McCain's McMortgage McStakes

When it comes to an economic rescue plan, John McCain is in full caducity. Compare and contrast:

March 26, 2008: "McCain Rejects Broad U.S. Aid on Mortgages"

Drawing a sharp distinction between himself and the two Democratic presidential candidates, Senator 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.”

October 7, 2008 (pm): "McCain proposes bailout for homeowners"

John McCain will direct his Treasury secretary to implement an American Homeownership Resurgence Plan (McCain Resurgence Plan) to keep families in their homes, avoid foreclosures, save failing neighborhoods, stabilize the housing market and attack the roots of our financial crisis. * * * For those that cannot make payments, mortgages must be restructured to put losses on the books and put homeowners in manageable mortgages. Lenders in these cases must recognize the loss that they’ve already suffered.

October 8, 2008 (am): "McCain changes homeowner plan"

Sen. John McCain (R-Ariz.) made an overnight change in the homeowner bailout he proposed at Tuesday’s presidential debate, making it more generous to financial institutions and more costly for taxpayers. * * * The document posted and e-mailed by the McCain campaign on Tuesday night says at the end of its first full paragraph: "Lenders in these cases must recognize the loss that they’ve already suffered.”

So the government would buy the mortgages at a discounted rate, reflecting the declining value of the mortgage paper.

But when McCain reissued the document on Wednesday, that sentence was missing, to the dismay of many conservatives.

That would mean the U.S. would pay face value for the troubled documents, which was the main reason Sen. Barack Obama (D-Ill.) gave for opposing the plan.

McCain's first position was unsustainable -- and known to be so at the time by anyone who was paying attention. His second position, sprung during this week's second debate in hopes of being a "game changer," was already well within the authority granted last week to the Treasury Department. His third and latest position, which would saddle taxpayers with the entire loss of risky mortgage derivatives and no hope of even partial repayment, is a non-starter with just about everyone -- conservatives, liberals, and realists alike:

• "It creates a big moral hazard," says Daniel Mitchell of the conservative Cato Institute.
• Says liberal economist Robert Reich: "McCain last night came up with the stupidist plan I've heard yet... . He wants the government to buy mortgages from the banks at face value and then write down the principal for homeowners. This would be the biggest handout yet to the financial industry. Taxpayers would take all the losses, including the downside risks of additional defaults if houses drop further in value, while the banks would get off scott free."
• Jared Bernstein, an economist with the non-partisan Economic Policy Institute, tells CBS' Marketwatch he finds McCain's proposal "quite unsettling" and adds, "Under this plan, there's no quid pro quo between lender and taxpayer. When I first heard it, I was underwhelmed. Now I'm actively nervous."

Not so long ago we recalled the famous bon mot that "historical facts and personages occur, as it were, twice * * * the first time as tragedy, the second as farce." John McCain, with his tragically crazy lurches from one extreme to the other, is in peril of reversing that sequence.

Soon, all he'll have left for his electoral base is the pity vote.