McCain thinks that big mortgage lenders should provide loans to homeowners whose mortgages are in default. He doesn’t explain how that’s supposed to be profitable for the lenders, why if it is profitable for the lenders they’re not doing it now, or why if it’s not profitable for the lenders the people who run, but don’t own, those institutions should do it anyway.
It might be reasonable to ask banks to go easy on their own borrowers. But equally of course the slicing and dicing of risk means that the outfit that services a mortgage often is just an agent for others, and has no authority to renegotiate the terms of the loan.
So McCain’s message to the victims of predatory lending practices and the owners of homes in half-finished subdivisions is: Good luck, suckers! You’re on your own.
Equally deficient is McCain’s analysis of how we got where we are. Yes, there was folly by lending institutions, fraud by agents, and excessive optimism among buyers. But the folly wasn’t a purely psychological phenomenon; the executives of those outfits, driven by the demand to “make the numbers” and (over)compensated via incentive schemes that encouraged them to take big risks with other people’s money, did so with abandon. The notion that we could solve the underlying problem without addressing corporate governance and executive pay seems rather bizarre.
Ryan Avent of The Bellows says of McCain:
If the American public finds out that he feels Bear deserved its bailout and homeowners deserve nothing, they’re going to be pissed.
h/t Matt Yglesias, who doubts that “eat your peas” is a winning political slogan:
Actual voters don’t much like that kind of thing; I think they’re skeptical as to how much different government policy makes in their lives, but they want policymakers to be at least trying to make their lives better.