McCain says lenders, not government, should play key role in helping homeowners

WASHINGTON – Sen. John McCain, R-Ariz., on Tuesday called for mortgage lenders to help struggling homeowners stay in their homes but said government's role should be temporary and limited.

McCain, the presumptive Republican presidential nominee, also called for increased transparency and accountability in the mortgage industry, among both lenders and borrowers.

"It is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers," McCain said in a speech in Santa Ana. "Government assistance to the banking system should be based solely on preventing systemic risk that would endanger the entire financial system and the economy."

McCain said that the Federal Reserve's bailout of Bear Stearns met his criteria. But he offered no specific federal proposals to aid homeowners facing foreclosure. He promised to evaluate proposals "based on their costs and benefits," but he didn't address any of the solutions percolating on Capitol Hill.

McCain advisers told reporters that the candidate frowns on legislation being prepared by Democrats that would have the government provide up to $400 billion in guarantees for mortgages that lenders agree to modify.

In downplaying direct federal assistance to homeowners, McCain drew a sharp contrast with both his Democratic rivals.

Sen. Hillary Rodham Clinton, D-N.Y., on Monday proposed a $30 billion federal fund to help local communities aid pressed homeowners. Sen. Barack Obama, D-Ill., proposed a similar $10 billion fund. In that sense, McCain's speech was as much a statement of political principle as it was a substantive response to the housing crisis.

After the speech, McCain adviser Doug Holtz-Eakin rejected the type of foreclosure moratorium that Clinton has pushed, saying it doesn't "address why someone is in foreclosure."

"As harsh as it may sound, that may be an appropriate outcome in some cases," Holtz-Eakin said.

Not surprisingly, Democrats panned McCain's approach.

"He sounds remarkably like Herbert Hoover," Clinton told reporters in Greensburg, Pa. "I don't think that's good economic policy. The government has a number of tools at its disposal."

Obama spokesman Bill Burton characterized McCain's response to the crisis as "just sit back and watch it happen."

McCain called for steps to ensure that future borrowers know exactly what they're getting into and to require borrowers to "provide a responsible down payment" when they buy.

Noting that the crisis came about in part because "lenders ended up violating a basic rule of banking: Don't lend people money who can't pay it back," McCain suggested that those same lenders need to play a leading role in ending it.

Also Tuesday, former first lady Nancy Reagan endorsed McCain for president as he continued to collect backing from leading Republicans who might help him unite the party and win over critical conservative voters, the Associated Press reported.

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