions, or worse (in the case of the last two of his eight principles), offer counterproductive or meaningless advice. Seventh on his list, for example, is this: “Our financial-market approach will include encouraging increased capital by removing regulatory, accounting and tax impediments.”
The problem, however, is not over regulation of the various financial institutions that helped create the housing bubble, but rather regulatory underkill, as former Securities and Exchange Commission chairman Arthur Levitt notes in his recent column in the Wall Street Journal. Levitt says that policymakers “need to realize that the true competitive advantage of America’s capital markets has been their high quality,” which he does not define as more lax regulations or accounting guidelines.
And number eight on McCain’s list is this: “Where government assistance is merited and received, all parties — lenders and homeowners — must participate in financial sacrifice in order to qualify.” Yet the seven principles that preceded his last one hold out no hope of actually providing meaningful government assistance. In fact, in this most pressing issue before our nation (according to his own reckoning) McCain offers are no policy proposals whatsoever.
McCain admits he’s not a crack economist, but even his chief economic advisor, Douglas Holtz-Eagin, fails to present any cogent plan to address the housing crisis. Instead, he also dodges the issue by blaming it mostly on “speculators looking for quick profits and by investors and bankers who ignored basic rules of risk management in an attempt to cash in while times were good.” Surely he knows that most homeowners on Main Street are not speculators to be punished but rather responsible, hard-working Americans who save and invest in their homes for their and their families’ futures. An economic plan that fails to detail precisely how to deal with the housing crisis is no plan at all.
Principles are not action, and action is what’s needed today. Fortunately, progressives in Congress are moving forward with some concrete proposals to stem the fallout from the housing crisis at its source — owner occupied homes. These plans, based in large part on Center for American Progress proposals to save responsible homeowners and to help neighborhoods devastated by foreclosures, contain concrete policy steps to bring relief to homeowners, the broader economy, and our spooked financial markets.
McCain, on this critical issue, is engaged in mere political posturing.
3 Responses to “McCain Spouts Policy Platitudes Instead Of Solutions To The Housing Crisis”
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Political posturing instead of coming up with some solutions.I do think oldman Johnny is corect when he says he is no economist.These guys could care less about the mortgage crisis, they are more worried about WAR.The solution is to bring every soldier home because you can`t defeat an enemy that does not want democracy or neocon christian values rammed up their A$$E$.
March 24th, 2008 at 10:23 amWe keep hearing that John McCain is such a Maverick. He stood against the Bush tax cuts (before he was for them.) He criticized the right wing elements of the evangelical movement (before he pandered to them.) He is pro choice although he will appoint strict constructionist judges that are more likely to set aside Roe v. Wade. In short, McCain is nothing more than a typical right wing Republican.
Economically:
1. McCain believes in supply side economics of giving wealthy families and corporations even more tax breaks so that the poor and middle class may scramble for the crumbs left on the floor.
2. McCain believes in the law of the jungle. He will feel sorry for you when the market explodes and you are left with nothing. However, he will do nothing for you. However, he will endeavor to assist the corporations and the rich since they are “the driving force” of the economy.
3. Regulation is bad. The wealthy and corporate interests are morally superior to those who have failed to gather wealth. The moneyed interests will always do the right thing. Regulations only interfere with their profit making.
4. He secretly despises those who have not attained wealth. The fault of the bubble were those evil speculators. It was not a fiscal policy that sought to fight the first recession by artificially pumping individuals to finance their homes and “spend, spend, spend” to goose the economy. Remember Bush bragging about the number of new home owners and Greenspan’s advice to take out ARM loans.
5. He blames the bankers for their poor practices with out discussing how looser regulations led to these results or how many of the practices constituted fraud.
Yes, John McCain, a true compassionate conservative.
March 24th, 2008 at 2:59 pmBecause of the repeal of the Glass-Steagall Act, banks now can make loans and not care about the risk (they’re selling the loans to companies like Bear Stearns) and they have no interest in whether or not the borrower can actually pay. Why worry about whether or not financially shaky borrowers can pay adjustable rates when the loan will ultimately be someone else’s problem? Admittedly, everyone bought into the false expectation that home prices would continue to rise indefinitely.
The Glass-Steagall Act was enacted to remedy the speculative abuses that infected commercial banking prior to the collapse of the stock market and the financial panic of 1929-1933, by separating banking and investment.
Because of lobbying by the financial industry during the Clinton administration, the Act was repealed.
On April 6, 1998, Sandy Weill of Travelers Ins. and John Reed of Citicorp announce a $70 billion stock swap merging Travelers (which owned the investment house Salomon Smith Barney) and Citicorp (the parent of Citibank), to create Citigroup Inc., the world’s largest financial services company, in what was the biggest corporate merger in history.
The transaction would have to work around regulations in the Glass-Steagall and Bank Holding Company acts governing the industry, which were implemented precisely to prevent this type of company.
Following the merger announcement on April 6, 1998, Weill immediately plunges into a public-relations and lobbying campaign for the repeal of Glass-Steagall and passage of new financial services legislation (what becomes the Financial Services Modernization Act of 1999). One week before the Citibank-Travelers deal was announced, Congress had shelved its latest effort to repeal Glass-Steagall. Weill cranks up a new effort to revive bill.
Weill and Reed have to act quickly for both business and political reasons. Fears that the necessary regulatory changes would not happen in time had caused the share prices of both companies to fall.
As the push for new legislation heats up, lobbyists quip that raising the issue of financial modernization really signals the start of a fresh round of political fund-raising. Indeed, in the 1997-98 election cycle, the finance, insurance, and real estate industries (known as the FIRE sector), spends more than $200 million on lobbying and makes more than $150 million in political donations. Campaign contributions are targeted to members of Congressional banking committees and other committees with direct jurisdiction over financial services legislation.
After 12 attempts in 25 years, Congress finally repeals Glass-Steagall, rewarding financial companies for more than 20 years and $300 million worth of lobbying efforts. Supporters hail the change as the long-overdue demise of a Depression-era relic.
On Oct. 22, Weill and John Reed issue a statement congratulating Congress and President Clinton, including 19 administration officials and lawmakers by name. The House and Senate approve a final version of the bill on Nov. 4, and Clinton signs it into law later that month.
Just days after the administration (including the Treasury Department) agrees to support the repeal, Treasury Secretary Robert Rubin, the former co-chairman of a major Wall Street investment bank, Goldman Sachs, raises eyebrows by accepting a top job at Citigroup as Weill’s chief lieutenant.
March 25th, 2008 at 8:59 pm