McCain seems to be batting a 1000 on this financial crisis. In the town hall “debate” of last night, he proposed buying up failed mortgages and “renegotiating” with the borrower on the value of the home as it is now. Brad Delong gives us a rundown on why that’s such a bad idea. In short, what McCain proposes to do is buy the bad debts from the banks that created them at face value, then become the banker to every bad debt borrower out there.
Apart from handing over billions of dollars to the irresponsible lenders, the problem with this that DeLong does not mention is that home prices are still falling. So, the person who seems fine at the moment may be in trouble in a matter of months. Meanwhile, it is the failing value of the homes that was the trigger for this whole mess in the first place. The McCain plan does nothing to solve this problem and so seems to be treating the foot of a man with a broken leg.