McCain warns against big-government aid amid housing, credit crisis

"Any assistance must be temporary and must not reward people who were irresponsible," Senator John McCain said in his speech yesterday in Santa Ana, Calif. (Mary Altaffer/Associated Press)

While Hillary Clinton and Barack Obama propose government help for homeowners facing foreclosure, John McCain offered some small-government tough love yesterday in his first major speech on the economy after returning from a tour abroad.

The presumptive Republican nominee, in a speech in Santa Ana, Calif., attributed the housing and credit crisis to a "bubble" caused by "rampant speculation" and created by lenders who lowered their standards, by Americans who bought homes they couldn't afford, and by financial players who invested in complex securities that were not transparent. Saying he's offering more trademark "straight talk," McCain vowed he "will not play election-year politics" with the housing crisis, and dismissed talk of any bailouts, except to failing banks that could bring down the financial system.

"I have always been committed to the principle that 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. "Government assistance to the banking system should be based on solely preventing systemic risk that would endanger the entire financial system and the economy."

"In our effort to help deserving homeowners, no assistance should be given to speculators," he added. "Any assistance for borrowers should be focused solely on homeowners, not people who bought houses for speculative purposes, to rent, or as second homes. Any assistance must be temporary and must not reward people who were irresponsible at the expense of those who weren't."

He called for homeowners to be required to make "reasonable" down payments on homes, for lenders to raise standards, and for all those involved to be more transparent.

The nation's top accounting professionals should offer new rules, and the nation's top mortgage lenders should convene to figure out how to help credit- worthy customers, he said.

McCain's approach is far more limited than those of Democrats. The Democratic National Committee faulted McCain, saying he isn't offering any new proposals "to deal with the millions of struggling homeowners who played by the rules or the larger issues that local communities are facing in light of the crisis."