During the second presidential debate, Sen. John McCain (R-AZ) unveiled a mortgage plan which would enable the federal government to buy bad home loan mortgages and renegotiate them, allowing financially troubled homeowners to stay in their homes.
Today, the New York Times reported that the plan “would allow millions of financially stretched Americans to refinance their mortgages with government help, but it would leave taxpayers to cover the losses, rather than the financial institutions that hold the original mortgages.” The plan favors bankers over taxpayers because it states that the government buy mortgages at their original market value, instead of buying them at their depreciated current value and forcing lenders to accept the loss.
The plan, though, wasn’t always designed this way. As the Politico reported, the initial version of the plan – posted by the McCain campaign Tuesday night – included a provision that lenders “must recognize the loss that they’ve already suffered.” However, “when McCain reissued the document on Wednesday, that sentence was missing.” The campaign said that the inclusion of the provision forcing the banks to accept losses was “a simple mistake“:
That language was mistakenly included in the initial draft and it’s been corrected. It doesn’t reflect the intentions of the initiative, which necessitated the correction and the removal of the sentence. A simple mistake.
So the McCain campaign evidently thinks it is a mistake to help taxpayers without throwing in $100 billion for the bankers. As Matthew Yglesias noted, McCain’s decision to nix the provision “transforms would could be a win-win measure to prevent mass evictions and a total collapse of housing prices into a strangely unmotivated subsidy to the people who issued bad loans.”
Of course, throwing a bone to the banking industry is nothing new for McCain, who has received $1.57 million from the banking and mortgage industry during the 2008 election cycle. In fact, McCain’s initial reaction to the housing crisis was to have the lenders themselves simply “pledge” to sort it out:
We should also convene a meeting of the nation’s top mortgage lenders. Working together, they should pledge to provide maximum support and help to their cash-strapped, but credit worthy customers. They should pledge to do everything possible to keep families in their homes and businesses growing.
As The Wonk Room noted yesterday, the goal of McCain’s plan – helping homeowners with decent credit who are burdened by bad mortgages – is laudable. But his Tuesday night plan, which forced bankers who made bad loans to swallow the loss, was much better than its Wednesday morning counterpart.