Ruminations

Opinions, thoughts, & recommendations.

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Name: Dave Leigh
Location: Union, South Carolina, United States

I was born too young. And when I die, I'll still be too young.

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Wednesday, September 24, 2008

McCain Suspends Campaign; Puts Country First.

John McCain has announced that he's suspending his campaign (including his television ads) to go back to Washington and work on the financial bailout. He had already spoken with Senator Obama and invited him to join McCain.

I agree. We have three senators campaigning who should be rolling up their sleeves and doing their day jobs. McCain's statement indicates that the bailout will not pass "in its present form." I'm sure it won't.

I have a suggestion or two... first of all, I like the idea that while in the government's "care" that no CEO should make more than the highest-paid government worker. However, this makes for some difficulty in finding talent, so I'd suggest that these top execs should be able to reap substantial bonuses upon successfully repaying the government.

Keep in mind, too, that this "$700 billion" is not necessarily $700 billion. It's security against risky loans. Some or most of it may never be used. So I would include in the legislation some provisions that make it very difficult for lenders to foreclose, and to encourage lenders to renegotiate the loans. Here's why...

Many of these loans were adjustable rate mortgages that were (barely) affordable at the deeply cut introductory rates. Of course, they're risky because the loan should never have been given unless the borrower could pay it back at the higher rate. So re-lower the rate. Tank their credit rating for all I care, but if they're currently in a mortgage, do everything possible to keep them in the house and keep them making payments... any payments. 90% of a loaf is better than none, and this scheme would not torch the economy.

What we need is a completely new way of thinking about how we handle risk. Tossing people out in the streets is not an option when there is no mortgage insurance to pick up the loss. At the moment there isn't, because the risks were off-loaded to companies that didn't set aside enough capital to follow through with their obligations. Rather than you thinking, "we taxpayers can't afford to let BankX fail," BankX needs to be thinking that they can't afford to foreclose on you. In the meantime, they would be heavily discouraged from making more risky loans. This approach would maintain home ownership, rescue the economy, and be generally superior than a simple bailout.

Of course, my plan would never make it to the table because it actually makes sense and it would actually work. Let's see what sort of "second best" solution they come up with.

Nearly an hour after McCain's announcement we're still waiting for Obama's response. And the University of Mississippi still thinks the debates are going ahead on schedule. Wishful thinkers. As it stands, Obama is in a political "no-win" scenario. Either he goes to Washington and follows McCain's unquestioned leadership, or he doesn't go, in which case he's all talk and no action. Either way it's a bold, magnificent move on McCain's part. It's magnificent from a political perspective, and it's even more magnificent given that "political" is exactly what this move is not intended to be... it's just something that needs to be done, and once again John McCain is unhesitatingly willing to walk the talk.

Update: Obama found a podium an hour and a half later. Obama states that he initiated the call with a mind toward issuing a joint statement, laying out the broad principles of an acceptable agreement. (BTW, I agree that the principles he lists are reasonable. They're also readily addressed by my own proposal.)

When asked about his plans, Obama said, "What I'm planning to do right now is to debate on Friday. That's what I'm preparing to do." When pushed for a statement regarding action he would take to do something about the bailout, he said, "I've done what I set out to do." That is, he issued a statement.

Alrightey, then. All talk and no action it is, then.

In the lull between the two candidates' statements, one thing really stood out. On MSNBC there was an interview with Sen. Blanche Lincoln from Arkansas. She thinks that the debates should go forward so that people can see how their future leader would deal with problems. I think that's exactly what we're seeing: John McCain will roll up his sleeves and do something about the problems; Obama will just talk about them.

If what Senator Lincoln wants to get out of this debate is an understanding of leadership styles, then the debates are unnecessary, as John McCain has already won.

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