Although most Americans fail to understand theunderlying details of the credit market mess that hasroiled the stock market since last summer, the averagehomeowner, however, clearly understands that the valueof their home has decreased.
The bursting of the housing bubble has certainly hurt,and Sen. Hillary Clinton (D., N.Y.) has sought to stayin front of the crisis, offering solutions anddemanding action from the administration againyesterday in Philadelphia.
In her speech, Clinton decried the lack of action onproblems facing average Americans:
"Last week when it became clear WallStreet was on the brink of a financial melt down, theFed and the administration sprang into action. The Fedextended a $30 billion lifeline to prevent BearStearns from imploding and took unprecedented actionto provide tens of billions of dollars in credit forother struggling investment banks as well. Homeowners,on the other hand, have received next to noassistance."
Clinton seeks support for Main Street, in addition toWall Street.
Clinton and her campaign started discussing problemsin the housing market in early 2007, when she calledfor a "foreclosure timeout." In December of last year,she preempted the Bush Administration's "Hope NowAlliance" by a day with
to freeze interest rate resets on subprimemortgages and offer help to struggling states with $30billion in subsidies.
Her new plan adds several layers. She endorses therecent legislation proposed by Rep. Barney Frank (D.,Mass.) and Sen. Chris Dodd (D., Conn.). The legislationextends the Federal Housing Administration's ability to
guaranteerestructured mortgages. Clinton believes theguarantees might spur private sector auctions tounfreeze the credit markets, and she wants additionalgovernment readiness to step in and to facilitatemortgage restructuring.
The legislative process takes time, however. Clintonurged President Bush in the interim to name a"high-level emergency working group" on foreclosuresin order to investigate appropriate measures to moveforward. The group would be nonpartisan. Clintonrecommended possible suggestions for members of thegroup, such as former
Chairs Alan Greenspan andPaul Volcker with Robert Rubin, formerly of
and currently of
. (It would be fittingto have Greenspan involved in solving a crisis thatmany say he helped foster by not monitoring mortgagemarkets and keeping interest rates low for far toolong.)
Clinton also plans to introduce legislation to limitthe liability of mortgage servicers from investors.She says some servicers have refused to help familieswith restructuring for fear of litigation. I askedClinton's advisers during a conference call if theyfeared an adverse reaction from investors of subprimesecurities. Gene Sperling, Clinton's chief economicadviser, said, "The legislation would not be an abruptchange" for investors and "provides clarity, which themarkets want."
Her speech set off a tit for tat with Barack Obama'scampaign. The Obama campaign issued a press releasequestioning Clinton's interest in helping with thehousing crisis. They noted she has received slightlymore than $900,000 from lobbyists (a small portion ofthe $163 million she's raised) and has had close tiesto housing industry lobbyists, including $22,000 indonations from subprime lobbyists from companies like
, which has been takenunder by
Bank of America
The Clinton campaign fired back, listing on
one campaign Web site a report from
that Obama had received more donations from the top 10 issuers of subprime mortgages than Clinton, saying the following 10 firms donated over $1.1 million to the Obama campaign:
, Countrywide, Washington Mutual, Citigroup, CBASS,
and Goldman Sachs. (It bears noting that some of the companies listed aren't pure mortgage issuers.)
John McCain, the presumptive Republican nominee, hasbeen traveling, and his campaign did not comment onthe plan. Republicans have portrayed Clinton during thecampaign as willing to tax and spend, thoughher plan calls more for government action.
Clinton closed by admonishing the administration:
"I hope we don't have to wait until thenext president is sworn in, but that we will cometogether and exercise that leadership in both thepublic and the private sector as soon as possible.That's why I've set forth this plan and hope that theadministration will begin to act with the urgency thatthe crisis before us demands."
Come November, voters will have to decide if they prefer a proactivepresident or a laissez faire approach in the upcomingelection.