Mon, 02 Feb 2009 15:04:05 +0000 – On Saturday, Senate Minority Leader Mitch McConnell (R-Ky.) unveiled a plan for helping homeowners to hang on to their homes--and hang on to the value of their homes.It's a great idea, because it targets economic relief to the middle class in the Heartland, not the upper class in Manhattan and Beverly Hills. It's a shame, though, that McConnell and the Republicans waited until after the 2008 elections, because this plan was available back in September, when the fiscal meltdown began. With a different response to the meltdown, history might have been a lot different.
As McConnell said in his radio address on January 31, America can't afford a boondoggle "stimulus" plan. And that's why, he said, "Republicans are suggesting a simpler, more targeted plan that gets right at the heart of the economic crisis." In a nutshell, the GOP plan would guarantee qualified homeowners a four percent mortgage.
As McConnell explained:
Most economists agree that falling home values are the underlying cause of the recent downturn. Republicans think we need to fix this problem before we do anything else. So first, we propose providing government-backed, four percent fixed mortgages to any credit-worthy borrower. The availability of these low-interest loans would increase demand for houses significantly. And low interest mortgages would boost household income. The average family would see its monthly mortgage payment drop by $466 a month, or $5,600 a year. Over the life of a 30-year loan, that's a savings of $167,760.
I strongly support McConnell's proposal. Indeed, I support it so strongly that I proposed pretty much the same idea four months ago.
My piece appeared right here in the FOX Forum, under the headline, "Let's Bail Out Main Street, NOT Wall Street. Here's How."My inspiration for the piece was Mallory Factor, a South Carolina businessman, who said, back then:
"Bail out homeowners, not lenders. Any qualified buyer who wants to buy a house should be able to buy one at a guaranteed low interest rate, of, say, 3.5 percent. And any qualified homeowner who wants to refinance could get the same rate."
If that happens, Factor argued,
"There would be a flood of liquidity into the system, as people bought houses again, which would also help reduce the housing-stock overhang. In addition, as people refinanced, all these instruments, such as collateralized mortgage obligations, which Fannie Mae and Freddie Mac have choked on, would once again start performing. And that would save the banks and many investors. It would save the banks and investors by saving homeowners and homeownership. In other words, trickle up, not trickle down."
Indeed, four full months ago, Factor correctly prophesied the fate of the Trouble Asset Relief Program (TARP):
"The Washington plan is like the government going to a bunch of car dealers, and saying, 'You've got a bunch of cars in your warehouse that nobody wants to buy, because most of them are lemons. How did this happen? Because you didn't bother to kick the tires or otherwise examine them before you ought them from the factory. But because we're the government, aka Uncle Sugar, we will buy them off you, deliberately overpaying, big, so that you can take our cash and get back in the car-retail business.'"
Unfortunately, McConnell voted for the TARP program last year, as did the Republican presidential nominee, Sen. John McCain.
So McConnell and McCain joined with such prominent Congressional Democrats as Senate Majority Leader Harry Reid, House Speaker Nancy Pelosi, and then-Sens. Barack Obama and Joe Biden in voting for a budget-busting failure.
It's too late, of course, for McConnell and McCain to undo their vote for TARP last year. But American politics is about second chances; McConnell, leading the Senate GOP as it looks ahead to 2010 and beyond, has shown that he can learn from mistakes and put forth better policies for the future.
And that's good news for all Republicans.