McCain's "hands-off" attitude could prolong the economic woes and hurt responsible homeowners. Both Democratic presidential candidates, Sens. Barack Obama and Hillary Rodham Clinton, propose solutions that better reflect the urgency of the mortgage mess.
No matter what, the credit crunch and housing meltdown will cost taxpayers. McCain no doubt remembers that from the $125 billion government bailout of the savings and loan industry of the late 1980s, a scandal in which he played a minor role.
The question isn't whether the government should get involved in the crisis, but how much aid it should give and who should get it. The government's help must include more regulation of the financial institutions to avoid future collapses.
In Philadelphia last week, Clinton proposed a greater role for the Federal Housing Administration in refinancing troubled loans. She also called for a 90-day moratorium on foreclosures, and $30 billion to states to prevent foreclosures. Both are worthy ideas, though even she was fuzzy on all of the details.
Clinton and Obama support pending legislation that would provide incentives for lenders to refinance existing mortgages - a worthy approach. Obama wants to amend bankruptcy laws so homeowners can have their mortgages adjusted in court. Faced with borrowers seeking bankruptcy protection, more lenders would be inclined to work with homeowners.
Another good suggestion that has been floated is to authorize the FHA to pay a fee to firms for each home loan they modify, giving loan servicers and lenders financial incentive to adjust loans instead of moving toward foreclosure. That could result in a more targeted solution, instead of a blanket bailout that rewards the cautious and careless alike.
