More on McCain's housing speech

Earlier I wrote that it was hard to pick a headline out of Sen. John McCain's housing speech today, and tonight I stand corrected, by The New York Times: "Drawing a sharp distinction between himself and the two Democratic presidential candidates, Sen. John McCain of Arizona warned Tuesday against vigorous government action to solve the deepening mortgage crisis and the market turmoil it has caused, saying 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.' "

A long headline, but a good summary of an important speech.

More: "... in a departure from Democrats, who have focused on the lending industry’s role in the crisis, Mr. McCain suggested that some homeowners had also engaged in dangerous practices, including borrowing too much in hopes that a rising market would cover their mortgages."

Key quotes from the speech, which you can read in its entirety here:

--"But in the process of a huge, and largely positive, upturn in home construction and ownership, a housing bubble was created. ... The normal market forces of people buying and selling their homes were overwhelmed by rampant speculation." Comment: It was a bubble -- sounds obvious, but you didn't hear this from Sen. Clinton yesterday; her lengthy analysis of the housing problem failed this pass-fail test of intellectual honesty.

--"Some Americans bought homes they couldn't afford, betting that rising prices would make it easier to refinance later at more affordable rates. There are 80 million family homes in America and those homeowners are now facing the reality that the bubble has burst and prices go down as well as up."  Comment: Again, sounds obvious, but Clinton's speech treated falling prices as a crisis to be stopped, not a reality to be faced.

--"In our effort to help deserving homeowners, no assistance should be given to speculators. 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. I will consider any and all proposals based on their cost and benefits. In this crisis, as in all I may face in the future, I will not allow dogma to override common sense."

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.

Comments

[Dan]

I'm generally a dem and will probably vote that way b/c of the war, but this does show how much better the reps are on economic regulation. I'm almost tempted to switch to McCain b/c he's against spending my tax money in order to make my living expenses higher...

[Geek Seek]

The Financial Centipede: Waiting For The Next 99 Shoes To Drop

Now that's a great headline.

http://tinyurl.com/29slzh

Courtesy Patrick.net, the "glass not only completely empty, but broken as well" website. Great information, just really depressing.

[amir]

There's a reason they call it straight talk. I don't see other politicians running around telling the truth to the voters...

[sean]

Dan,

Not that I am either Dem or Rep (I am proudly independent), but how is Rep better at economic regulation? Do you mean instead of spending billions to save stupid Americans who speculated irresponsibly, Rep simply spend it (and much much more) on ONE war started on false premise (the other one is justfied, in my opinion)? Do you mean that while people like me getting wealthy through massive tax cuts (hence less earning), government spending has balloned out of control (through massive boost in defense OUTSIDE of funding for the wars)? In this regard, how is the Rep led US government different from irresponsible folks currently losing in this housing bubble (both are spending way more than they earn)? Obviously one (US government) is trying very hard to make the debt worthless by devaluating the dollar.....

So, I post this question to you, and every poster here: If we are to punish the idiots who lost on speculation, shouldn't we also "punish" the Rep for being irresponsible with our money? After all, during the last 3 Rep presidents (Reagan, Bush Sr, and Bush Jr), WE SPENT MORE THAN WE EARNED (doesn't it sound like all those idiots we are currently blaming)? Obviously we had a sex fiend of a Dem for president ("blue dress"), but DIDN'T WE SAVE MORE THAN WE EARNED under his presidency?

Obviously the next logical question is: How do we expect the American people to act responsibly when the government acts recklessly with our money? If the government can be willy nilly with its spending on decreasing income (from tax cuts) with relative impunity, why can't its people act irresponsibly and get away with it?

Again, I am not an advocate for any kind of bail out. In fact, I loath the idea. But, on a macro scale, how are the two irresponsible acts I mentioned above different? Both are using huge amount of debt to cover their insatiable appetite to spend money. The only obvious difference is that the speculators were hoping to get out of debt by selling higher to the next idiot (greater fool theory); and the US government is hoping to get out of debt simply through either time value of money, or by devaluating its own currency.

