Last month, I detailed the proposals offered by the two candidates for the Democratic presidential nomination regarding the current crisis facing the mortgage and housing markets (‘Blog View: Clinton, Obama, And The State Of The Industry,’ Feb. 4). The article did not cite the positions offered by the now-presumptive Republican presidential nominee, Sen. John McCain, because at the time he did present any official comment on the issue.
In the past two weeks, however, McCain has presented his position on the situation. However, I find it impossible to either praise or slam what he is saying, because his language is opaque and contradictory.
(As an aside – I have no clue which candidate to support for president. Not unlike my Feb. 4 Blog View, I am just commenting on policy statements that were widely reported and what they could mean for this industry – don't take this as a pat on the back or a slap in the face to anyone seeking the Oval Office.)
On March 24, McCain gave a speech where he stated his opposition to federal financial intervention to those caught in the mortgage maelstrom. ‘It is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers,’ he said.
But almost in the same breath, McCain stated that federal intervention could be possible if he was president. ‘Government assistance to the banking system should be based solely on preventing systemic risk that would endanger the entire financial system and the economy,’ he added. Considering that the failing big banks acted irresponsibly (a lack of risk mitigation, due diligence, quality control and basic fraud reviews in both the origination and securitization processes), it appears McCain is having it both ways.
McCain also spoke with Forbes.com on March 20 on the subject, but many of his bullet points were either missing crucial details or took two approaches to the same issue. A case in point: ‘Where government assistance is merited and received, all parties – lenders and homeowners – must participate in financial sacrifice in order to qualify,’ said McCain. But he never defined ‘financial sacrifice’ (especially for the lenders) or what anyone had to do to ‘qualify’ for this.
There's more. ‘Lenders should be accountable for acting responsibly in originating and securitizing mortgages,’ he said, but then added: ‘Our financial market approach will include encouraging increased capital by removing regulatory, accounting and tax impediments.’
But how can lenders be held to task when the laws and governmental procedures designed to ensure accountability are, in the McCain plan, being removed?
However, what truly puzzled me was this comment from his March 24 speech, where he called for a meeting with the nation's top mortgage lenders. ‘Working together, they should pledge to provide maximum support and help to their cash-strapped but creditworthy customers,’ he said. ‘They should pledge to do everything possible to keep families in their homes and businesses growing.’
Isn't that what the HOPE NOW initiative is all about? The Bush White House, to its credit, involved the major lenders as part of the solution. Wasn't McCain aware of this?
Ultimately, McCain did not provide specifics of how his plans would work. Instead, he added he was ‘prepared to examine new proposals and evaluate them based on these principals.’
Unless I am reading that last line incorrectly, McCain is stating that he'll wait for someone else to come up with a different idea to the current problem and then think about whether that's the right solution. Is that a correct interpretation?
Whether this vagueness is better than the Obama-Clinton approach of clearly defined heavy government spending and potential federally financed litigation against lenders is something I can't determine. Both approaches, I believe, should leave the industry more than a little concerned over what to expect from the next president.
– Phil Hall, editor, Secondary Marketing Executive
(Please address all comments regarding this opinion column to hallp@sme-online.com)
