McCain Bad Mortgage Plan Turns Reagan In Grave

In the debates last night, John McCain referenced Ronald Reagan as his hero. Undoubtedly, this was intended to try and hold on to the conservative voters he was about to send running to the hills. I realize that the economy is about as bad as any of us can remember, so bad that both sides agree government intervention is necessary. But John McCain's new plan is not only a blatantly populist move to try and save his collapsing campaign, but it's also terrible.

In case you don't know what I am talking about, here's the summary of his plan: Basically, he wants to take $300 billion dollars, buy up a bunch of bad mortgages and refinance them back to their owners at the real home value and not the one that speculators had bubbled it up to. Basically, this is a mark-to-market for home owners. Sounds like a win for the home-owner, who gets a lower priced mortgage, and a win for the loan holder, who gets to sell the asset to the government at face value, when it's actually a piece of crap. (Something smells fishy, eh?)

The no-brainer complaint here is from the 90% of us who don't have a mortgage we can't afford. "Where is my big fat windfall for not making horrible decisions?" Even worse than that, now we'll have that 90% regretting making good decisions. Wishing they had bought a house way outside of their means, so they would now be getting their mortgage chopped in half. Don't think that is the kind of behavior we want to encourage, eh?

But the really, REALLY, terrible part of the plan is this: IT ENCOURAGES PEOPLE TO STOP PAYING THEIR MORTGAGE!!!

That's right, somewhere in the details of this plan will be a cutoff. A line that says "We'll buy these mortgages, but not those." That line is going to be somewhere around 60 days of delinquency (where assets are officially accounted for as delinquent on bank balance sheets). This qualification will be public knowledge. So anyone who wants the windfall from the government will instantly stop paying their mortgage, and wait for the golden parachute to land in their yard.

This is proof that McCain is going down, and going down swinging. Hay-makers only. And he forgot to aim.