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Here's a word of caution from the campaign trail. Republican presidential candidate John McCain says the federal government should be careful about offering relief for the mortgage mess. While Democrats have been calling for more aggressive government action, Senator McCain says Washington should only play a limited role.
NPR's Scott Horsley reports.
SCOTT HORSLEY: John McCain says he's willing to consider anything and won't let dogma trump common sense. But the presumptive Republican nominee outlined some fairly conservative principles for dealing with the mortgage crunch, and they don't include any emergency government funding of the kind Hillary Clinton proposed earlier this week.
Senator JOHN MCCAIN (Republican, Arizona): I will not play election-year politics with the housing crisis. I will evaluate everything in terms of whether it might be harmful or helpful to our effort to deal with the crisis we face now.
HORSLEY: McCain spoke yesterday in Orange County, California, a bastion of conservative politics. Even in wealthy Orange County, though, the number of fourth quarter defaults on home loans more than doubled in the last year. McCain says any assistance that is offered should be temporary and should not encourage people to either buy more house than they can afford or make loans to those who do.
Sen. MCCAIN: It's not the duty of government to bail out and reward those who act irresponsibly, whether they're big banks or small borrowers. Government assistance to the banking system should be based on solely preventing systemic risk that would endanger the entire financial system and the economy.
HORSLEY: McCain acknowledged that what began as a problem in the subprime mortgage market has now rattled the entire financial system. Yesterday the S&P/Case-Shiller Index, which tracks home prices in 20 major cities around the country, showed prices falling in all but one.
Senator Clinton argued earlier this week that even families who are not at risk of foreclosure are losing value in their homes and deserve a response from the federal government. McCain countered that it's up to mortgage lenders to reach out and help their credit-worthy clients.
Senator MCCAIN: They've been asking the government to help them out. I'm now calling upon them to help their customers and their nation. It's time to help American families.
HORSLEY: Democrats blasted McCain's position as inadequate. DNC Chairman Howard Dean argued that McCain doesn't understand the economy, the mortgage crisis, or its impact on American families. And James Kvaal of the left-leading Center for American Progress Action Fund said McCain's call for voluntary loan forgiveness by mortgage lenders does little more than the Hope Now Alliance that the Bush administration formed five months ago.
Mr. JAMES KVAAL (American Progress Action Fund): It seems like a time warp where he's talking about solutions that have already been in place for months and are not working and is not participating in the debate over some of the new ideas that are on the table now.
HORSLEY: Democratic lawmakers, for example, have proposed a bulk restructuring of mortgages in danger of default, with the Federal Housing Administration guaranteeing the new more affordable loans.
McCain says he's against any proposal that would reduce down payments for home buyers. In fact, he says those payments should be increased. And McCain says Wall Street firms should also keep more capital on hand, although he stopped short of suggesting regulation along those lines.
McCain says if the government does spend taxpayer money on mortgage assistance, it should be coupled with reforms. He says the goal should be to promote transparency in the market and prevent more housing bubbles in the future.
Scott Horsley, NPR News, San Diego. Transcript provided by NPR, Copyright NPR.
