This week, John McCain has undergone a slide in his standing nationwide as the financial crisis on Wall Street, combined with McCain’s “the fundamentals of the economy are strong” gaffe, have pushed voters in Obama’s direction. Today in Cedar Rapids, Iowa, John McCain laid out an economic program to fix the subprime mortgage mess that is dragging down both mortgage companies and investment banks. The Obama campaign and the mainstream media have been strongly critical of McCain’s economic policy, and today’s speech appears to be designed to specify McCain’s plan to fix the economy and perhaps rebut such criticism.
The central plank in McCain’s economic plan is the creation of a Mortgage and Financial Institutions (MFI) Trust, which would act in concert with the Treasury Department and financial institutions with exposure to non-performing subprime mortgage loans to purchase a large chunk of the non-performing loans and sell them off over time. The idea is similiar to the relatively successful Resolution Trust Corporation (RTC), which was created in the 1980’s to clean up the Savings & Loan mess via purchase and slow resale of those failing banks’ assets. If implemented, diverse economists from the Carter, Reagan, Bush 41 and Clinton years believe a new RTC-like plan may work. As envisioned by McCain, implementation of a MFI Trust may stop the current free fall in the subprime mortgage paper market and place the U.S. economy on a path back to stability.
McCain also shined a spotlight on the strong ties between Obama, the Democratic Party and the goverment sponsored entities (“GSE”) at the center of the subprime mortgage crisis: Fannie Mae and Freddie Mac. McCain referenced recently publicized fundraising figures for Fannie Mae for the period of 1989 to 2008 showing the top three receipients being Democrats, with Obama in the number 2 position. Obama’s choice of ex-Fannie Mae CEO Jim Johnson as the head of his search committee was also highlighted, with McCain’s clear intent being to tie Obama to the root of the present financial crisis. Recent analysis of the subprime crisis suggests a link between the GSE’s lending practices and the exponential creation of subprime mortgage debt and resultant housing market oversupply.
Interestingly, the mainstream media’s coverage of McCain’s economic policy speech is solely focused on McCain’s statement that he would fire the present chief of the Securities & Exchange Commission (“SEC”), Christopher Cox. Perhaps in the days to come the mainstream media will report on the pros and cons of McCain’s MFI Trust proposal and pressure Obama to outline in concrete terms his economic revitalization plan.
To date, Obama has focused on laying sole blame upon the GOP and McCain for the present financial crisis and promising change, increased regulation and tax cuts if elected. Obama ridiculed McCain’s proposal earlier this week to engage a commission to determine how to reform overlapping regulatory agencies over financial markets to steamline the bureaucracies and increase effectiveness. Interestingly, Obama himself supports streamlining of regulation, but has no concrete proposal on how to actually fix the present regulatory failings, instead relying on the claim that GOP control of the Presidency is the primary problem with financial regulation. Today’s detailed proposals from McCain may force Obama’s hand in fashioning concrete proposals for fixing the subprime mortgage mess and the failure of oversight on Wall Street.
Technorati Tags: Fannie Mae And Freddie Mac, Mortgage and Financial Institutions Trust, Resolution Trust Corporation, subprime mortgage crisis
