26 Days Out: Pay No Attention to the Embarrassingly Horrible Economic Plan Behind the Curtain

Jesse Lee is the Online Rapid Response Manager for the DNC, this is a daily update on the day's messaging.

In McCain's latest attempt to appear competent or knowledgeable on the economy, during Tuesday's debate he announced his latest big, bold, erratic plan. He and his campaign spent the next day boasting about it. Then something happened -- everybody looked at it and realized it was awful, as an Obama campaign memo and ad today explain:

Your favorite and mine, Brad DeLong gives arguably the definitive take-down:

Brad DeLong, New York Daily News: "John McCain's new foreclosure plan is a giveaway to the banks... Put this in perspective. Under the just-passed $700 billion bailout bill, the Federal Housing Administration is already charged with guaranteeing and refinancing up to $300 billion of mortgages. But there is a big difference between that and what McCain proposes. What we already have requires that the bank get only 85% of the face value back. Under the deal McCain is offering, the banks could get back 100%. Why do they deserve it? ...Out of the blue, McCain has just proposed a large, no-strings-attached gift of taxpayer cash to bank executives who failed at their business of risk management, and to bank shareholders who failed at their business of hiring executives. That's simply corrupt."

Krugman: "John McCain's bailout plan manages to take everything that's wrong with the Paulson plan and make it worse."

And when your plan is too beneficial to the wealthy, irresponsible and/or crooked CEOs for even the Wall Street Journal editorial board and the National Review, you're reaching into new territory.

Wall Street Journal editorial: "The 'Resurgence' is different, the McCain campaign says, because it is more 'aggressive.' By this, it means that this one doesn't require lenders or investors to share the pain. Instead, the government will buy the mortgages for their full amount and write a new mortgage that reflects the current (lower) value of the home. The taxpayer -- not the lender or homeowner -- absorbs the losses on loans that exceed the value of the home."

National Review: "McCain's plan would also be a gift to lenders who abandoned any sense of prudence during the boom years. Under the Frank-Dodd bill, lenders must agree to 'take a haircut' -- slang for writing down the value of a mortgage -- in order to qualify for federal insurance on a distressed mortgage. The lender bears an initial loss but is protected if the borrower eventually defaults. McCain would transfer that initial loss to the taxpayers. Under his plan, the government would buy mortgage loans at face value and then reduce the principal and interest on these loans to accommodate distressed borrowers. Taxpayers would take so many haircuts we would all look like Britney Spears after a three-day bender."

What to do? Look over there, it's a stupid smear web ad! Let's talk about something else! Naturally Fox News agrees, like McCain economics has never been their big thing either. Obama spokesman Bill Burton patiently explained the situation to them this morning, starting off by asking, "Hey, I'm guessing you guys don't want to talk about the economy, huh?"

I never thought I'd say this, but perhaps John McCain should take David Frum's advice.

David Frum: "We conservatives are sending a powerful, inadvertent message with this negative campaign against Barack Obama's associations and former associations: that we lack a positive agenda of our own and that we don't care about the economic issues that are worrying American voters."

Wouldn't want anybody getting that idea.

Comments

[scottowego]

I'm starting (?) to get real tired of not hearing any real answers from either candidate about what they are going to do about this economy nor how they plan on changing their agendas to fit this new scenario. We need some answers. period. Be honest with us!

[Aaror]

I suspect that the only logical thing to do is something Obama can't mention till after the election.
Think New Deal...

[proudem]

My staunchly conservative republican brother-in-law just called me to say that he is voting for Obama. He (my BIL) is an economist and believes that we need a change. Folks are starting to come around because it is obvious that McCain doesn't have a clue on how to fix the economy. Hint: He also thinks the Dow will hit 6500 before it begins to rise. Who knows?

[theducator]

This is the result of the same ethics that brought the nation Enron. Here is my solution. We privatize the assets of those who lead these corporate entities and use those resources to pay off mortgages.
I really want to hear the click of handcuffs on the heads of Fannie, Freddie, AIG, Lehman, and Bear - all of them. In order to reduce the arrogance of the remaining thieves we march them down Wall Street to the exchange in a perp-walk with dunce caps and televise it live for the World to see who these guys. There should also be a rail, tar and feathers for the AIG participants of the Spa Trip. I know it would mess up their pedicures, but I am no longer paying for their gated community largess. If we have to take over a company, the leadership should go home spitting out feathers, not drifting under a golden parachute.
The very first failed leaders who should pay this price are W and Chaney.
With regard to W, we need to make sure the name on his Presidential Library is the Repugnican Hall of Shame and Lies. This happened on their watch, not Barney Frank et. al.

[schatsie]

I agree - if Keating can go to jail for Racketeering, that is gambling with assets and taking exorbitant compensation, then these jerks can go to jail also including Paulson....