Dan, your last sentence didn't make that much sense either. You mentioned that you are a Dem and you are against the war (I assume Iraqi war). But, you also assume that McCain is against spending your tax dollars to make your living expense higher. But, you do know that McCain is the biggest supporter of the war, right? Even when other Rep were questioning the war, he was and still is fully behind it. That means increased spending on it to maintain, if not increase, our troop levels. That means, EACH year we will probably spend more in Iraq than we will cumulatively spend on bailing out idiots acting irresponsibly (imagine total cost in Iraq being 10 to 20 times higher than total cost of bailing American people out). So, Dan, let me post this question to you again: who do you think will be footing the bill for the war? The Chinese? The Europeans? No. You and Me..... and you don't suppose that will put a pinch in your wallet?

Just a thought.......

[FINLwhiz]

--"Some Americans bought homes they couldn't afford, betting that rising prices would make it easier to refinance later at more affordable rates."

Can't say that I don't agree with his line of reasoning - in principle; and McCain already has my vote - but this is the exact same comment I heard from the mortgage broker and realtor I really not all that fond of at the moment. Very disenlightening statement, in a much better better context this time though I might add. Hindsight is always 20/20 I suppose.

But seriously, okay housing stinks - can't we just stop deflating the dollar already though? I get it - I bought a house for twice the price - it will end ugly. Do we really have to keep driving the cost of everything else through the roof?

Makes no sense to me. Welfare for Wall Street and banks needs to be the same tough love.

[Tex]

I am a lifelong Democrat, but have tremendous respect for McCain. While I don't agree with all his positions, I respect and admire the fact that he is not afraid to speak up for what he believes is right, even if politically unpopular, which is much more than one can say for any of the Democrats. Hillary is pandering, while Obama is keeping disappointingly quiet on the subject of the housing "crisis."

Although I do believe a President McCain might be sucked into pro-Wall Street corporate welfare as Pres. Bush has been, I applaud him being the first major presidential candidate to openly acknowledge that housing is just too expensive and that yes, irresponsible homeowners had some role in creating their own plight.

Although I still prefer Obama, if Obama is not the nominee I would face a dilemma -- vote for Hillary "lying if her lips are moving" Clinton, vote for honest-but-too-conservative McCain, or waste my vote on Ralph Nader. McCain just made this choice a whole lot easier for me.

[Sami]

Mccain will fail ..he is agint helping home owners...he will not win the race in 2008...he will be a looser

[buz]

Sounds like McCain has a brain. Without that amnesty blunder and his stance on the war he could win a few votes.

[Sandy]

Yeah, Dan, the Repubs are so good on economic regulation that they've kept our country out of debt.

Just remember, whatever money McBush saves you by not helping American homeowners in need will be spent on a war.

[NevadaGal]

Come on folks,

McCain is has only been a lying, blue butted liberal from day one. He is just trying to make points with conservatives in his party (my party also).

Want to throw a monkey wrentch at the the political processes then vote for Dr. Ron Paul who has opposed any bailout or even a thought of a bailout since day one.

Elect McNut and he will be rubbing shoulders with Ted, Hillary, and Byrd just about 5 minutes after taking the oath of office.

[Sean]

Wow, someone in political office has the correct viewpoint on this issue. How rare.

I am a Democrat who will be voting for McCain. No doubt about it now.

I am completely against any bailout and it seems that he is as well.

Many who bought a home had no business buying one. Many put no money down, took out 100% loans some with negative amortization, and gambled they could refinance in a few years. This put more demand on housing and higher and higher prices leading to the inflation we saw. Why bail out these irresponsible people with my money?

The housing market is simply going through a much-needed housing price deflation. The government does not belong in this situation. Let the free market work.

[William E. Jones]

I think McCain is right, but I think his side will lose because many people will see it as lacking in "compassion." If you believe that people should be allowed to endure the consequences of your behavior you are said to be lacking in "compassion." This will end up being a bidding war in terms of her who will throw the most money at the problem.

