John McCain’s proposal to bail out homeowners by buying up their troubled mortgages, the only policy surprise in last night’s debate, left observers scrambling to understand how it was—if it was—different from the Treasury’s existing bailout plan. The proposal, fleshed out by the campaign, would pump $300 billion into the housing market by buying bad mortgages and replacing them with fixed-rate loans, with reduced principal, in an effort to forestall foreclosures, the New York Times reports.
The existing bailout gives Treasury the power to do what McCain’s proposing, but the focus is on buying mortgage-backed securities from banks. McCain’s asking for a new pivot toward individual homeowners, which, he acknowledged in the debate, could be even more expensive, because millions might want help. McCain’s proposal is actually borrowed from Hillary Clinton, who in turn took the idea from a New Deal program.