Bumped and Updated: Today McCain's campaign staff offered enough details about the McCain version of this proposal that Obama called it a big mistake:
McCain's proposal to spend $300 billion in federal funds to buy distressed mortgages was a highlight of Tuesday's presidential debate, and it seemed to catch Obama off guard. At first, Obama's campaign said he had made similar proposals and there was nothing new in McCain's remarks.
But after McCain aides offered more details Wednesday, Obama's campaign shifted gears.
The plan would cause the government "to massively overpay for mortgages in a plan that would guarantee taxpayers lose money, and put them at risk of losing even more if home values don't recover," Obama economic adviser Jason Furman said in a statement. "The biggest beneficiaries of this plan will be the same financial institutions that got us into this mess, some of whom even committed fraud."
The statement did not detail why the plan would fail. Some mortgage officials, however, say the great majority of bad loans are owned by large pools of investors who would sell them only at prices much higher than their current worth.
If McCain's plan would have the government pay all or most of the difference between a home loan's original value and its renegotiated lower value, as these officials understood it to do, it could prove costly.
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Everyone is expressing a certain degree of surprise over John McCain's announcement during last night's debate regarding the purchase of mortgages - it was a new concept for McCain, something we hadn't heard from McCain at any time in the past.
"I would order the secretary of the Treasury to immediately buy up the bad home-loan mortgages in America and renegotiate at the new value of those homes -- at the diminished values of those homes -- and let people be able to make those payments and stay in their homes."
Wonder where McCain came up with this idea?
"It's my proposal," McCain said. "It's not Sen. Obama's proposal. It's not President Bush's proposal."
McCain is desperately trying to establish himself as a thinker, so he ripped off Obama and then claimed the idea as his own, that's where he came up with this idea - he ripped it off. It's just another McCain campaign stunt.
In fact, at a news conference on Sept. 24, Obama said, "we should consider giving the government the authority to purchase mortgages directly instead of simply purchasing mortgage-backed securities."
Days later, in a news release, he said he would "encourage Treasury to study the option of buying individual mortgages like we did successfully in the 1930s."
"Senator Obama has been consistently calling for policies that would buy up mortgages and restructure them so that families can stay in their houses," Obama economic adviser Jason Furman said. "He continues to support that and believes Treasury should use its authority in whatever way it can to bring about that goal, including buying mortgages directly."
"Keating Economics: John McCain and the Making of a Financial Crisis"
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