Argues Alan Stewart Carl, a moderate blogger, about Sen. John McCain’s proposal: “When John McCain first announced his homeowner bailout plan, called the American Homeownership Rescue Plan, the description of the plan indicated that the government wo…

While i agree with your final analysis of the ’simple mistake’ the McCain camp now admits they made concerning the change in the wording of their buyout plan, I think you’re missing the big picture.

First is the erratic behavior of McCain’s campaign. There’s no rhyme or reason. How do you think his latest economic plan would square with the House Repubs when he so ‘heroically’ came to their support against the Feds current economic plan? This new plan would enrage them more than anything for the reasons you mentioned - the moral hazard of letting everybody off the hook. That certainly goes against their ‘Fiscal Conservative’ core.

Secondly, the way it’s set up now, the Fed will try to get stability in the market by obtaining some sort of value for each mortgage backed security. How they will do this is the great mystery everyone’s waiting to see. McCain’s plan would blow that up by preventing the free market to negotiate this crucial dollar amount. Why would the holders of these mortgage securities take pennies on the dollar when this plan- to give them 100% face value- is on the table?

The other thing that further complicates the matter is the Credit Default Swaps that the troubled ‘banks’ got involved in. That’s where the really big bucks were squandered, and they were supposed to minimize risk!. They say that the value of the actual mortgage securities on the books is only about 300 billion (only?) and not that much of it is actually bad debt. How McCain’s plan would deal with those complicated financial instruments nobody knows. I wonder how many in the business really care?