President Obama's $275 billion housing bailout plan, aimed at halting mortgage foreclosures, is drawing comparisons to a proposal championed last year by John McCain.
Thursday, February 19, 2009
President Obama, in rejecting GOP alternatives to his massive economic stimulus plan, cited his electoral victory over John McCain in November as proof that Americans wanted change.
But Obama's $275 billion housing bailout plan, aimed at halting mortgage foreclosures, is drawing comparisons to a proposal championed last year by John McCain.
"I hope they took the best ideas wherever they found them. And, certainly, Senator McCain campaigned for a long time on this proposal," said Douglas Holtz Eakin, former economic adviser to McCain and author of McCain's plan.
Obama's $275 billion program offers $75 billion in incentives to lenders to lower payments by at-risk homeowners to 31 percent of their income. The other $200 billion would be drawn from money approved by last year's Congress to bolster efforts by federal lenders Fannie Mae and Freddie Mac to offer affordable mortgages and bring stability to the housing market.
Holtz Eakin says Obama has recognized the need to stop foreclosures before they happen. It's an idea he says McCain introduced at his second presidential debate with Obama.
"I would order the Secretary of the Treasury to immediately buy up the bad home loan mortgages in America and renegotiate at the new value of those homes," McCain said.
McCain said he was following in the footsteps of Hillary Clinton, but her aides said his plan was nothing like hers.
Housing Secretary Shaun Donovan also says McCain's plan is not like Obama's, explaining that Obama's is "focused, targeted to those most at risk of foreclosure and would be far less expensive to the taxpayer than Senator McCain's plan."
Democrats said McCain's $300 billion plan would have had the government basically eat the cost of reduced property values.
"Taxpayers shouldn't be asked to pick up the tab for the very folks who helped create this crisis," Obama said on the campaign trail. "And that's the problem with Senator McCain's risky idea."
Now Obama's $75 billion plan would have the government and the finance industry share the cost of declining property values for a smaller group, though it envisions pumping $200 billion more into Fannie Mae and Freddie Mac, which McCain criticized in the fall for supporting the Obama campaign.
"His pals there and the Democrats in Congress that refused to reform Freddie Mac and enact legislation to stop this crisis," McCain charged on the campaign trail.
Donovan, however, says the money is just a backstop.
"We have no expectation that the full amount would be needed, certainly not in the short run," Donovan said.
On that score, however, Obama officials say they are facing the problem of having to rescue institutions that are too big to fail. Fannie Mae and Freddie Mac are the mortgage market today, Obama officials say. They account for the vast bulk of mortgages and without them mortgage rates would soar and far fewer mortgages would be available.