Issue of the week: The candidates tackle the housing crisis

As the housing crisis worsens, said Maeve Reston in the Los Angeles Times, the presidential candidates have forcefully jumped into the fray. Last week, Republican John McCain and Democrats Hillary Clinton and Barack Obama all gave major economic-policy addresses, and while McCain differed from the Democrats on most issues, nowhere was that difference more stark than in their proposed responses to the mortgage meltdown. Both Clinton and Obama laid out multibillion-dollar plans to aid homeowners facing fore­closure; McCain offered a stern warning that the government shouldn’t necessarily rescue homeowners or lenders who get in over their heads. “It is not the duty of government to bail out and reward those who act irresponsibly,” McCain said, “whether they are big banks or small borrowers.” Instead, he called for the Federal Housing Authority to gradually increase down-payment requirements for the mortgages that it insures. He also said that as president, he would convene a meeting of mortgage lenders, who, he said, “should pledge to do everything possible to keep families in their homes and businesses growing.”

As befitting Democrats, the Clinton and Obama plans envision a much greater role for government, said Anne E. Kornblut and Jon Cohen in The Washington Post. Clinton “has lashed herself to the issue of homeowner security,” proposing $30 billion for individual homeowners and communities. Under her plan, states and cities could use the aid to buy foreclosed properties and convert them to low-income or rental housing. Obama wants to establish a $10 billion fund that would offer federal guarantees to lenders who convert adjustable-rate mortgages to 30-year fixed-rate loans. Both Democrats also are calling for tighter regulation of mortgage companies.

Obama insists that he’s not proposing a bailout, but I don’t buy it, said Jim Geraghty in National Review Online. After all, “taxpayers are on the hook for repaying those refinanced mortgages if the homeowner doesn’t.” But Obama can’t call his plan by its true name, “because the actual details of the plan would be phenomenally unpopular.” Polls show that more than half of Americans oppose aid to those who borrowed more than they could afford. Clinton’s plan should also worry taxpayers, but for different reasons, said Peter Viles in LATimes.com. Under her proposal, we’d essentially be trusting municipalities to invest in real estate, with $30 billion in taxpayer money. “Imagine the bungling, the fraud, and the favoritism.”

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At least the Democrats understand that without government intervention, millions more Americans will suffer, said Daniel Gross in Slate.com. McCain does not deny that there’s a housing crisis and that people are hurting. “But his solution to an era in which financial deregulation set the stage for federal bailouts, rampant speculation, and reckless lending is ... less regulation.” As for homeowners, under McCain’s way, they “should just put up more money for down payments and work harder to keep current” on their mortgages. I guess we have to give him credit for “straight talk.” But his plan is neither good policy nor smart politics. Many swing states, including Florida and Nevada, have been ravaged by the housing crisis. “Besides, he’s already got the ‘let-them-eat-cake’ vote sewed up.”