John McCain’s Free Market Principles
Posted by Joshua Claybourn on 31 January 2008 | 2 responses
At last night’s Republican debate in California, Amanda Oro from Casey, Illinois asked “if [the candidates] have a plan to help people with bad credit get lower interest rates so they can keep those homes and avoid foreclosure.” John McCain answered this way (emphasis added):
…I think the efforts that have been made so far are laudable. We may have to go further, but the fact that the FHA and the other organizations of government under Secretary Paulson’s direction, and I think he is doing a good job of sitting down and fixing at least a significant number of these problems.
I think that we’ve got to return to the principal that you don’t lend money that can’t pay it back. I think that there’s some greedy people on Wall Street that perhaps need to be punished. I think there’s got to be a huge amount more of transparency as to how this whole thing came about so we can prevent it from happening again.
When a town on Norway is somehow affected by the housing situation in the United States of America, we’ve gotten ourselves into a very interesting dilemma.
If necessary, we’re going to have to take additional actions and particularly in cleaning up a mortgage. A mortgage should be one page and there should be big letters at the bottom that says, “I understand this document.”
We ought to adjust the mortgages so people who were eligible for better terms, but were somehow convinced to accept the mortgages which were more onerous on them. We need to fix the rating systems, which clearly were erroneous in their ratings, which led people to believe that there were these institutions which were stable, which clearly were not.
You can see video of the response here. In an earlier presidential debate McCain noted, “The issue of economics is not something I’ve understood as well as I should. But I’ve got Greenspan’s book.”
2 Responses to “John McCain’s Free Market Principles”
Lots to be worried about in this answer, but one small nit.
When one closes on a home there is a lot of paper work to sign. In Chicago the title company where nearly everyone signs has a futuristic adoption center type feel and the process takes over an hour for most people.
However if I recall correctly from 18 months ago when I closed on my first home, one of the forms you sign IS a one page summary stating the terms of your loan. Also, my mortgage broker made it very clear what I was getting into.
Many, if not most, of these loans were fraudulent entered into by the borrower.
Yeah, there’s a federally-required “truth-in-lending” statement, which I understand is referred to by real estate professionals as the “truth-in-confusion” statement.
McCain is absolutely right that there are greedy people on Wall Street that deserve to be punished over this subprime loan debacle. Lots of people made big bucks cutting up ill-advised loans into little pieces and reselling them to investment banks.
On the other hand, most of the people who took out these loans were completely irresponsible. Some were mislead to various extents, but no one should ever make such a huge financial decision without understanding what you’re getting into. I’ve read a lot of interviews with subprime borrowers who admit that they didn’t know and didn’t care what they were getting into–they just wanted that house.
So really everyone who was involved in the debacle shares the blame. The only innocent victims are the financially responsible people who are going to have to pay higher taxes and higher interest rates as a result of cleaning up this mess.
(It would be nice if McCain had stated the obvious that a lot of borrowers were irresponsible, but if he’d said that his campaign hopes would immediately be dead, as his political opponents would compare that to blaming a rape victim.)