McCain on the Economy Sounds Muddled

March 26, 2008

McCain sounded confused and his responses were meandering when he answered questions in Texas about the invasion of Ecuador. I was quite happy to attribute this to fatigue after a hard day, but his recent speech on the economic crisis makes me wonder.

He urged caution and took the position that a bailout should only be done if there is a threat of systemic collapse. Who on earth does he think he is arguing with? Has there ever been a bailout such as the recent one that was not justified by claiming that the action was taken to preserve the system? This is no position at all, unless he is suggesting that there was an insufficient basis for the action taken with Bear Stearns. The lack of specifics makes this sound like nothing more than someone trying to sound conservative without necessarily knowing what is going on. In its tone of principled conformance with the status quo without much in the way of true explanation, the comment is very similar to the ones we are accustomed to hearing from our current executive.

His comment about caution in providing assistance to the people caught in the foreclosure crisis also struck me as odd. This of course is a residential mortgage crisis. He cautions against federal intervention because speculators should not benefit by such help. That really doesn’t say anything does it? Does he have any idea how many of these speculators would inappropriately benefit by such a program or whether it is possible to cull them from the rest, or whether that would be worthwhile to undertake a culling process? This left me with sort of a vague, amorphous sense of caution without any sense of what he might do other than be slow in dealing with this.

While arguing against quick federal action he did suggest that adding more disclosures to the stack of papers a consumer is required to sign at closing might solve things. The problem with this of course is that the mass of loan papers already overwhelms most people and the people who find themselves in this crisis are not likely to have been assisted by a thicker stack of papers to sign at closing. Is it just me or does this sound really lame? The financial institutions, which knew exactly what they were doing still jumped into this. That suggests to me that dumping more paper on consumers might not be entirely effective.

This struck me as a random suggestion, as just a few months ago he refused to accept changes in the Truth in Lending Act, which he now advocates. This business about enhancing the Truth in Lending Act is inconsistent with his statements about avoidance of federal regulation and to all appearances would be regulation without much effect. He has steadfastly refused to approve measures to restrain predatory lending practices, which is I guess consistent with his speech about avoiding intervention. The problem is that you just cannot decipher a policy out of vague statements of restraint with odd exceptions.
Clinton and Obama have proposed a fund in about the same about used for Bear Stearns to help people threatened with foreclosure. This has appeal to me because it would address the whole problem. That is it would help people facing foreclosure and by so doing it would improve the quality of the mortgage backed securities and bad loans that bedevil financial institutions. Sort of a win-win situation, rather than just letting the people go and bailing out financial institutions, who at least had the expertise and full opportunity to choose not to leap into the quagmire.

I am sure that there are counter arguments to the proposals of the Democrats. I sincerely hope that McCain plans to engage in policy discussions and not just the same old junk. Maybe he does plan to just try to seem very cautious, stay the hand with the war, merely watch the economy as we go deeper and deeper in debt and fissures like the current one appear. He seems to be making some effort to to assure us that it will be business as usual. My uncertainty about reserve without defining what you are looking for and what measures you would adopt if the circumstances warranted applies to Obama as well as McCain. See the discussion of this matter as a campaign issue.