John McCain’s speech on the housing crisis in Santa Ana on March 25 was a dull speech: earnest, plodding, methodical and utterly devoid of any rhetorical flourishes that might set an audience swooning.

Nevertheless, I think it was a good speech. First, he explained the economics behind the housing crash in clear and simple terms, without condescending to his audience.

He put it this way:

A bubble occurs when prices are driven up too quickly, speculators move into markets, and these players begin to suspend the normal rules of risk and assume that prices can only move up - but never down. We've seen this kind of bubble before - in the late 1990s, we had the technology bubble, when money poured into technology stocks and people assumed that those stock values would rise indefinitely. Between 2001 and 2006, housing prices rose by nearly 15 percent every year. The normal market forces of people buying and selling their homes were overwhelmed by rampant speculation. Our system of market checks and balances did not correct this until the bubble burst.

Of those 80 million homeowners, only 55 million have a mortgage at all, and 51 million are doing what is necessary –- working a second job, skipping a vacation, and managing their budgets –- to make their payments on time. That leaves us with a puzzling situation: how could 4 million mortgages cause this much trouble for us all?

A good question, and Sen. McCain had an equally good answer:

The other part of what happened was an explosion of complex financial instruments that weren't particularly well understood by even the most sophisticated banks, lenders and hedge funds. To make matters worse, these instruments -- which basically bundled together mortgages and sold them to others to spread risk throughout our capital markets - were mostly off-balance sheets, and hidden from scrutiny. In other words, 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. Capital markets work best when there is both accountability and transparency. In the case of our current crisis, both were lacking.

Because managers did not fully understand the complex financial instruments and because there was insufficient transparency when they did try to learn, the initial losses spawned a crisis of confidence in the markets. Market players are increasingly unnerved by the uncertainty surrounding the level of risk, liability and loss currently in the financial system. Banks no longer trust each other and are increasingly unwilling to put their money to work. Credit is drying up and liquidity is now severely limited – and small business and hard-working families find themselves unable to get their usual loans.

The Senator then promised some “straight talk” on how to deal with the problem, and he delivered:

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.

When we commit taxpayer dollars as assistance, it should be accompanied by reforms that ensure that we never face this problem again. Central to those reforms should be transparency and accountability.

In short, Sen. McCain succinctly analyzed the circumstances that caused the current economic downturn, and then outlined a sensible, hard-headed approach to dealing with it. In reading the speech, I was reminded of Franklin Roosevelt’s fireside chats -– the radio addresses he made to the nation during his presidency. For the most part, they were not memorable speeches, but they were models of simplicity, clarity and sheer persuasiveness. An aide to FDR once said that “he looked for words that he would use in an informal conversation with one or two or his friends.”

If it turns out to be a contest between Obama and McCain for the White House, it will be fascinating to see which of their very different rhetorical styles will sway the voters. Obama can touch people’s hearts; we know that. But in this latest speech, McCain has shown that he can appeal powerfully to their common sense. In the end, the American people may well decide that they love Obama’s platform performances –- but they trust McCain to run the country.