John McCain and Sarah Palin co-author an Op-Ed in today’s Wall Street Journal setting forth their position on the just-announced government bailout of Fannie Mae and Freddie Mac:
Enduring reform of Fannie and Freddie is a key first step. We will make sure that they are permanently restructured and downsized, and no longer use taxpayer backing to serve lobbyists, management, boards and shareholders.
Treasury has broadly followed the McCain plan, outlined months ago, and gets at the short-term heart of the problem. That plan reinforces the federal commitment to meet our obligations and get this mess behind us. It replaces management and board members. It requires that shareholders take losses first. It puts taxpayers first in line for any repayments. And it terminates future lobbying, which was one of the primary contributors to this great debacle.
Along with the commitment of taxpayers’ dollars, we should make market reforms to help ensure that we do not face this problem again. We will make sure the marketplace understands its obligations. Homeowners must be able to understand the terms and obligations of their mortgages. In return, they have an obligation to provide truthful financial information, and should be subject to penalty if they do not. Policies must be in place to ensure that homeowners provide a responsible down payment of equity in the initial purchase of a loan. In the future, Fannie, Freddie or any government organization should never insure a loan when the homeowner doesn’t have enough of his or her own capital in the investment.
Lenders who initiate loans will be held accountable for the quality and performance of those loans, and strict standards must be required in the lending process. Every lender must be required to meet the highest standards of ethical behavior, with recourse if they do not perform.
Reforms are necessary now to make mortgage lending and banking organizations more transparent. We will require greater disclosure, so that complex derivative instruments and excessive leverage can’t put the marketplace, and the financial security of your home, at risk.
After reading through the Op-Ed, which may appear under the McCain/Palin byline but was obviously written by a staffer or three, twice I can’t honestly say that I understand what exactly it is that the Republican nominees are actually proposing other than increased government scrutiny and regulation of an industry that has suffered from far too much scrutiny and regulation already.
Compare McCain/Palin’s non-specific “plan” with Bob Barr’s idea, which I wrote about yesterday:
“It is time to say no more. Fannie Mae and Freddie Mac need to be privatized and sold off. And Congress must stop treating the federal government like a national soup kitchen for businesses in trouble,” says Barr.
A radical idea ? Sure, but it’s better than more of the same regulation that has gotten us into this mess to begin with.
