The Wake

Sen. John McCain

In a time when consumers’ views of the economy are gloomier than they’ve been in five years, the Presidential candidates are devoting more and more rhetoric to fixing our stalled economy. While the Democratic candidates announced government remedies to help heal the situation, Republican candidate John McCain got more specific about his solution to the pending recession than ever before: let the market figure it out. Here’s an excerpt from his Tuesday speech in front of Latino businessmen:

“I have always been committed to the principle that it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers.”

But last week, the Federal Reserve and JP Morgan Chase & Co. bailed out investment bank Bear Sterns Cos., which lost billions of dollars after investing in securities backed by pools of subprime mortgages. Wasn’t Bear Sterns acting irresponsibly by investing billions of dollars in risky mortgages? “They had the least-diversified earnings stream of all of Wall Street securities firms, and as a result, they’re paying the price today,” said Andrew Wilkinson, senior market analyst at Interactive Brokers Group, in a Huffington Post article.

So naturally McCain would denounce the Federal Reserve/JP Morgan bail out of Bear Sterns, right? When asked whether it was a bad move, McCain said it was “a close call, but I don’t think so.” Remember that this is a man who once admitted he really doesn’t understand the economy.

I’m curious to wonder how a McCain administration would have handled this mess. As an alternative to government intervention, McCain politely asked the mortgage lenders to voluntarily step forward and “help their customers.” Anyone smell a little wishful thinking? What’s surprising is that McCain is less willing to take steps and intervene than President Bush. To revitalize sagging housing sales, Bush, along with the Federal Housing Administration, is looking at lowering required mortgage down payments. McCain, however, opposes this idea.

If the defective economy is the biggest issue on the voter’s mind and McCain isn’t willing to do more, but less than Bush to fix it, then the Democrats have no excuse whatsoever to lose this November. As Ralph Nadar said on Meet the Press, “If the Democrats can’t pull a landslide victory over John McCain and the Republicans this year above all then they should just pack up and go home.”

Tags: Bear Sterns, Economy, Federal Reserve, John McCain