McCain’s $300 Billion Mortgage Bailout

In last night’s debate, I was taken aback when I heard Sen. Barack Obama, the Democrat, call for tax cuts for the middle class in order to ease their financial burden and thus, perhaps, enabling them to keep their mortgage, contrasted with Sen. John McCain, the Republican, who called for a $300 billion adventure by the government to get further into the mortgage business.

Curious, I went to the McCain web site today to see more details on the plan:

The McCain Resurgence Plan would purchase mortgages directly from homeowners and mortgage servicers, and replace them with manageable, fixed-rate mortgages that will keep families in their homes. By purchasing the existing, failing mortgages the McCain resurgence plan will eliminate uncertainty over defaults, support the value of mortgage-backed derivatives and alleviate risks that are freezing financial markets.

The McCain resurgence plan would be available to mortgage holders that:

* Live in the home (primary residence only)

* Can prove their creditworthiness at the time of the original loan (no falsifications and provided a down payment).

The new mortgage would be an FHA-guaranteed fixed-rate mortgage at terms manageable for the homeowner. The direct cost of this plan would be roughly $300 billion because the purchase of mortgages would relieve homeowners of “negative equity” in some homes. Funds provided by Congress in recent financial market stabilization bill can be used for this purpose; indeed by stabilizing mortgages it will likely be possible to avoid some purposes previously assumed needed in that bill.

Perhaps Nina Easton, a Fox News contributor, said it best: those who were truly defeated in last night’s debate were fiscal conservatives who saw their ship keel over and slip beneath the waves.

The only saving grace to this plan is that it purports to be part of the existing and already approved $700B giveaway.

Do fiscal conservatives even exist anymore?