McCain: ‘New Money’ Might Fund $300 Billion Mortgage Plan

By Arnab Datta

Oct 9, 2008 7:11pm

ABC News’ Teddy Davis, Hope Ditto and Arnab Datta Report: John McCain’s $300 billion mortgage buy-up plan may require new funds, according to a Thursday interview the Arizona senator gave to ABC News’ Charles Gibson.

Asked if his mortgage plan would be "new money or part of the $700 billion" already appropriated by Congress for the Wall Street bailout, McCain said, "part of the $700 billion, new money, if necessary."

"Look," he continued, "in one day they wiped out $1.2 trillion when it dropped 700 points. And I’m not throwing this money around lightly. But if the housing values continue to go down, there’s no floor. There’s no turnaround here. We all know what was the catalyst for this catastrophe. And that was Fannie and Freddie."

The Obama campaign reacted to the Gibson-McCain interview by charging that the Arizona senator’s plan "just keeps getting worse."

"John McCain’s risky bailout scheme just keeps getting worse," Obama-Biden spokesman Hari Sevugan tells ABC News. "After calling for a spending freeze, now he tells us he wants as much as $300 billion in new spending for a scheme that would have taxpayers subsidize the same banks on Wall Street that got us into this mess. John McCain’s response to the financial crisis gets more erratic by the day."

In an outline of the plan emailed to reporters during Tuesday’s debate, the McCain campaign indicated that the $300 billion plan would be drawn exclusively from the recently enacted $700 billion Wall Street bailout.

On Wednesday, McCain adviser Douglas Holtz-Eakin altered the Tuesday night plan, saying it would be drawn from "several pots of money".

"The initiative would rely on authorities that have been provided, in recent months, by the Congress," said Holtz-Eakin on a Wednesday conference call arranged by the McCain campaign. "There’s $300 billion worth of refinanced capacity at the FHA at this point. That can be combined with the statutory capacity of Fannie Mae and Freddie Mac, which are now owned by the federal government, for all practical purposes, to purchase mortgages."

"You know," he continued, "if a Fannie Mae or Freddie Mac bought 80 percent of the mortgage, you could leverage that $300 billion in refinancing tremendously. And there’s also the $700 billion that was provided to the Treasury by the Congress. There’s direct purchase authority in there to augment these as well, although it may be useful to reserve that for other purposes."

The designated funding source is not the only aspect of McCain’s plan that changed from Tuesday to Wednesday.

As first reported by Politico’s Mike Allen, McCain also changed the substance of the mortgage buy-up plan, "making it more generous to financial institutions and more costly for taxpayers."

The McCain campaign told reporters in a Tuesday issue paper that lenders "must recognize the loss that they’ve already suffered."

But when McCain posted his plan to the web on Wednesday, that sentence was missing.

"That language was mistakenly included in the initial draft and it’s been corrected. It doesn’t reflect the intentions of the initiative, which necessitated the correction and the removal of the sentence," a McCain official told Politico. "A simple mistake."

You are using an outdated version of Internet Explorer. Please click here to upgrade your browser in order to comment.
blog comments powered by Disqus