10/29/2008 05:12 am ET Updated May 25, 2011

Did John McCain Help Main Street in the Bailout Bill? hmm, Not So Much

A short while ago I wrote a blog post for those of us who weren't financial analysts or bankers about the simple things I would look for in an acceptable legislative bailout proposal.

I said we needed some equity for the taxpayers in any investment the government was going to make so that if these bad assets became profitable we would benefit. We needed executive compensation in these firms to be limited, we needed strong oversight of the Treasury Dept activities, and we needed additional help for folks on main street who were concerned about their mortgages and their jobs.

I think there are still lots of Democrats who should and will vote against this thing. After all the Republicans created this mess and the Democrats willingness to step to the plate here isn't quite sacrificial but it is risky. Overall, I think the Democratic leadership and Chairman Frank and Dodd did pretty well in getting the Treasury to agree to their terms. I am hopeful that real help will be given to the folks on main street for mortgage assistance and more but the reality is that the decision to help is on an individual bank basis and is left up to the discretion of the Secretaries of Treasury and Housing through the Federal Housing Administration. For now, we look to good faith. And in January, we look to Barack Obama to implement it right. By insider accounts, it was the best deal that could get done. In large part this is because Democratic negotiators were being held hostage by the votes of House Republicans led by John McCain.

What??? I thought that John McCain was charging into Washington last week to save main street - to help the people. My Goodness, he even suspended his campaign to do so.

At the infamous White House meeting, John McCain said he wanted some oversight but most importantly, he wanted the House Republicans to be an equal participant at the table. That is how he would make a difference in this important effort.

Well they were there all right. So what DID the House Republicans and John McCain add to the Bill?

Well, for two days they demanded additional tax cuts so that banks and other institutions could buy up the bad assets rather than the government. Of course, that meant that they would also benefit from any increase in value to those assets. What? John McCain and the House Republicans wanted to add tax cuts for profitable businesses to a bailout bill??? Shocking, I know. That was too greedy even for Hank Paulsen who is used to being surrounded by a high level of greed.

Finally, in an effort to get a deal done, Paulsen and the Democrats agreed to the final McCain/House Republicans additions to the bill. They agreed to let the McCain club devise a way for the private sector to profit without getting additional tax cuts in the process. In other words, they could profit only once, not twice.

The legislation creates authority for a federally backed insurance program that would make the so called "bad" mortgage-related securities, salable to the private sector. How? By making them a good deal for them and reducing risk, obviously. The compromise reached would require Paulson to "establish" such an insurance alternative, but he is not compelled to use the insurance option.

Oh, by the way, the McCain/House Republican additions to the bill also include $3 billion to help small community banks (not their mortgage holders or depositors) take a deduction for losses from their investments in Fannie Mae and Freddie Mac, since taken over the government this summer.

John McCain went back to Washington to save main street from Wall Street. The problem is, his "main street" ran through a pig's trough. Will he take credit for that?