First, it was his speech at the NFIB 2008 National Small Business Summit on June 10th. John McCain saw an opportunity to score a populist point with a fairly conservative constituency. The senator from Arizona told the assembled entrepreneurs how much he loved them, then he took a whack at their corporate counterparts: "Americans are right to be offended when the extravagant salaries and severance deals of CEO's -- in some cases, the very same CEO's who helped to bring on these market troubles -- bear no relation to the success of the company or the wishes of shareholders," he said. "If I am elected president, I intend to see that wrongdoing of this kind is called to account by federal prosecutors. And under my reforms, all aspects of a CEO's pay, including any severance arrangements, must be approved by shareholders."
Then it was his speech, a week later, to a bunch of oilmen in Houston. This time he took aim at the "speculators" who've supposedly driven up the price of oil. "We all know that some people on Wall Street are not above gaming the system....And while a few reckless speculators are counting their paper profits, most Americans are coming up on the short end," he said. "Investigation is underway to root out this kind of reckless wagering, unrelated to any kind of productive commerce, because it can distort the market, drive prices beyond rational limits, and put the investments and pensions of millions of Americans at risk. Where we find such abuses, they need to be swiftly punished." What was needed, he said, was "clear and effective" reform to "assure transparency, prevent abuse, and protect the public interest."
Finally, yesterday, he spoke to reporters about the potential collapse of Fannie Mae and Freddie Mac, which together own or guarantee half of all U.S. mortgages. "Those institutions, Fannie and Freddie, have been responsible for millions of Americans to be able to own their own homes, and they will not fail, we will not allow them to fail. They are vital to Americans' ability to own their own homes. And we will do what's necessary to make sure that they continue that function." A reporter pressed him: "What about moral hazard?" Said the Republican candidate: "I think that Freddie and Fannie have a vital role to fulfill and that they cannot and will not fail. There has to be much greater transparency in the way that they do business in order to insure that this kind of difficulties that they're in is not repeated."
What do these three statements have in common, besides a peculiar and vague insistence that opacity (as opposed to, say, greed) is to blame for our current woes? Distrust of market mechanisms, that's what. What is outrageous CEO pay but the market in action? ("If we don't give him $200 in stock options, another airline will woo him away!") How does McCain propose to distinguish good speculation -- the kind that makes the futures markets work -- from the bad (or "reckless") speculation that raises oil prices -- is it simply a matter of outcomes? Religious conservatives, evangelicals particularly, are said to be suspicious of McCain and his principles. If I worshipped at the altar of Mammon, I would find his demagoguery unsettling, too.
But let me be clear: I don't believe that free markets were handed down from God, like the Ten Commandments at Mount Sinai. (No. 11: "Thou shalt not intervene in the Commerce of Men.") I, personally, have no problem with the kind of intervention McCain occasionally offers. The public purpose Fannie Mae and Freddie Mac are meant to serve should be protected. I just wish McCain wouldn't squander his heresies on trivial matters.
He had the right idea, for instance, back in May, when he prepared a speech that dared to link capping greenhouse gas emissions to trade. "If industrializing countries seek an economic advantage by evading [emissions] standards, I would work with the European Union and other like-minded governments that plan to address the global warming problem to develop a cost equalization mechanism to apply to those countries that decline to enact a similar cap," he planned to say. Then he thought better of it: when he actually gave the speech, he made no mention of a "mechanism." "The original formulation sounded like too much like an interference with free trade," an adviser later told reporters. In that case, the market was sacrosanct.
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