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Reality Check: Obama Hits McCain Mortgage Plan

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Oct 10, 2008 11:45 am US/Mountain

Reality Check: Obama Hits McCain Mortgage Plan

Reporting
Raj Chohan
(CBS4) In the wake of Tuesday's presidential debate, the Obama campaign has a new ad blasting John McCain for his proposal to make the federal government buy up bad mortgages directly.

ad: In a time of crisis, our leaders judgment is tested. on tuesday, an announcement, I would order the secretary of the treasury to immediately buy up the bad home loan mortgages in America.

 The claim is true. Much to the consternation of the Republican base, McCain unveiled a sweeping, expensive, big government style program. The kind you might expect fiscal conservatives to hate and populist Democrats to love.

In fact, the initial response from the Obama camp was that McCain's plan was nothing new, and that Barack Obama had already proposed a similar idea. That was before the details came out, and before the critics started sounding off.

Now Obama is using McCain's plan as a hammer against him.

ad: On Wednesday, the details. McCain would shift the burden from lenders to taxpayers, guaranteeing a loss of taxpayer money. Who wins? The same lenders that caused the crisis in the first place.

 The basic claim is true. The problem with McCain's plan is that it rewards bad behavior. It lets lenders and borrowers who made risky investment decisions off the hook and leaves taxpayers holding the bag.

Having said that, the Wall Street Journal said McCain's plan, at its core, has the right idea: to stabilize home values at the front end of the mortgage security pipeline. But the paper concludes McCain's plan is too expensive and leaves too many questions unanswered.

ad: Putting bad actors ahead of taxpayers. We can't afford more of the same

 There is some spin here. The big bailout plan the president just signed into law includes provisions that allow the government to buy up and restructure some mortgages. And Democrats including Barney Frank and Barack Obama have talked about similar government intervention to help struggling homeowners.

Bottom line. John McCain rolled the dice and came up snake eyes. With his poll numbers lagging, he tried to run to the left of Obama on the housing crisis, but apparently didn't vet his plan to make sure it was solid. Now he's given Obama the advantage, while fiscal conservatives are left to shake their heads.

(© MMIX CBS Television Stations, Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)

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