Obama Now Rejects McCain’s Mortgage Buy-Up Plan

Oct 8, 2008 8:17pm

ABC News’ Teddy Davis and Rigel Anderson Report: Barack Obama’s top economic adviser criticized John McCain’s mortgage buy-up plan on Wednesday, saying it would cause the government to lose money by paying too much for bad loans.

McCain’s top economic adviser responded with a statement of his own in which he argued that Obama would "rather support a bailout of Wall Street than rescue Main Street America."

During Tuesday’s debate, McCain proposed devoting nearly half the $700 billion from the recent financial rescue package to buying troubled mortgages directly, rather than indirectly aiding the nation’s financial markets by buying up mortgage securities.

The Obama campaign’s initial reaction was a version of "me, too," and his press aides circulated a quote from last month when Obama had floated a similar idea while stopping short of formally proposing it.

"We could consider giving the government the authority to purchase mortgages directly instead of simply purchasing mortgage-backed securities," said Obama while campaigning in Clearwater, Fla., on Sept. 23. "In the past, such an approach has allowed taxpayers to profit as the housing market recovered. But, this is not simply a question of looking out for homeowners, it’s doubtful that the economy as a whole can recover without the restoration of our housing sector, including a rebound in the home values that have suffered dramatically in recent months."

But as more details about the plan began to emerge on Wednesday, Obama’s campaign shifted gears and came out against it.

Here are Tuesday’s dueling statements:

Obama-Biden economic policy director Jason Furman : "Senator McCain’s first response to this economic crisis was to say that the fundamentals of our economy are strong. Since then, he’s acknowledged that there is a crisis and offered multiple plans, sometimes conflicting. Last night, in his latest attempt to get it right, he threw out a proposal that appeared to give the Treasury authority it already has to re-structure troubled mortgages. But now that he’s finally released the details of his plan, it turns out it’s even more costly and out-of-touch than we ever imagined. John McCain wants the government to massively overpay for mortgages in a plan that would guarantee taxpayers lose money, and put them at risk of losing even more if home values don’t recover. The biggest beneficiaries of this plan will be the same financial institutions that got us into this mess, some of whom even committed fraud. Since this beginning of this crisis, Barack Obama has demanded that any rescue plan must protect taxpayers and ensure that they share in any profit once the economy recovers, and he worked to include that principle in the plan that passed Congress. John McCain’s plan to overpay for bad mortgages by handing taxpayer dollars over to big financial institutions is erratic policy-making at its worst, and it’s not the change we need to strengthen our economy, create new jobs, and keep Americans in their homes ."

McCain-Palin senior policy adviser Douglas Holtz-Eakin: "By opposing John McCain’s effort to help Americans stay in their homes, it is clear that Barack Obama would rather support a bailout of Wall Street than rescue Main Street America. Unlike Barack Obama, John McCain doesn’t believe that working to keep Americans in their homes is ‘too costly’ and ‘out of touch.’ From his campaign’s comments, it is clear that Barack Obama would rather see the taxpayers’ money go to corrupt Wall Street firms like AIG than keeping Americans in their homes. If Barack Obama wants to defend using the taxpayers’ money to prop up Wall Street instead of keeping people in their homes and providing jobs on Main Street, John McCain is happy to have that debate. Barack Obama says he wants to protect taxpayers but apparently that does not include protecting their homes."

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