[KungFuGrip]

I like the spin the Dems try to put on this. "Aren't Bush and the Reps just as irresponsible as these homeowners?" I guess sometimes it's best just to change the subject. Likely this is the only kind of "change" we can expect from the Dems.

[tony]

Hey, Sami. It's 'loser', not "looser". Why does everyone on the internet make this mistake???

[anon1137]

I agree with most of the other commenters.

I'm a democrat and I admire McCain for having the courage to take unpopular positions. But if I have the choice of a Hillary/Obama spending $50B to prolong the housing bubble or a McCain spending $50B to prolong the Iraq war, I'll take the bubble.

[Rob]

Wrote: "Mccain will fail ..he is agint helping home owners...he will not win the race in 2008...he will be a looser"

Me, Me, and Me, me-me. me plus mee-me. The biggest problem of the Democrats, especially this generation, is they failed their Macroeconomic courses and barely passed the Micro...

[loveMEsomeME]

People can we stick to the housing subject. McCain was and is showing great courage sticking his neck on the line, politically. I don't need a rehash of tired anti-war statements everywhere I turn. Because yes you are right spending money to stop Sadam from killing 150,000 kids a year through starvation is a waste of money, the fact that a dictator was attempting to control his own people much the way Stalin did even by using chemical weapons on his own people, who cares. The FACT that Sadam paid the families of terrorist suicide bombers in Israel up to $60,000 per incident (not disputed and there is video evidence). Oh, and why is no one talking about WMDS anymore, maybe because the dems and reps both fearing looking like idiots when we find out that the weapons were moved to Syria, as asserted by Israeli intelligence a month before we invaded Iraq. But you are right saving peoples lives is a waste of money and an equatable argument when talking about housing. Yes millions of lives vs HOUSING, can we please stay on subject from now on.
As a veteran of the first gulf war and military intelligence who has many friends in harms way can we please stop this TIRED TIRED TIRED rhetoric and just talk about housing, that is what this blog is about.

[Jeff in Burbank]

I'm a lifelong GOP voter from the Midwest who is leaning more Democrat the longer I live in California. However, the housing issue alone reminds me of why I voted Republican for so long. This may pull me back to the Republicans in this election as well.

[acidspit]

I'm slowly inching my way over to McCain thanks to this speech, especially compared to Clinton's most recent housing speech in PA. I favored Clinton (Obama, seems, to me, has a weird self-aggrandizing, entitled air about him), but after that speech from Monday, I'm leaning more and more towards McCain. My vote will be based on 2 things that concern me the most at this time, which is immigration and housing.

[Lou]

Why do you people complaining about Republicans and the debt leave out entitlement programs? After all the overwhelming majority of the federal budget goes to entltlement programs that automatically roll over year to year without any votes from Congress.

Entitlement programs are the reason we have this huge debt. And as far as I can tell Clinton and Obama want more entitlements (bailouts). I don't like the war but I'm not sheep. I know what really is destroying our economy, unchecked entitlement programs and the Fed's inflationary policies.

[Chris]

I am against bailing out homeowners and I am against bailing out the financial institutions that played a part in this mess while their execs made millions. I did not read everything that McCain said, but would be surprised if he is against the actions the fed has taken to "bailing" out the banks.

I also wonder where McCain stands on the bailouts given his connections/ shenanigans with Lincoln Savings during the S&L crisis and bailouts back in the early 90's. I suspect he is of the leave no millionaire behind mentality. Bailout the corporations- of course, bailout the idiot homeowners- no never. The bottom line to us taxpayers is it doesn't matter which side the bailout money is going to (banks or homeowners), we'll be stuck footing the bill for generations. The IOU to China is going to get a bit bigger.

