Stimulating the economy: McCain has not proposed any further emergency economic stimulus. Last January, as the Bush Administration and Congress talked of short-term tax rebates (which eventually became law), McCain appeared resistant, and focused instead on his long-term tax-cutting proposals.
Stabilizing and regulating financial markets: In March, McCain set out his conditions for government intervention in the banking system: It "should be based solely on preventing systemic risk that would endanger the entire financial system and the economy." At the time, McCain offered his unenthusiastic support for the Bear Stearns bailout. He also backs the present federal takeover of the government-sponsored mortgage enterprises, the risk of encouraging moral hazard notwithstanding. Like Obama, he would require that shareholders take the first loss and taxpayers collect the first profits. He would also restructure and downsize the two enterprises.
In mid-September, McCain called for a sweeping overhaul of financial regulation, similar in its outline to what Barack Obama proposed. "The McCain-Palin Administration will replace the outdated and ineffective patchwork quilt of regulatory oversight in Washington and bring transparency and accountability to Wall Street," the campaign declared in a statement. "We will rebuild confidence in our markets and restore our leadership in the financial world."
This is a reversal of his original position, and was announced as Merrill Lynch looked likely to become a division of Bank of America, Lehman Brothers declared bankruptcy, and AIG teetered on the brink. Back in March, the Arizona Republican was not inclined toward tightening regulations such as liquidity requirements, or overhauling federal supervision of the financial markets. In general, he told the Wall Street Journal, "I am a fundamentally a deregulator." In the financial markets, McCain said then, "there is no substitute for adequate capital to serve as a buffer against losses," and McCain instead promised to encourage "increased capital in financial institutions by removing regulatory, accounting and tax impediments to raising capital."
As of this writing, McCain has not elaborated on the sort of reform he would seek. An unidentified campaign official told National Public Radio that it would entail updating the rules, not relaxing them. "The goal would be to have a comprehensive regulatory reform, so that every transaction, whether it's done in a commodities future market, a financial futures market, a stock market, a bond market -- if it has the same economic transaction, it should have the same regulation," Douglas Holtz-Eakin, McCain's top economic adviser, said in a separate interview with NPR. Currently, "there are transactions being treated differently, and obviously people will seek out the holes." When pressed whether this would mean more or less regulation, Holtz-Eakin demurred. "We would expect that you'd have an efficient regulatory system. I think more and less is probably not the right way to think about it."
However, in other venues, McCain has articulated certain reforms:
- He would "convene a meeting of the nation's accounting professionals to discuss the current mark-to-market accounting systems." ("There is widespread concern that this approach [to valuing long-term assets] is exacerbating the credit crunch.")
- He would, as he announced in a June speech, set rules to "assure fairness and punish wrongdoing in the market." In addition to a renewed emphasis on prosecuting "reckless corporate conduct," McCain would insist that "all aspects of a CEO's pay, including any severance arrangements, must be approved by shareholders."
- He would clamp down on speculation in oil futures markets to "assure transparency, prevent abuse, and protect the public interest." Oil futures, he told the oil industry in June, must be "just as clear and effective as the rules applied to stocks, bonds, and other financial instruments."
The McCain Record: McCain voted for the Economic Stimulus Act, but was not present for the vote on the housing plan.
