During the third and final presidential debate last night, Sen. John McCain (R-AZ) was asked about his plans for the economy. In response, McCain outlined his Homeownership Resurgence Plan, which he said will help “put the homeowners first.” McCain also addressed what he called “the criticism” of his plan:

Now, I know the criticism of this. ‘Well, what about the citizen that stayed in their homes? That paid their mortgage payments?’ It doesn’t help that person in their home if the next door neighbor’s house is abandoned.

However, this is not the main criticism of McCain’s plan. The main criticism is that the plan rewards bankers who made bad loans by directing the federal government to buy bad mortgages at their original market value, instead of at their current depreciated value.

Testifying today during a Senate Banking and Housing Committee hearing on “The Genesis of the Current Economic Crisis,” Cuyahoga County Treasurer Jim Rokakis explained that “if you buy them at face value…you’re guaranteeing yourself, I believe, tens of billions of dollars of losses.” Watch it:

As Matthew Yglesias noted at the time, “instead of having the lenders take a haircut in order to avoid mass foreclosures, McCain wants the taxpayers to bear all the costs of doing so.” “The plan rewards those who took on the risk — banks that made loans, and homeowners that bit off more than they could chew — at the entire expense of taxpayers,” wrote Morgan Housel at The Motley Fool. “McCain’s proposal comes about as close to a get-out-of-jail-free card as it gets.”

McCain initially included in the plan that he would force lenders to “recognize the loss that they’ve already suffered,” but he flipped – overnight – to place the bill back on the taxpayers. This is the criticism that McCain needs to address.

During the presidential debate last night, Sen. John McCain (R-AZ) attempted to explain America’s financial meltdown by saying that “the catalyst for this housing crisis” was Fannie Mae and Freddie Mac (although he botched the delivery by saying Freddie Mae). McCain then claimed that the two GSEs “caused the subprime lending situation.” Watch it:

McCain, however, does not have his story straight. As McClatchy reported this week “federal housing data reveal that the charges [against Fannie and Freddie] aren’t true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.”

In 2006, during the height of the subprime boom, “more than 84 percent of the subprime mortgages…were issued by private lending institutions.” That same year, Fannie and Freddie’s regulator – the Office of Federal Housing Enterprise Oversight – “imposed new restrictions…that led to Fannie and Freddie losing even more market share in the booming subprime market.”

In fact, back in 2002, Freddie Mac “announced that it will no longer purchase subprime loans that include a variety of onerous features commonly associated with predatory financing.” Realty Times called this “a strategy that has the potential to seriously impact abusive lenders.”

Today, Dean Baker, the co-director of the Center for Economic and Policy Research, noted that “while Fannie and Freddie, as huge actors in the mortgage market, certainly contributed to the bubble, it is absurd to point to them as principle culprits.” He pointed out that “their market share actually fell as the bubble grew to ever more dangerous levels, dropping from 50.1 percent in 2002 to just 34.8 percent at the peak of the bubble in 2006.”

This was not the first time that McCain tried to incorrectly blame Fannie and Freddie for the financial crisis. But repeating this claim doesn’t make it any more true.

UPDATE: During a Senate Banking Committee hearing today, Sen. Chris Dodd (D-CT) explained that those blaming Fannie and Freddie are “wrong” and the crisis is a “direct consequence of years of regulatory failures by government officials.” Watch it:

The wild stock market fluctuations have wiped out $2 trillion in private retirement accounts in the last 15 months.

If John McCain and George W. Bush had had their way, millions of worker’s Social Security benefits would have been at risk.

To illustrate this risk, a new analysis from the Center for American Progress Action Fund finds that a retiree with a private Social Security account invested in stocks, along the lines of those proposed by President Bush and supported by John McCain in 2005, would have lost approximately $26,000 if they had retired on October 1, 2008 after 35 years of contributions to such an account.

Read the full analysis here.

But it could have been even worse. If the U.S. economy had undergone a decades long slump and performed like the Japanese economy over the past 35 years, the account would created a loss of almost $70,000.

In a rosier scenario, if the U.S. market had performed like the German market, a worker would have made almost $40,000 in their account. But this radical unpredictability is precisely the reason why draining trillions from Social Security to pay for these accounts is a very bad idea.

Check out a review of what the research from the 2005 Social Security privatization debate can tell us about John McCain’s plan to put retirement security on the stock market here.

To oppose the privatization of Social Security, sign the “Golden Pledge” here.