[Manny from Inglewood, because its Real Estate... unlike that other Fake Estate]

i wish everyone would stop the gernal Republican bashing, everyone acts as though Bush is the end all-be all of republicanism, when in fact he is not he is far far from it. Real Republicans are for less government not more!!! (unlike bush can you say dept of homeland security)

i'm no fan of amnesty, but McCain is a fiscal conservative (can you say "no ear marks")
he will let the housing market play its self out and come back down to reality.

I usally support the Democrats up to the point that they open their mouths !!

[Brady Westwater]

Why no link/story on the WSJ article on foreclosures? It seems to contradict a ton of conventional wisdom and I'd sure like to see some local housing experts - and I mean real experts - comment upon it.

http://lacowboy.blogspot.com/2008/03/why-does-
new-york-have-twice-as-many.html

[Arti]

Well said, Tex. I too have never voted for a Republican before, but McCain's speech on housing that shows his "straight talk" is not just hype and that he won't pander, are really winning me over. If Clinton is our nominee, I will be switching to McCain and their stances on housing (one panders, the other gives it straight) will be a big factor for that.

[greg]

I like all the comments that start off: "I'm a lifelong democrat, but I'm voting McCain now b/c of this speech". What a load of BS! You are Rep voting Rep, just admit it!

A vague speech on the economy that basically says FU to those who were hurt in this crisis is not sound economic policy. This is a guy who, with Romney, flat out told Fox News (Rep company line: Everything is Great!!!) a few months ago that the economy is good. McCain doesn't speak for anyone except for the GOP and his friends in the Keating Five.

[amir]

hey anon1137,

You assume Obama or Hillary will spend zero on the war in Iraq? The difference in spending in Iraq will be minimal. Withdrawing might be even more expensive short term than staying.

The next president will withdraw much of the force in Iraq and leave some of it behind. McCain will withdraw slower, Obama fastest. And all three will have to leave a large contingency force for the foreseeable future, per the demands of the military, Iraqi governments and international obligations. The differences are not as big as advertised.

As for bailouts, the Dems will bailout more, the Republicans less, but both will have to act if the financial system crumbles.This also depends on who controls Congress.

By the way, both a bailout and the war in Iraq, are nothing compared to the financial problem this country will face when all baby boomers start asking for their social security and medicare. In twenty years these two will suck more than 50% of the federal budget.

[JohnnB]

It’s not a bad speech per se, but it’s mostly rhetoric.

“The past decade witnessed the largest increase in home ownership in the past 50 years. Home ownership is part of the American dream, and we want as many Americans as possible to be able to afford their own home.”

The past decade witnessed the largest decrease in home EQUITY in the past 50 years. Why don’t you emphasize the difference? Signing a debt contract with nothing down does not really mean one OWNS their home. Was your head in the sand along with your other “esteemed” colleagues?

“But in the process of a huge, and largely positive, upturn in home construction and ownership, a housing bubble was created.”

So, mega builders hiring tens of thousands of illegal aliens to substantially lower their labor costs - at the expense of American contractors/construction workers - is positive? This is similar to manufacturing outsourcing, but it’s even worse. These tens of thousands are a subset of the millions of Mexican immigrants who needed to find shelter and then signed on to basically “free” mortgages… which was the early dynamic that initiated the rise in housing prices. The worst (and earliest) locations are the biggest immigrant states of CA, AZ, NV and FL. Many, many, many more folks “bidding” on a relatively fewer number of houses. THEN, the wider speculation took hold across the country. (This is not about racism.)

“A sustained period of rising home prices made many home lenders complacent, giving them a false sense of security and causing them to lower their lending standards.”

BS… that’s the cart before the horse.

“That leaves us with a puzzling situation: how could 4 million mortgages cause this much trouble for us all?”

You’re obfuscating. It’s about most houses being overvalued and not supported by income levels. It’s about all forms of mortgages included refies and HELOCS. It’s about the overwhelming DEBT burden that the banks “manufactured” and then profited on in stupendous fashion. It’s about the biggest redistribution of wealth to the top 2% EVER.

