Everytime I think McCain might start making a run at this thing, he pulls something dumb out of his butt. For someone to prattle on about big government spending and then say something like that takes a lot of something, and it ain’t good.
I feel like he was trying to be populist but this will come off as really dumb imo.
Why do you classify this as dumb. That was my first reaction too but, after a little thought, I'm not sure.
The $700B is to be spent to buy up bad paper which, at least as I understand it, are the packages of good & bad mortgages put together with an unknown value. It is also my understanding that the government would be able to buy these at a pretty steep discount to help with liquidity (since now valued at near $0). It has been stated that we stand to make a potential profit on re-sale once segregated.
If this is true, the government would own home mortgages that could have a face value of more than the home is currently worth. Either the Government could stick with the existing mortgage and hope the homeowner continues to pay and wait for the home value to go up/principal to go down and then re-sell it or they could try to dump it immediately at fair market value of the home (which is, hopefully, at or above what they paid for it).
If the mortgage will be resold at the current value of the home, why not "sell" it to the existing homeowner which, in effect, would be the renegotiation that McCain stated.
I am not a financial expert and would enjoy hearing from those that are what assumptions I got wrong; please feel free to pile on.