Mercurial McCain: 'Erratic, Uncertain'

We were ruminating over the details of John McCain's wildly mercurial home mortgage crisis plans earlier today. And, lo, here's Barack Obama speaking out on the same subject several hours later at an Ohio rally.

We didn't write his speech. Honest.

(Transcript of clip, above)

"Now this is just the latest in a series of shifting positions that Senator McCain has taken on this issue and just about every issue. His first response to the housing crisis in March was that homeowners shouldn't get any help at all. Then a few weeks ago he put out a plan that basically ignored homeowners. Now, in the course of 12 hours, he's ended up with a plan that punishes taxpayers, rewards banks, and won't solve our housing crisis.

"This is the kind of erratic behavior we've been seeing out of Senator McCain. You remember the first day of this crisis he came out and said the economy was "fundamentally sound." Then two hours later he said we were in a crisis.

"I don't think we can afford that kind of erratic and uncertain leadership in these uncertain times. We need steady leadership in the White House. We need a President we can trust in times of crisis. And that's why I'm running for president of the United States of America."

As Steve Benen puts it, while evaluating a new Obama ad for Tee-Vee, the word "erratic" is appropriate because McCain "has been all over the map in response to the financial crisis."

He said it wasn't a time for blame, and then blamed Obama. He was for and against the AIG bailout on successive days. He pushed Chris Cox's firing, then dropped it. He wanted a commission to study what had gone wrong, and then never mentioned it again. He "suspended" his campaign 10 days after the crisis began, but never actually put his campaign on hold. McCain has simply gone from one ridiculous notion to another, flailing around, looking desperately for something coherent to say.

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.

Annals of Privatization - Chapter XXVIII

UPDATED BELOW

From Florida's Annals of Privatization-No-Matter-What:

The headline:

"State Investment Chief Considers
Privatizing Investment Pool"

The lede:

"As an audit committee attempts to unravel how Florida became so heavily invested in subprime-tainted securities, the state's new investment chief is considering leaving such future decisions to professionals."

The story:

"Bob Milligan, interim director for the State Board of Administration, told Cabinet members Tuesday he believes all of Florida's short-term investments -- from hurricane insurance to operating cash for the state's prepaid college program -- might be better handled by private managers."

The context: Privately owned Wall Street investment bank Lehman Brothers on its own buys billions of dollars of high-risk mortgage derivatives, expecting to make a killing. So do JP Morgan Chase and Bear Stearns, among other Wall Street gurus.

When these investment geniuses at the privately owned Wall Street firms finally figure out they've made a whopper of a mistake -- so huge, in fact, they might lose everything -- what do they do? They hire recently-become private investment consultant Jeb Bush to help them palm off all that bad paper on the Florida Local Government Investment pool so it will take the loss, not them.

Even after the crap privately-owned Lehman Brothers palmed off on Florida was headed firmly south, the Wall Street firm had the temerity, or greed, to try sinking their hands deeper into the state's pockets. "It suggested that Florida could buy more structured finance commercial paper from Lehman Brothers for the state pension fund, " Bloomberg reports.

But not all Florida local governments were fooled. Salaried money managers who work for local governments like Orange County and Pompano Beach saw what was happening and promptly withdrew their money from the state fund.

The conclusion: Florida's new governor and his minions say, 'To avoid debacles like this in the future, let's turn over all of our money to Wall Street gurus like Lehman Brothers and JP Morgan.'

What's the thinking here? To avoid burglaries, hire a thief?

Nonsense. Hire those bureaucrats in Orange County and Pompano Beach. They know how to protect public money.

UPDATE
12-20 am

A correspondent asks how our own local governments did during the run on the state fund.

The answer is better than those investment geniuses at Bear Stearns, Morgan-Stanley, and Merrill Lynch & Co. And, a lot better than the state of Florida. As Michael Stewart reported late last month --

Escambia and Santa Rosa counties and the Escambia School Board are among scores of local government agencies statewide that have withdrawn more than $16 billion from Florida's Local Government Investment Pool over the past three weeks because of qualms about its stake in mortgage-backed investments.
* * *
The Escambia School District had $165 million invested in the fund and withdrew $30 million last week and another $100 million on Wednesday — the maximum amount allowed.

As for the City of Pensacola and Pensacola Junior College, not so much:

The City of Pensacola and Pensacola Junior College are among the entities whose investments were frozen after Thursday's action. The city has more than $3.9 million invested in the fund, and PJC's stake tops $5 million.

On the other hand, Lehman Bros. did pretty well, too. The old fashioned way: by screwing their customers.

Lehman, the fourth-biggest U.S. securities firm by market value, boosted 2007 revenue by limiting losses from subprime mortgage-related securities and lifting income from fund management, equities and investment banking. The firm said earlier this week that Richard Fuld, Lehman's chairman and chief executive officer, was granted a $35 million stock bonus for 2007, up 4 percent from last year.

If there was any justice, Patty Sheldon and Ernie Magaha also would have gotten a $35 million bonus.

Florida First in Nation!

"Florida held the No. 4 spot last year, but vaulted over Georgia, Michigan and Illinois to claim the lead."

But it's not what you think.