“I will not play election year politics with the housing crisis… Government assistance to the banking system should be based solely on preventing systemic risk that would endanger the entire financial system and the economy.”

That definition sure does leave a lot of wiggle room for behind the scenes and inappropriate bailouts to Wall Street investment banks. A lot of wiggle room. This wouldn’t be an election year political message to your constituents, naw…

“When we commit taxpayer dollars as assistance…”

There ya go.

“GSEs (Government Sponsored Enterprises) should never insure loans when the homeowner clearly does not have skin in the game.”

That won’t cover all loans.

“…to improve the ability of our companies to compete by reducing our corporate tax rate”

Heard that one before.

[Granny]

Any relief the gov gives is only going to help those who are wealthy enough to afford the rich homes and are one payment late. What about those who struggle every month to make that mortgage payment on a house that is considered shelter and a warm place to be in the winter. It's tough out here and if they (the politicians) had to walk in our shoes they would wake up and take off those rose colored glasses. Every one is not rich. Life is hard in these times. The middle class have become the poor in this country. No one notices. No one cares, Democrats or Republicans. It's all about what they personally can gain from holding a position in our government. Sad but true.

[Laker]

JohnnB, "“GSEs (Government Sponsored Enterprises) should never insure loans when the homeowner clearly does not have skin in the game.”"

FHA loans with 0-3% down with low or no FICO scores and NO reserves...and with limits up to $730,000 are basically the new subprime loans backed by the federal government....Guys and Gals, Open your wallets please....

The solution to the mess is very simple, NO MORTGAGES WITHOUT 20% DOWN!
If we put that skin in the game, the number of speculators will decrease, people will fight to make payments, and not mail in the keys.
Also, if a grown up person does not have 10-20% down in cash, how does he expect to buy a house and keep it?
Is this a joke or what?
If you are not responsible enough to save some dollars, who will help you to replace your roof, bad AC unit?
And please don't cry about poor people living from pay check to pay check, they can RENT ! (and save in the meantime)

[SJ]

I agree with Laker. He is 100% correct.

I would also like to add that lenders should hold the risk involved with making a loan. He who makes the loan, holds the risk. This way, banks would actually first VERIFY a borrowers income level prior to making a loan. If the lenders are so reckless that they wont properly scrutinize a borrower, then the LENDER should lose money when the borrower does not pay them back.

Irresponsible banks are as much to blame in this mess as irresponsible borrowers and should not be bailed out.

This type of change would make it more difficult for deadbeats to get a loan in the first place and make the hyper inflation we have seen in home prices much less likely to happen in the future.

Let the free market correct itself. No government bailout!

[jbunniii]

I'm rather nonplussed by the fact that I may well be voting for a Republican presidential candidate for the first time!

Clinton and Obama have totally dropped the ball on this issue, insisting that the insane increase in house prices over the past few years must be sustained by all means necessary, using taxpayers' (i.e., yours and mine) money.

These two make Bush look financially disciplined by comparison, and I never thought I'd have occasion to say that.

[Peter I]

McCain's tough talk of course appeals to the bubble bloggers, me included.

Until, that is, I think about what he's actually saying. He's basically saying, No Bailouts! (Except for when Bailouts must happen.)

When must bailouts happen? When systemic instability of the economy is likely to occur. When is that likely to occur? When it's a financial institution with huge amounts of worthless mortgages on its books. Who, then, is being bailed out? Are the individuals who took those mortgages out being forgiven the loan? No. Are they able to stay in their houses? No.

The people being bailed out, ladies and gentlemen, are the fat cats who bought those worthless securities. So, yes, save every millionaire, leave no Millionaire behind! That should be McCain's motto. I can't believe any thinking Democrat would fall for it.

I say no bailouts for ANYONE, fat cats included. Will McCain say that? Not likely

[HelloKitty]

That seals the deal, Im a dem voting for Mcain

At least war spending doesnt prop up the 1m starter home in los angeles insanity.

stop the insanity!!