Candidates step up battle over mortgage crisis, ailing economy
John McCain says his mortgage plan will help overburdened homeowners keep their houses and boost an economic recovery. Barack Obama says it will hurt taxpayers and reward reckless financial institutions that helped cause the crisis.
The two presidential campaigns yesterday intensifed their battle over McCain's plan to spend $300 billion to directly buy distressed mortgages and then refinance them on terms friendlier to homeowners - a fight that has become the latest focus in a broader contest over who can better fix the faltering economy.
McCain told a town hall meeting in Waukesha, Wis., that Obama's opposition to his mortgage plan shows that his Democratic rival is more interested in helping Wall Street than Main Street.
While Obama supported the bailouts of AIG, Bear Stearns,
McCain said it's essential to get people into "manageable mortgages" and stem the foreclosure crisis. "We must stabilize housing values in America," he said.
Answering a question about prosecuting those to blame for the housing meltdown, McCain argued that Democrats - including Obama, Senator Chris Dodd of Connecticut, and Representative Barney Frank of Massachusetts - are taking credit for the $700 billion financial rescue package approved last week, but stood idly by as the housing crisis festered.
"Willing coconspirators," he called them.
The Democrats have said they tried to push through stricter regulations to rein in mortgage companies and to protect homeowners but were opposed by the Bush administration and Republicans.
In a series of rallies across Ohio and in a new national cable TV ad, Obama assailed McCain's proposal and argued that it shows that he - and not his Republican rival - will protect average Americans as he deals with the economy.
"The next president will have to manage this recovery," he said at an outdoor rally in Dayton, Ohio. "The question is, will that president be looking out for you?"
McCain's plan would reward "irresponsible lenders," Obama said, criticizing the plan directly for the first time. "We have to act to fix our broken economy and restore the credit markets. But taxpayers shouldn't be asked to pick up the tab for the very folks who helped to create this crisis. And that's the problem with Senator McCain's risky idea."
Obama said the plan is the latest example of McCain's "erratic" behavior during the campaign, a description that Republicans assert is intended to remind voters of the Republican's age, 72. If elected, he would be the oldest person ever to assume the first term as president.
"We need steady leadership in the White House," Obama said. "We need a president we can trust in times of crisis."
Obama said he favors helping homeowners facing foreclosure by going after predatory lenders, making sure the government doesn't overpay for any mortgages it buys, and allowing bankruptcy judges to redo mortgages.
Obama appears to have the weight of opinion on his side. Since McCain announced the proposal without much fanfare during Tuesday night's presidential debate, it has drawn criticism - even from the staunchly conservative National Review magazine - because taxpayers would cover any losses, not the financial institutions that hold the original mortgages.
Under the plan, the government would pay off the original loans and replace them with 30-year fixed mortgages pegged to the current, lower market value of homes and carrying lower interest rates of a little more than 5 percent.
The estimated $300 billion needed would most likely, but not necessarily, come from the $700 billion authorized in the financial rescue package that both senators voted for last week. That plan allows the Treasury Department to buy bad mortgage-based debt, but not directly from homeowners. 