“Let’s start with some straight talk. I will not play election year politics with the housing crisis. I will evaluate everything in terms of whether it might be harmful or helpful to our effort to deal with the crisis we face now. “

Today John McCain will address business leaders in California and discuss the housing problems hitting our economy. Based on his prepared remarks it seems that McCain’s plan lives up to the above quote and is an honest, sometimes difficult, but non-interventionist approach to the crisis with fiscal discipline, the recognition that people are worried, but the understanding that not everyone will get what they want or deserves a bailout.

Here is a quick point-by-point roundup of the plan.

‘“How did we get here?” In the end, the motivation and behaviors that caused the current crisis are not terribly complicated, even though the alphabet soup of financial instruments is complex. The past decade witnessed the largest increase in home ownership in the past 50 years. Home ownership is part of the American dream, and we want as many Americans as possible to be able to afford their own home. But in the process of a huge, and largely positive, upturn in home construction and ownership, a housing bubble was created.’

McCain compares the bubble created in housing to the tech bubble and lays out the problem of speculators moving into the markets and making the assumption that prices would never go down. He outlines how lenders began giving out mortgages without asking if people could afford their homes and the complexity of home bundling.

“The housing bubble was made worse by a series of complex, inter-connected financial bets that were not transparent or fully understood. That means they weren’t always managed wisely because people couldn’t properly quantify the risk or the value of these bets. And because these instruments were bundled and sold and resold, it became harder and harder to find and connect up a real lender with a real borrower.”

So we know the problem, what is the solution?

Unlike Senator Clinton’s plan given yesterday, McCain stands by a principal of personal responsibility even if it has harsh results:

I have always been committed to the principle that it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers. Government assistance to the banking system should be based solely on preventing systemic risk that would endanger the entire financial system and the economy.

He proposes no assistance for those who cheated the marketplace unless it is necessary to sustain the economy:

In our effort to help deserving homeowners, no assistance should be given to speculators. Any assistance for borrowers should be focused solely on homeowners, not people who bought houses for speculative purposes, to rent or as second homes.

McCain proposes that any assistance given to homeowners should be temporary and not given to those who were irresponsible in buying a home they still cannot afford. “I will consider any and all proposals based on their cost and benefits. In this crisis, as in all I may face in the future, I will not allow dogma to override common sense.” The Senator also proposes that any and all assistance will only be given with the passing of reforms that ensure the problems are solved for the future through transparency and accountability.

Part of those reforms would include, policies that force those seeking homeownership to give a reasonable down-payment; “I therefore oppose reducing the down payment requirement for FHA mortgages and believe that, as conditions allow, the down payment requirement should be raised.”

For the financial institutions who are locked in this crisis McCain suggests the following for the future:

In financial institutions, there is no substitute for adequate capital to serve as a buffer against losses. Our financial market approach should include encouraging increased capital in financial institutions by removing regulatory, accounting and tax impediments to raising capital.

Basically financial institutions should start raising money and tax incentives and the removal of regulations that keep them from raising capital should be done away with.

McCain would take two immediate actions:

1) First, it is time to convene a meeting of the nation’s accounting professionals to discuss the current mark to market accounting systems. We are witnessing an unprecedented situation as banks and investors try to determine the appropriate value of the assets they are holding and there is widespread concern that this approach is exacerbating the credit crunch.

2) We should also convene a meeting of the nation’s top mortgage lenders. Working together, they should pledge to provide maximum support and help to their cash-strapped, but credit worthy customers. They should pledge to do everything possible to keep families in their homes and businesses growing.

Beyond that McCain goes back to his position of removing the alternative minimum tax along with other taxes as a way of stimulating business and giving workers more money.

In short, if you juxtapose this with Hillary Clinton’s proposal from yesterday you find two candidates with two very different plans. McCain stands by the principal that things may be bad for homeowners who are struggling to pay for houses they cannot afford but that isn’t the governments problem and these owners will have to face the fact that they cannot afford their home. Also for the financial institutions who sold them the mortgage McCain offers no bailout will be provided except in cases when reform is attached or it is good for the overall economy.

It is a bare knuckles and honestly conservative approach that asks homeowners and financial institutions to own up to their problems while recognizing that some were bilked out of their money. For those who are deserving of assistance, McCain ties reform to their bailout with the focus being on ensuring this doesn’t happen again.