Jack Kemp conducted a conference call to discuss the economic rescue plan and John McCain’s policies.  They also attacked Barack Obama’s spending plans, and Obama’s alleged mischaracterization of McCain’s positions last night.  Doug Holtz-Eakin declared McCain “disappointed” in the result yesterday, and noted that the failure had begun keeping credit from people who need it to keep our economy growing.

Secretary Kemp recalled his days in the Bush 41 administration and his experiences with the Resolution Trust Corp and the S&L collapse.  Kemp strongly supports immediate action to alleviate the financial crisis.  He sees an opportunity to rescue institutions but also to revive the credit market.  Kemp agrees with McCain that the situation is urgent and needs attention now.

One of the mistakes conservatives have made is thinking that this socializes the credit market.  Kemp says that’s not the case.  The government will buy assets for later resale when the market stabilizes.  The new FDIC limit should have been applied long ago and is greatly needed now.  Kemp hailed McCain’s leadership on this issue.

Kemp hit Obama on tax policy.  He didn’t know of any tax-policy thinking that said taxes should be raised in an economic crisis.  McCain’s policy of lowering capital-gains and corporate taxes will stimulate the economy. Raising taxes on investment capital could send us into a depression.

Questions:

• Business Week: Any sense of changes in the plan that McCain would support to get more votes, and does the FDIC need more funding to meet the requirement for greater insurance?  McCain would support the changes for FDIC expansion.  The FDIC says they have adequate reserves, but McCain could support more funding for those reserves.  Kemp says conservatives need to support this plan, and his own suggestion would be that bank losses could be amortized instead taking it all in one quarter to maintain liquidity.
• Reuters: Should FDIC increase be temporary or permanent?   What will McCain’s role now, and what about his assertion today that it failed because of a lack of recognition of the pain on Main Street now?  McCain sees his role as that of a leader on the Hill, and will continue in that role.  The increase should be permanent in Kemp’s opinion.  The pain is real on Main Street, and we need to do a better job of communicating that, and the Wall Street vs Main Street idea is a huge myth.  Everyone will lose value in this meltdown.
• New York Times: Will the next action occur in the Senate or House, and what will McCain do now to promote an agreement?  McCain wants to communicate with Republicans on the Hill to see how he can get more support for emergency action.
• Cincinnati Enquirer: Only one-third of House Republicans voted for this package.  How did this fail, and who gets the blame?  Kemp was surprised that they didn’t get the votes counted beforehand.  He thinks the problem started with the characterization of the bill as a “bailout”, when the taxpayers would purchase tangible assets and could profit from their resale when the market stabilizes.  He objected strongly to the idea that this bill would socialize the credit markets.  Instead, it allowed the only player with enough liquidity to trade it for real assets.