The McCain Plan

Democrats are throwing everything they can at John McCain and are attempting to blame him for the failure of negotiations on the bailout bill, and it may be true that McCain is standing in the way. It could be because he has a better option:

McCain may back alternative to bank bailout

Phoenix Business Journal - by Mike Sunnucks

U.S. Sen. John McCain, R-Ariz., may be throwing a monkey wrench into efforts to pass a $700 billion bank bailout, instead favoring alternative plans that looks to free up capital and credit markets via tax and regulatory relief while allowing financial institutions to temporarily skip dividend payments to shareholders.

Republican and Democratic officials in Washington said McCain was offering alternatives Thursday to the $700 billion plan backed by the Bush administration, Federal Reserve chairman Ben Bernanke and U.S. Treasury Secretary Henry Paulson.

That plan has the federal government acquiring bad mortgage assets from struggling banks with the goal of keeping them afloat and allowing more credit to flow.

McCain appears to be siding with conservatives and House Republicans who question the bailout and its costs to taxpayers as well as government rescuing private lenders and perhaps taking ownership stakes in rescued banks.

The alternative plan allocates less public money and relies more on tax breaks, lifting regulatory barriers and using less bailout-oriented mechanisms to free up capital and credit. It also seeks to create a privately funded mechanism to ensure mortgages and mortgage-backed securities.

One Republican official said McCain is standing up for taxpayers as he, President Bush, congressional leaders and presidential foe Sen. Barack Obama try to hash out a deal. A deal was close to being finalized Thursday but House Republicans and McCain are looking to get alternatives considered.

Bernanke and Paulson have warned that without action the flow of credit could totally freeze, more banks could fail and the rough economy sink into a recession.

A Democratic official said Thursday McCain and U.S. House Minority Leader John Boehner are the major barriers to passage of the bailout.

Public opinion polls show voters upset with the bailout plan and its relief to Wall Street bank and investment houses.

Some economists and business groups support the bailout, echoing worries that if something is not done the economy and financial markets could collapse.

Democrats had wanted to put stipulations on the Paulson bailout plan including limits on CEO pay.

The reaction of the stock market may indicate whether this idea works or not. If stocks tank today because of the breakdown in talks, McCain could find himself getting the blame and his numbers will tank too. However, if the market responds positively it could be helpful to McCain.

The problem right now is the Democrats will never sign on to a plan, even a better plan, if there's any possibility that McCain could benefit. Politics will very likely cause this crisis to continue and possibly worsen.

By the way, the problems with the way Fannie Mae was operating and the potential for disaster was apparent even to the NY Times as far back as 1999 as you can read in this piece. As late as 2007 Democrats were still denying there was a problem.