McCain’s ill-conceived mortgage proposal
After a technical problem brought an abrupt end to the debate between Conn Carroll and Danny Schechter, Danny joined Senior Editor Paul Jay in a one-on-one discussion about the financial crisis in the debate. Danny critiqued McCain’s haste in proposing a poorly thought-out mortgage plan as well as Obama’s oversimplification of the financial crisis into a problem of regulation. Danny also criticized the lack of any thorough analysis of the crisis on anyone’s part, along with an absence of any new ideas on how to effectively address the situation.
PAUL JAY, SENIOR EDITOR, TRNN: Welcome back to our interview with Danny Schechter. For those of you who were watching our debate between Danny Schechter and Conn Carroll, you’ll know we had a technical meltdown and wound up interviewing Conn Carroll separately halfway through the debate. Now we pick up with Danny Schechter. Danny’s a producer, journalist, worked for Mediachannel.org. He’s the author of the recent book Plunder: Investigating Our Economic Calamity and the Subprime Scandal, which deals directly with the issue of our current financial crisis. Welcome, Danny.
DANNY SCHECHTER, AUTHOR AND EDITOR OF MEDIACHANNEL.ORG: Pleased to be with you.
JAY: And let me remind viewers again, your book was published a few days before the crash of the Lehman Brothers, and you’ve been very immersed in this whole issue. So I’m going to assume viewers—and, viewers, I’m speaking to you—that go back and watch the debate, go back and watch the interview with Conn Carroll. You’ll kind of know where we were in the conversation. We were talking about McCain and Obama’s response to the financial crisis, and we had specifically zeroed in on McCain’s proposal or announcement tonight that he thinks that the federal government should actually help people renegotiate, pay for their mortgages so people don’t get foreclosed. And then in the conversation we were trying to figure out where was McCain planning to pay for this. So just start us off: What do you make of this proposal of McCain?
SCHECHTER: Well, first of all, the proposal is contrary to what the House and Senate actually voted for with McCain’s support. Although he called the bill a "tourniquet" at the time, nevertheless he supported it, filled as it was with so many earmarks. I’m sure that that revolted him, but he held his nose and he did it anyway. This proposal to buy up mortgages is against a basic premise of the bailout, which is to actually buy up bad paper from banks and in the process pump liquidity into the system to get the credit markets going again. The whole measure was a response to the freeze-up of the credit markets. And, in fact, the concerns of homeowners, the people who are facing foreclosure—3.5 million families—was barely referenced in the bill. What was proposed was something that shouldn’t cost a lot of money, which is, namely, the restructuring of loans in order for people to stay in their homes, make homes affordable, turn adjustable-rate mortgages into fixed-rate mortgages, lower interest rates. Oddly enough, a number of lenders have agreed to do this—Countrywide for one, Citibank for another, Wells Fargo for a third. Three of the big banks have agreed, essentially, to cut back on what they feel is entitled to them in order to keep people in their homes, because foreclosing on people actually is very expensive, and then the homes are there, empty, and often a target for criminals and the like.
JAY: So, Danny, in terms of McCain’s proposal, he’d have to be talking about a whole new pot of money. He can’t be talking about the $700 billion that was already voted, because, as you say, that money was directed towards buying toxic debt and solving the liquidity crisis. So he’s talking about another hundreds of billions of dollars to take up these mortgages, except you’re saying there’s already a solution coming from some of the banks. But—.
SCHECHTER: Yeah. In other words, there’s a private-sector, you know, solution actually pushed for by advocacy groups like NACA (the Neighborhood Assistance Corporation of America), ACORN, and others, who’ve been demanding that the banks restructure loans. Now they are, in part because of a lawsuit brought in 11 states against Countrywide. And Countrywide has agreed to spend some $800 billion, supposedly, to restructure loans. So the banks are doing this on their own; they don’t need government subsidies and government money or John McCain’s proposal. And this is where McCain once again turns out to be, you know, in this big disconnect with reality.
JAY: Let’s leave McCain there, because I think it’s pretty clear this proposal—I mean, it almost sounds like they wrote it in a car on the way to the debate. But let’s—.
SCHECHTER: They wrote it in the car in the same way that, you know, Mr. Paulson came to the House of Representatives with a three-page plan, which grew somehow into 451 pages.
JAY: Alright. Let’s turn to Obama’s plan, because—. What did you make of Obama’s economic presentation tonight and how he plans to deal with the crisis?
