A Return to Common Sense

Well, in all this economic mess, conservatives instinctively shudder at the thought of the government taking over more and more of the economy, given the abysmal performance of the Democrats' housing subsidy piggie banks Fannie and Freddie. At the debate the other night, Sen. McCain made a good faith proposal to address the fact that one in six homeowners are under water--which impacts their neighbors' home prices as well. The Journal weighs in on the McCain plan:

John McCain got the diagnosis right in Tuesday night's debate with Barack Obama -- the economy won't recover until home prices find a bottom. We're less convinced that his plan to buy underwater mortgages at taxpayer expense is the cure this patient needs. [snip]

In the past year, we've had other attempts to put a floor under the market by reducing foreclosures. The Treasury's 2007 HOPE program was an attempt to orchestrate voluntary loan refinancings, and the $300 billion Federal Housing Administration mortgage program, slated to start this month, has a similar goal.

The "Resurgence" is different, the McCain campaign says, because it is more "aggressive." By this, it means that this one doesn't require lenders or investors to share the pain. Instead, the government will buy the mortgages for their full amount and write a new mortgage that reflects the current (lower) value of the home. The taxpayer -- not the lender or homeowner -- absorbs the losses on loans that exceed the value of the home.

Rethink this one, please, Sen. McCain. But consider the Obama alternative folks--the Hoover recipe for a depression: high taxes and trade grinding to a halt. Then there's Obama's assault on small business, many of whom file as individuals, who would be taxed at punitive levels. Small business is the engine of job creation in our economy and the most productive ones who create the most jobs would be stopped in their tracks with the new Obama taxes--this at a time when they are struggling to keep the doors open anyway.

The Journal does see some progress, saying we are better off than we were a week ago. As they explain it:

The London move goes to the heart of the problem, which is the capital hole in the financial system that is fueling the global panic. Private capital won't fill that hole with fear so rampant, so some public capital is going to have to serve as a temporary life preserver -- in the U.S. and Europe.[snip]

Mr. Paulson is right to interpret his mandate broadly, and to show that he is willing to use it. In essence, he is saying the Tarp could be used as a larger, better capitalized version of the Federal Deposit Insurance Corp., injecting capital into banks in return for preferred stock to protect the taxpayer. This is a policy breakthrough.

As bank stocks recover, taxpayers might even see a profit on their preferred shares. And here's another thought to take away, given election day is less than a month away. VDH:

Second, wisdom and blue-chip college educations are not quite the same thing. The fools in Washington and New York who blew up Wall Street had degrees from our finest professional schools.

The most chilling example, at the very beginning of this ongoing mess, came in 2003 during the House Financial Services Committee's hearing on Fannie and Freddie. At one point, Harvard Law School graduate Rep. Barney Frank, D-Mass., asked Fannie Mae CEO and fellow Harvard Law School graduate Franklin Raines -- who took millions in bonuses even as he helped bankrupt the once-hallowed institution -- whether he felt the mortgage giant had been "under-regulated." Raines answered him under oath, "No, sir." Then overseer Frank announced, "OK. Then I am not entirely sure why we are here."

If these guys are our best and brightest, then it is about time we rethink what constitutes wisdom, since an Ivy League law degree certainly seemed no proof of either intelligence or ethics.

Common sense gets my vote, despite Newsweek telling us we're all too common. Character counts in America.