Statement by McCain Campaign on Negotiations

John McCain’s decision to suspend his campaign was made in the hopes that politics could be set aside to address our economic crisis.

In response, Americans saw a familiar spectacle in Washington. At a moment of crisis that threatened the economic security of American families, Washington played the blame game rather than work together to find a solution that would avert a collapse of financial markets without squandering hundreds of billions of taxpayers’ money to bailout bankers and brokers who bet their fortunes on unsafe lending practices.

Both parties in both houses of Congress and the administration needed to come together to find a solution that would deserve the trust of the American people. And while there were attempts to do that, much of yesterday was spent fighting over who would get the credit for a deal and who would get the blame for failure. There was no deal or offer yesterday that had a majority of support in Congress. There was no deal yesterday that included adequate protections for the taxpayers. It is not enough to cut deals behind closed doors and then try to force it on the rest of Congress -- especially when it amounts to thousands of dollars for every American family.

The difference between Barack Obama and John McCain was apparent during the White House meeting yesterday where Barack Obama’s priority was political posturing in his opening monologue defending the package as it stands. John McCain listened to all sides so he could help focus the debate on finding a bipartisan resolution that is in the interest of taxpayers and homeowners. The Democratic interests stood together in opposition to an agreement that would accommodate additional taxpayer protections.

Senator McCain has spent the morning talking to members of the Administration, members of the Senate, and members of the House. He is optimistic that there has been significant progress toward a bipartisan agreement now that there is a framework for all parties to be represented in negotiations, including Representative Blunt as a designated negotiator for House Republicans. The McCain campaign is resuming all activities and the Senator will travel to the debate this afternoon. Following the debate, he will return to Washington to ensure that all voices and interests are represented in the final agreement, especially those of taxpayers and homeowners.

If the hit is big enough, the laws of economics already see to that, no regulation or legislation or special practice of any kind is required. If you set up a small business in a town full of people who wake up broke the next day, your small business will fail, and it won't have anything to do with whether you are a nice person or ate your wheaties.

Those who made bad decisions in this mess already lost their assets. Are you paying any attention? After someone loses their assets, what happens to those assets? Do they disappear? No. They go to the creditors of whoever just failed. Well, these non-performing mortgage assets have entirely banrupted not just their original bad deciders, but 5 tiers of other people who got stuck with the collateral after each previous tier defaulted.

And guess what? Now the creditor stuck with them as everyone ahead defaults, is all of us, in our capacity as bank depositors.

You see, you are a reckless lender. You put money in an FDIC insured bank account. Ha ha ha, how stupid a financier are you?

The same thing is happening to you, that happened to the banks now failing. They inherited the mess as everyone ahead of them blew out and defaulted.

The original buyers couldn't pay, and lost their homes.

The mortgage originators couldn't pay, New Century Financial has been bankrupt and liquidated for 2 1/2 years already. Countrywide limped into the arms of Bank of America for pennies.

The issuers of private mortgage insurance were to all intents and purposes seized by their regulators and put into run-off, with their remaining capital segregated to pay what claims they can.

The original owners of the mortgage securities blew over over a year ago, all of them, bankrupt. Before they went bankrupt, they drew down their bank credit lines hoping for a turn in the market that never came. As a result, when they went bankrupt their creditors were - the banks.

The ones you see failing all around you.

Guess who *their* creditors are, in turn.

Us. Of course. The hit keeps on going until it hits a pocket deep enough to take it.

The original borrower is most at fault. Fine, rail against him, so the heck what. He hasn't got it, or the loan would be good. He doesn't, it isn't, face it already and move on. Same for the next three tiers.

Now the banks are all failing, 2 1/2 years after the originators. You are their creditor, as am I - all of us. What shall we do with them? We can bankrupt them all, and we still get left with the loss.

Or we can take the loss we are going to take anyway, and spare them.

Why would be do that? Well, it is kinda useful having a banking system. I don't know about you, but I'd find it a little difficult to get through the day paying for everything using barter with blueberry scones.

Or paying for anything, come to that, after the effective money supply shrinks be a factor of 10.

Net mortgage issuance in the 2nd quarter of 2008 for the entire country, was $80 billion. That is down 93% from the 2005 figure. We can safely assume that over borrowing is not going to be the problem going forward. What houses are worth without mortgages - well, just guess.

You can't save money by bankrupting half of your neighbors. Economics is not a zero sum game.

I don’t have time to respond to all of your contentions, but I think it is important to note that:

a)There are plenty of banks with limited exposure to the mortgage mess. They aren’t about to fail.

b)Strong banks buy weak and failing banks. Look what just happened to Wamu. Big hit for their shareholders, but that’s why investing in stocks is risky, and equities have a large upside compared to investments with no real risk of loss of principal. No real hit for the taxpayer or depositors.

c)There will be plenty of banks left when the dust settles to keep the economy going. No harm in thinning out the ranks of the poorly managed banks.

d)The unwinding of credit bubbles is never pretty.

d)I still haven’t seen any argument put forward as to why the taxpayers, as investors, should buy junk assets. What rational investing theory for any market suggests that anyone should intentionally buy impaired assets? Why not just use the money to buy good assets?

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