McCain vows to provide direct aid on mortgages

WASHINGTON — Republican presidential candidate John McCain said he would order the federal government to spend $300 billion in federal funds to buy up bad home mortgages and allow financially troubled homeowners to keep their houses.

McCain's proposal, announced during Tuesday's presidential debate, would use nearly half the $700 billion from the recent bailout package to assist Americans directly, instead of indirectly by rescuing the nation's financial markets.

Democratic nominee Barack Obama last month proposed that the government consider taking such a step.

But McCain's approach was more categorical. "I would order the secretary of the Treasury to immediately buy up the bad home-loan mortgages in America and renegotiate at the new value of those homes — at the diminished values of those homes — and let people be able to make those payments and stay in their homes," he said.

The proposal, which he called the American Homeownership Resurgence Plan, is as much a policy plan for the future as it is a political tactic for the present.

Americans reacted with outrage at the need for the recent $700 billion rescue for the country's financial institutions.

Many Republicans voted against the package, objecting to its size and to government intervention in the free-market economy. McCain's step would represent an even greater role for government and potentially an even greater financial loss.

He made clear he would use the plan to distinguish himself not only from his rival but also from President Bush, an increasingly unpopular figure as the economy sinks.

"It's my proposal," McCain said. "It's not Sen. Obama's proposal. It's not President Bush's proposal."

As conceived by Treasury Secretary Henry Paulson and as passed by Congress, the rescue package would be used primarily to purchase mortgage-backed securities. It would allow, but not require, direct purchase of mortgages. Under McCain's plan, the Treasury would be required to rework mortgages directly with homeowners whose houses were losing value.

It was unclear — either from McCain's remarks or from the backup materials provided by the campaign — how such a plan would be administered.

McCain, a budget hawk and critic of rising federal spending, did concede one point. "Is it expensive? Yes," he said.