SCHECHTER: Well, Obama basically bashes the Republicans. He seems to believe, you know, that deregulation is responsible for all of this, and if there’s re-regulation, these abuses will be checked. He didn’t really get into predatory lending practices or illegal and criminal practices by mortgage companies and by the big banks and investment houses that repackaged these worthless securities and then tried to sell them, peddle them, all over the world. So, you know, he also is pretty superficial on this point, basically trying to, you know, hit a high point of reassuring people that through tax cuts and job, you know, programs we’ll be able to get the economy going again. This is sort of a standard Democratic Party approach. It didn’t go really to the crisis that we’re in right now, which is odd. You know, both parties in their party platforms really didn’t talk about financial regulation. They’re only talking about it now because of the news, you know, basically, that the system is imploding. So they’re trying to come up with some kind of a proposal. At the same time, they don’t want to say anything that could be controversial in any way, because then they can get into being accused of making a mistake somehow.
JAY: I said earlier, I think, in the interview that this is a bit like going to a theater, and a bomb goes off, and people get off their script for a couple of minutes to recognize that some kind of bomb went off in the theater, but then they realize they can go on with the play and they just get back to their script. I mean, there’s no sense of the profound nature of this economic crisis that the world is talking about a run on the American dollar. The markets reacted to the bailout plan as if the bailout plan hadn’t even passed. We’re talking about being on the precipice of another great depression. You wouldn’t know any of this from looking at either of their performances. But now we’re talking about Obama, and I didn’t get that sense of urgency or grasping the nature of the problem from Obama either.
SCHECHTER: They keep saying, well, this is the worst crisis since the Great Depression. But the point is that this is a new, you know, situation here. There were measures put in effect after the Great Depression trying to prevent this from happening, and yet it’s happening. Why is it happening? And there’s no explanation, really, for people. You know, today, $2 trillion in retirement funds disappeared, essentially, in this meltdown. The market dropped 500 points as we speak, just earlier today. So, you know, this reality seems to kind of eluded both of them. It’s as if they’re in denial. You know, they’re basically repeating their message points. They believe, I guess, that you don’t introduce any new ideas, basically; you just reinforce the messages that you’re trying to convey, which were essentially, "We’re good guys, we have the best interests of the country at heart, and trust us and let us handle this." You know.
JAY: I mean, it doesn’t take rocket science to understand two things. Number one, wages have barely moved since 1972 in any real terms, and—.
SCHECHTER: That was not referenced.
JAY: Not referenced. Number two, if people are maintaining their consumption power on debt, it’s a phony economy. So the problem of the stasis in wages has to be addressed in some realistic way—not even talked about. And then the other point is you can’t keep carrying on wars and trillion-dollar bailouts and not raise taxes and not to be honest about that with people.
SCHECHTER: Yeah, I thought that was a core dishonesty. Ironically, it was McCain who sort of hinted at cutting back on military spending, okay, referencing one program which he had opposed. It was Obama who was actually saying that we have to kind of take a new look at our own consumption pattern and take personal responsibility, get involved in making our homes more energy efficient, and all the rest of it. So he was sort of introducing some new ideas there, but these were not ideas saying what government can do; they were saying what people can do. And, you know, so, again, I think there was avoidance and almost denial on the parts of both parties here, and I think part of the reason is the feeling that somehow people don’t have the tools to comprehend the complexities of our financial system, so you have to kind of simplify it and dumb it down and use, basically, slogans.
JAY: And everyone’s afraid of panic, so they talk in calming ways, but, in fact, the panic is going to set in. If the reality calls for panic, there’ll be panic. And if they don’t face the reality, they’re going to have worse panic. That is my own opinion.
SCHECHTER: You know, after the debate I came back and saw a report, basically, that Pakistan, which figured in the debate tonight, is on the verge of bankruptcy. The entire country could go bankrupt, okay? A major financial crisis there, not mentioned at all. The impact of this financial crisis in the West is kind of rippling out into Asia, rippling out into the emerging economies, and having a devastating effect. And yet none of that was really discussed. And Obama did talk about, you know, the need for international cooperation and, you know, having, you know, talks and conversations with our allies. But clearly more than that is needed. There really needs to be an international summit to deal with this financial crisis.
JAY: Oh, doggone, Danny, there you go talking about the real world again. Alright. Thanks for joining us, Danny, and we’ll do this again soon.
SCHECHTER: Thank you, Paul.
Please note that TRNN transcripts are typed from a recording of the program; The Real News Network cannot guarantee their complete accuracy.