[LRM216]

I am so sick and tired of the bashing of McCain and even Obama regarding this nightmare of a financial mess the whole world is in. When the first reports regarding the bail out were announced, Barney Frank was on the news waving a stack of papers stating that 130 of the country's leading economists had gotten together and these papers were their suggestions as to how to help solve the ensuing problems we were about to face. Instead of just sitting around and throwing dirt while the world's economy is tanking, why aren't all of these people sitting around a table and fixing this nightmare. How much more time are we going to waste while we just throw blame and angry retorts around.

[the-lexicon]

Fifteen goddamn minutes into this financial crisis, I said what should be done.

Set up a 2nd mortgage program for homeowners in forclosure, with some constraints like it must be principal home, etc. the 2nd mortgage, guaranteed by the feds (using an FHA type setup) pays the mortgage payments for a time, much like a grace period on a student loan.

This simple thing 'bubbles up' through all that failing commercial paper, keeping it afloat long enough to unwind it. While we're at it, suspend mark-to-market for a bit on that paper.

lexicon

[Bobrobert]

roflmao

Another easy fix... and the market tumbles some more.

[thebigthinker]

Please read "A Solution That Works" http://www.asolutionthatworks.com/
It is a very good idea how to stop housing crisis today, keep people in their homes and don't spend billions while doing it. And it is fair to everyone.

[schatsie]

I don't think it is fair to every one...I would rather that people were able to write off their interest at 35% with a capped interest write off of 35,000 that is interest payments would be 100,000 and you could write off 35,000 and this would be above and beyond the standard deduction and the same for Property taxes up to $17,500 for tax payments of $50,000... This would benefit people who are purchasing their houses and the tax credit would help those who own their house... YOU MUST REALIZE that 90% of these tax savings are going to the top 10-20% and are minimal for the rest of us...

I would also set the children's deduction to a tax credit also based on 35% of 10,000 or $3500 per year... and something similar for the child care expenses and cap that at $3500 for each child... That might result in payments to the parents, but I want that for the children...(I also would remove subsidized housing from the picture somehow, I do not believe that this is a good investment from either the government side or the renter's side...They are not well maintained at all and people need the choice to find their homes,,besides we have empty houses that can be rehabbed and I would want students to spend a week every year working with Habitat for Humanity...

and I dream of a better America...Obama/Biden/Franken 08!!!

[thebigthinker]

I have not seen anywhere any discussions about how people who would get their mortgages re-structured, reduced or canceled out would re-pay the difference. Or is there no re-payment clause at all? The way it sounds to me is people who used the system and bit more then they could chew now will get a pass to get out of debt free. While other people who have been playing by the rules and are struggling but keep on paying their mortgages will be bailing out the once who are not paying and end up loosing value of their houses as well. I have a proposal how to help people who are loosing houses and at the same time don"t punish people who are paying their mortgages. There has to be a lien and re-payment clause. If they want to accept government help and stay at their house, they should know that they owe government the full amount of the difference from the sale of their house. They cannot sell their houses until market stabilizes completely (or for 10 years) and they cannot collect any profits until they re-pay in full. Also they are not eligible to purchase any new properties before they re-pay in full.

[proudem]

sounds interesting...wonder if it would work? good post.

[sleek]

McCain is disaster because ALL OF HIS POLICY is created by lobbyists.

WAKE UP America! He DOES NOT care about you! He cares only about himself and his money-providers.

[munki]

The ad is pretty much accurate... Do you mean, McCain means... deep pocket = taxpayers...
That is not going to happen!

[ReasonablySkeptical]

I nearly choked on my Cheerios when I read the WSJ editorial this morning. It slammed Sen. McCain not like a ball out of the park but like a squeaky door shut -- for good. In its "Can't you get anything right?" piece, the conservative's last hope in the print MSM walked readers through Sen. McCain's "Resurgence Plan" and explained in the most patronizing way why it is patently the wrong "cure" for the ailing economy or, frankly, for winning an election ("Hello. Your plan rewards the banks at sends the bill to taxpayers who are mad at the banks."). The only thing the WSJ didn't complain of was the name, "Resurgence Plan" (McCain: "Hey, maybe people will think it'll work with the word 'surge' in it"). Rolling their eyes, I suspect they decided to leave that for The Daily Show.

[arthur2008]

This is one more instance in which McCain's rash and cynical behavior is foolish -- and toxic.

[louieloueye]

Bill Burton is a fabulous spokesman!

[mazees]

He is excellent.

[demfriend]

The very idea that McCain tossed out what he did as his plan after not really paying too much attention to the 700 mil bail out already approved is kind of par for him. He has said he knows little about the economics of the economy and thn of course he said he didn't say that. But he has shown us he will listen to whats his name that thinks we Whine about everything. Yep he was probably the one who told McCain we had a strong economy the same day things started to go down. Yeah McCain has all the help he needs in his corner to help us out right?

[AmericasMostGangsta]

McCain in the membrane (other than that, I am speechless)