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McCain Flip-Flops on Foreclosure Crisis

April 11, 2008

In order to secure the Republican presidential nomination, John McCain has reversed course on almost every issue he once held near and dear. Now with the general election contest underway, McCain is starting his predictable walk-back from the hard right abyss. Just days after proclaiming his adamant opposition to federal intervention in the housing market crisis, McCain yesterday announced half-measures to support "deserving" homeowners on the edge of foreclosure.
Given his Scrooge-like pronouncements just two weeks ago, to call McCain's reversal on aid to struggling American homeowners a "shift" (New York Times, Wall Street Journal) or a "revision" (Washington Post) which came "unexpectedly" (Politico) is an understatement, to say the least. Then again, the dismal reviews of his widely panned March 25 address on the economy may have had something to do with it.
Then, McCain, whose meager pronouncements on the economy have been limited to cutting corporate tax rates and endorsing the wildly irresponsible Bush tax cuts he once opposed, blamed the credit and housing crises on "rampant speculation." In response to the deepening foreclosure morass, McCain in March made it clear he opposed broad action by the federal government to either aid homeowners or mandate changes by lenders:

"Some Americans bought homes they couldn't afford, betting that rising prices would make it easier to refinance later at more affordable rates," he said. Later he added that "any assistance must be temporary and must not reward people who were irresponsible at the expense of those who weren't."

As for the lending institutions themselves, McCain back then asked that they play nice:

"They have been asking the government to help them out," he said. "I'm now calling upon them to help their customers and their nation out."

But that was then, this is now. In the interim, Americans largely scoffed at McCain's "let them eat cake" attitude. More important, while the self-proclaimed economic neophyte McCain was following the counsel of Phil Gramm (who both as a Senator and late UBS vice chairman was a key player in the sub-prime mess), a bipartisan consensus was already emerging on Capitol Hill behind a relief package for American homeowners.
All of which helped drive John McCain's reversal this week. In an address Thursday introduced by New York Mayor Michael Bloomberg, McCain changed course in an attempt to offer at least the façade of a program to battle the devastating housing market crisis. As the Politico noted:

McCain's proposal, which he called the "HOME Program," would let some homeowners replace their mortgage for one that is more in line with the depressed value of their home. He said the plan, to be guaranteed by the Federal Housing Administration, would be limited to those defaulting on only a primary residence and to those who could afford a new mortgage.
"There is nothing more important than keeping alive the American dream to own your own home," McCain said in a mid-day speech at Windows We Are, Inc. "And priority number one is to keep well meaning, deserving home owners who are facing foreclosure in their homes."

Of course, McCain's program remains ill-defined and with its $3 to $10 billion price tag is much smaller in scope than either the proposals from his Democratic rivals or the legislation already passed by the Senate. As with his half-baked health care package, details as to who qualifies for how much assistance are still murky. With an many as 9,000,000 American homeowners at risk, McCain's package purportedly offers the prospect of assistance for only 200,000 to 400,000.
Still, McCain's seeming reversal was enough to achieve its desired goal. As the NewYork Times noted of McCain's speech:

In both tone and substance, Mr. McCain's remarks were something of a departure from a speech the senator delivered last month in California in which he warned 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."

That McCain has begun his abrupt turn toward the center on this high-profile pocketbook issue is also revealed by the stinging criticism he is receiving from his erst-while allies on the right. Michelle Malkin fumed, "Last month, I said something nice about John McCain's tough-sounding stand against federal housing bailouts. Should have known better." David Boaz, representing the GOP's libertarian wing at the Cato institute, worried, "I do worry that he has instincts toward government activism."
Given McCain's feeble effort yesterday and his economic program consisting of born-again support for making President Bush's tax cuts for the wealthy permanent, the likes of Boaz shouldn't worry too much. The American people, however, should be very worried, indeed.
After all, John McCain yesterday experienced another conversion of the road to the White House and discovered a previously untapped well of economic knowledge. In 2005, McCain acknowledged "I'm going to be honest: I know a lot less about economics than I do about military and foreign policy issues. I still need to be educated." And as recently as last December, he admitted "The issue of economics is not something I've understood as well as I should. I've got Greenspan's book." But appearing on ABC's The View this week, McCain laughably told the American people:

"I know the economy better than Senator Clinton and Senator Obama do."


About

Jon Perr
Jon Perr is a technology marketing consultant and product strategist who writes about American politics and public policy.

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