With the black-and-blue economy now the No. 1 issue vexing American voters, presumptive Republican Presidential nominee John McCain is busy sharpening his economic line. On Mar.25 in California, he addressed the housing debacle and the Fed-backed JPMorgan (JPM)-Bear Stearns (BSC) deal. McCain cautioned against bailing out individuals who had speculated during the housing bubble. He largely rejected the approaches of Senators Hillary Clinton and Barack Obama, both of whom have put forth plans to rescue strapped homeowners without, critics say, differentiating between those in need and those who may have acted—in McCain's words—"irresponsibly." In an interview the next day, former Hewlett-Packard (HPQ) CEO Carly Fiorina, who is advising McCain and campaigning with him and for him, expanded on the senator's positions.
Senator McCain seems to have staked out a position on the housing crisis that will play well with fiscal conservatives, saying it's not government's job to bail out and reward those who act irresponsibly. But how will it play with Jane and Joe Six-Pack?
Carleton S. Fiorina
One of the really important things that I think he did in that speech was draw some very important distinctions. One was to say: Look, it isn't government's role to bail out speculators or investors who made some bad bets. But he did specifically say that government does have a role; government has a role in helping the truly needy who are cash-strapped but creditworthy, who through no fault of their own are in trouble. He said government has a role to prevent systemic economic risk, which is why he supported the bailout of Bear Stearns. And he has said government has a role in enacting reforms to ensure that this kind of thing doesn't happen again, and in particular he would focus those reforms on restoring transparency and accountability in the system.
Some have suggested the JPMorgan-Bear Stears deal is little more than Wall Street socialism. What's your take on that?
When you have a run on a bank, which is in essence what was going on with Bear Stearns, that represents a confidence issue. And I think it's important to stem those crises of confidence quickly.
There has been little talk until now about individuals who became speculators. But is Senator McCain placing too much emphasis on the behavior of individuals vs. the behavior of brokers, lenders, and Wall Street?
I think his assessment of that was pretty balanced in his speech. He talked about Wall Street bankers and investors and mortgage lenders who engaged in risky behavior or who, frankly, got involved in a set of financial instruments they didn't really understand and that had insufficient scrutiny. On the other hand, there are 80 million homeowners in this country. There are 55 million mortgages; 51 million of those mortgages are in fine shape. We're talking about 4 million mortgages that are a problem. So there is a role in terms of big institutions, but there's also a role in terms of individuals who piled into a market, figured prices were only going up, never coming down, and wanted to flip a house quick and got into a mortgage that they really shouldn't have.
Senator McCain has a very strong reputation in terms of fighting for this country. Yet we don't really hear him talk about the economy and about business all that much. What more does he need to do to convince voters that he will be the President best equipped to repair a badly damaged economy?
Let me start with the businesspeople who are with him: John Thain, chairman and CEO of Merrill Lynch (MER); John Chambers, chairman and CEO of Cisco (CSCO); in addition to myself and others. [EBay (EBAY) CEO] Meg Whitman has just got on board. So he has a lot of very strong businesspeople who endorse him, point one. Point two, he understands the role of innovation in job creation and growth. He understands how government can stimulate business or retard business.Paragraph I mean, the Democrats are likening [the financial crisis] to the Great Depression. That's just irresponsible fearmongering.
I'm presuming you oppose the plans put forth by Senators Clinton and Obama for the government to help homeowners avoid foreclosure and/or refinance at better rates. If you were Treasury Secretary, what would you do to address the pain many lower- and middle- income American homeowners are feeling?
Part of the problem with Clinton's and Obama's plans is that they make no distinctions among anyone. So it's a $30 billion slush fund, basically. It even goes so far as to suggest, for example, that some mortgage lenders should be protected from lawsuits. Well, you know what? Some mortgage lenders ought to be sued for what they put out there. John McCain has suggested a mortgage ought to be on one page, so everyone can understand [it] and you don't need a lawyer to explain it to you. Second, he has opposed lowering the down-payment requirements. He believes homeowners should have some equity in their home, and he also believes mortgage lenders need to ask the right set of questions. Third, he believes there needs to be more transparency, which means that when we talk about reforms, which are coming, we have to focus on: How could so many of these investment vehicles that have caused so much trouble be off-balance-sheet and avoid all scrutiny whatsoever? That's part—a big part—of what got us into this problem.
Would you accept a post in a McCain Administration?
Obviously, it would be an honor to be asked to serve, but honestly, that's not what's on my mind at the moment.
What would be your dream job?
I'm not going there, Maria.
There has been some talk that after misspeaking about Iran and al Qaeda, Senator McCain is losing his edge. Would you say he's on top of his game right now?
Anyone who has spent any time around him knows that this is a man of great intellect, great curiosity. He understands the issues. But it's also fair to say that this is an exhausting process. Sometimes people get a little tired and misspeak, particularly when they're jet-lagged. But nobody needs to worry about his edge, his mental edge or his physical stamina.