The McCain Resurgence Plan

On a conference call with reporters, McCain policy chief Douglas Holtz-Eakin spelled out how McCain would pay for his plan for the government to buy troubled mortgages and replace when with more favorable fixed-rate mortgages at minimal direct cost to the homeowners. The government could use some of the $700 billion authorized for the bailout and tap other accounts, although the campaign estimates that, owing to negative equity -- the government can't magically turn bad mortgages into good ones without taking a hit -- would be $300 billion.  The McCain team hopes that by buying mortgages directly, the government wouldn't have to buy as many distressed assets from big banks, thus reducing the net cost. McCain claims this idea as his own, although the bailout/rescue bill already gives the government the authority to deal directly with homeowners, and Obama has suggested that the government do the same -- although McCain's certainly being more aggressive here. 

Why propose this now? Holtz-Eakin said that to have done so during the middle of the debate would have injected an element of instability and potentially compromised the rescue plan's passage. The proposal certainly seemed to have caught even McCain's surrogates off guard; they had not been prepped to answer questions about it. The media didn't quite know what to think, and there hasn't been too much attention paid to this yet, even though it's a bold and expensive idea. If McCain can sell this cleanly, it's a real opportunity for him to get economically anxious voters to associate something positive with his candidacy. If not, it'll have been a waste. Last night, wags were referring off-handedly to the plan as the McCain Campaign Resurgence Plan -- a last ditch goodie bag that undermines his message about spending discipline.