WASHINGTON, D.C – Former treasury secretary, Paul O’Neill said that congress should scrap plans for a new economic stimulus package and instead simply require mortgage lenders to only make loans for people with a 20% or higher down payment.
On Tuesday, O’Neill addressed reports and indicated that he was not surprised that neither presidential candidate supported his position.
O’Neill has not endorsed either presidential candidate but indicated that he reached out to the Obama camp and made a personal pitch last month concerning his idea to mandate down payments. He declined to characterize Obama's response.
According to a published reports O’Neill also said, "Unfortunately we've gotten to a point where people that want to run for president don't think they can tell the truth and still get elected. I'm hopeful whichever person gets elected, they'll be better than what they've said. An awful lot of presidential campaigns now are pandering to the lowest common denominator. They promise people everything."
O’Neill also indicated that he supported the recently passed $700 billion financial bailout, which has allowed the financial system to take a "deep breath." He also stated that government action should have come earlier. According to O’Neill, as early as 2006 30 percent of home mortgages required no down payment and a large number of those borrowers had a first payment defaults.
"That was a strong enough signal we should have shut down this ... flagrant abuse of the principles of home finance," said O'Neill. "It was bound to crater. It was absolutely bound to come down around our ears, which it has."
"If you can't afford a home mortgage, we shouldn't give you one," he added.
O’Neill said he is disappointed in both parties. He also indicated that the wide support for another stimulus package rather than addressing the underlying cause, bad mortgages, was disappointing.
If another stimulus package was introduced he fears much of it will be bogged down by pet projects.
“It's a dangerous time because every politician can imagine some additional money that they could put into a package that they believe will help them get re-elected," said O'Neill. "It's like a feeding frenzy when it looks like they're going to have more stimulus programs. It's almost as though there's no connection and understanding that at the end of the day, we the American people are going to have to pay for this."
O’Neill served as the 72nd United States Secretary of the Treasury for part of President George W. Bush's first Administration. He resigned in December 2002 under pressure from the administration and became a harsh critic. O'Neill was chairman and CEO of Pittsburgh-based industrial giant Alcoa from 1987 to 1999, and retired as chairman at the end of 2000.
