Spin Cycle

Is McCain's $300 billion mortgage bailout plan part of the $700 billion or not? Sorry if we're confusing you, but it's confusing:

Tuesday night the answer was yes: "The direct cost of this plan would be roughly $300 billion because the purchase of mortgages would relieve homeowners of 'negative equity' in some homes. Funds provided by Congress in recent financial market stabilization bill can be used for this purpose; indeed by stabilizing mortgages it will likely be possible to avoid some purposes previously assumed needed in that bill."

On a Wednesday conference call with economic advisor Douglas Holtz-Eakin, the answer seemed to be no: "There's $300 billion worth of refinance capacity at the FHA at this point. That can be combined with the statutory capacity at Fannie Mae and Freddie Mac, which are now owned by the federal government for all practical purposes, to purchase mortgages. If Fannie Mae or Freddie Mac bought 80% of the mortgage, you could leverage that $300 billion in financing tremendously. And there's also the $700 billion that was provided to the Treasury by the Congress. There's direct purchase authority in there that would allow to augment these as well, although, it may be useful to reserve that for other purposes."

Today, campaign spokesman Tucker Bounds, responding to criticism about the cost, seems to say it's yes again: "Please see our campaign’s response to Barack Obama’s event in Dayton, Ohio. During the event, Barack Obama attacked John McCain’s proposal to use a greater proportion of the funds authorized by the legislative rescue plan to secure fixed-rate, affordable mortgages for American homeowners who are in danger of losing their homes."

It's kind of important.