In announcing his latest mortgage proposal, McCain has exposed himself as an erratic and insane narcissist, with no core beliefs whatsoever.
He proposed that the government buy the loans of all houses where the mortgage is now above the market value.
This is estimated at 40% of the houses in America. Of course, he made this proposal in the debate as a demogogue, knowing it has zero chance of adoption.
It would be tempting to say this is rampant Socialism, but I think it is more. McCain's idea is out-and-out Communism.
It is important to understand this is fundamentally different than the proposal to buy illiquid mortgage securities. In that case, the government would be buying distressed assets at their depreciated value. The investors would be taking the loss, not the government.
In McCain's shocking proposal, the government would be absorbing every bad residential real estate deal in the country. The retired woman living in her modest paid-off home would be paying tax dollars to bail out a couple who moved into an $800,000 mansion with zero down and a 2% adjustable rate mortgage.
The fact that the value of the mansion has fallen to $500,000 and the interest rate is about to reset is a loss that has to be shared by the borrower and lender.
If McCain wants to write a check to make both the borrowers and lenders happy, it would cost many trillions of dollars.
I'm not big on moral hazard arguments, but if government would really do this, the only mistake the couple would have made was not buying a bigger mansion.
But McCain is desperate. Maybe Hugo Chavez will campaign for him now.