Ali’s blog

Mostly quant stuff with occasional digressions

McCain talking economic sense

Posted by alifinmath on March 26, 2008

In today’s FT:

John McCain has promised to consider all options to ease the crisis in the US credit markets but warned that the government should not bail out homeowners or lenders who acted irresponsibly.

The Republican presidential candidate said assistance to the financial sector should be based solely on tackling systemic risks and that speculators and second homeowners should be excluded from any aid to homeowners.

“I will not play election-year politics with the housing crisis,” said Mr McCain. “It’s not the job of government to bail out and reward those who act irresponsibly, whether they’re big banks or small borrowers.”

He said years of rising house prices had made lenders and homeowners complacent, while the increasing complexity of global financial markets made it difficult to quantify risk. “Capital markets work best when there is both accountability and transparency,” he said. “In the case of our current crisis, both were lacking.”

Amen and well said. McCain gets a lot of flak for not knowing much economics but I don’t think those two bozos on the other side know any more than he does.

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6 Responses to “McCain talking economic sense”

  1. Chris Prouty said

    Amen. I’m not a fan of a lot of McCain’s opinions, but this even-keeled approach to fiscal policy is badly needed. I dare say that such a constituent-less opinion is Ron Paul-esque, which of course I adore.

  2. alifinmath said

    Just heard Obama on CNN using McCain’s statements above to attack him on his ignorance of economics. How McCain’s stance differs from those of the Democrats. How — if and when gullible voters opt for Obama — Obama will fix everything, make the bad bogeyman of the recession magically vanish, and “involve” the government more with both struggling Wall Street firms and hapless home owners. With whose money, pray? The reckless, the imprudent, and the greedy just can’t lose: when their schemes and plans come a cropper, the government’s there to bail them out, at the expense of taxpayers who have been prudent. This is precisely why socialism gets such a bad rep: take from the hard-working, the cautious, the diligent, the thrifty and hand it over to the reckless, the lazy, and the loony. I did not cause this howling housing mess: I foresaw it developing years ago. Now why should my money be used to bail out people who are getting their comeuppance?

  3. Chris Prouty said

    Because, Mr. Ali, those people are pillars of the economy! You must bail them out or reality as we know it will come to an end! Women will faint, grown men will cry, babies will go unfed and feral dogs will roam our streets! No, it is better to sacrifice a wee bit of our income to make sure that captains of industry are allowed to continue to steer our ship through these uncertain waters.

  4. Anonym said

    If John McCain keeps this up, he may actually grow on me to the point where I’ll vote for him. Thanks for flagging this article.

  5. Anonymous said

    Oh really? We shouldn’t bail out the irresponsible even if it takes us all down? Then I guess McCain wouldn’t put out a fire if it was started by someone playing with firecrakers in their living room. Quite irresponsible btu not worth letting the whole neighborhood burn down. You take the actions that are necessary to protect the system. I don’t like the idea of virtually reward someone for stupidity but the time for moral posturing about responsibility was before this all started and after it’s all settled down. When someone sets their house on fire, for whatever reason, you grab a hose not because you want to give them reason to do it again but because you don’t want your own house to go down in flames. Standing around saying “We don’t need no water. Let the motherf-r burn.” isn’t an economic policy of a sane person.

  6. alifinmath said

    Nah, I don’t buy that for a moment. The same old “Let’s not point fingers right now; this is not the right time; we’re all in this together.” The same bailout at taxpayers’ expense occurred about twenty years ago with S&L, and nothing has changed since then. If anything, there’s been a steady dismantling of regulations aka “letting the free markets perform their magic.” The hapless taxpayer is always left holding the bag. The analogy isn’t that great either: it doesn’t hurt me to grab a hosepipe whereas these bailouts do. Nor do I see any regulatory framework being seriously discussed. It’s the same old “take from the poor and give to the rich.” And by the way, what if it does come tumbling down? A system that rewards a small fraction of the population and keeps everyone else in semi-serfdom? Is this the “American dream?” I’ve heard enough of these bogeyman stories. I won’t shed a tear when this financial superstructure comes tumbling down. I’m not one of the beneficiaries. Gotta clear all this old debris away for something new. Not obsessively cling to it.

    Postscript: I see Obama is also making a bit of sense; here in the FT:

    QUOTE Barack Obama on Thursday laid much of the blame for America’s unfolding credit crisis on the financial deregulation of the 1990s in his hardest hitting attack so far on the economic legacy of Bill Clinton’s administration.

    Mr Obama’s speech – the fourth so far this week by a presidential candidate focusing on America’s probable recession – called for an overhaul of US financial regulation and another $30bn in fiscal stimulus.

    In his address Mr Obama associated Mr Clinton’s abolition of the Depression-era Glass-Steagall Act in 1999 with the financial scandals that rocked the early years of the Bush administration and which led up to the bailout earlier this month of Bear Stearns.

    Mr Obama also ascribed the bankruptcy of Enron and WorldCom in 2001 and the subsequent lack of oversight of the US sub-prime mortgage market to the influence of special interests and lobby groups in Washington DC dating from the Clinton era. And he contrasted his refusal to take campaign donations from lobby groups with Mrs Clinton’s acceptance of such funds.

    “This was not the invisible hand at work – it was the hand of industry lobbyists,” he said. “Instead of establishing a 21st century framework we simply dismantled the old one – aided by a legal but corrupt bargain in which campaign money all too often shaped policy and watered down oversight. In doing so we encouraged a winner take all, anything goes environment that helped foster devastating dislocations in our economy.” UNQUOTE

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