Today in the Wall Street Journal there is an Op-Ed piece from Hillary Clinton that shows us how if we had listened to her this situation might not be so bad right now for the markets or for the homeowners involved.
Unlike Obama or McCain she had a concrete plan that would have stabilized the mortgage market by a measurable degree. Set up a Home Owners’ Loan Corporation to help home owners refinance their homes at a fixed rate they can afford allowing millions more to stay in their homes and keeping foreclosure rates lower and allowing the markets time to adjust and correct. Sounded like a good plan to me when she first proposed it almost two years ago and it still sounds like a good plan to me now.
By Hillary Rodham Clinton
There is a broad consensus that Congress must act to stave off deeper turmoil on Wall Street. Irrespective of the final agreement yet to be reached, there are several principles that must be part of a broader reform effort that begins this week and continues in the coming months.
This is not just a financial crisis; it’s an economic crisis. Therefore, the solutions we pursue cannot simply stabilize the markets. We must also deal with the interconnected economic challenges that set the stage for this crisis — and reverse the failed policies that allowed a potential crisis to become a real one.
First, we must address the skyrocketing rates of mortgage defaults and foreclosures that have buffeted the economy and ignited the credit crisis. Two million homeowners carry mortgages worth more than their homes. They hold $3 trillion in mortgage debt. Nearly three million adjustable-rate mortgages are scheduled for a rate increase in the next two years. Another wave of foreclosures looms.
I’ve proposed a new Home Owners’ Loan Corporation (HOLC), to launch a national effort to help homeowners refinance their mortgages. The original HOLC, launched in 1933, bought mortgages from failed banks and modified the terms so families could make affordable payments while keeping their homes. The original HOLC returned a profit to the Treasury and saved one million homes. We can save roughly three times that many today. We should also put in place a temporary moratorium on foreclosures and freeze rate hikes in adjustable-rate mortgages. We’ve got to stem the tide of failing mortgages and give the markets time to recover.
The time for ideological, partisan arguments against these actions is over. For years, the calls to provide borrowers an affordable opportunity to avoid foreclosure as a means of preventing wider turmoil were dismissed as government intrusion into the private marketplace. My proposals over the past two years were derided as too much, too soon. Now we are forced to reckon with too little, too late.
As a result, the home-mortgage crisis slowly eroded the value of debt instruments upon which Wall Street firms were depending. That is how this house of borrowed cards began to fall. If we do not take action to address the crisis facing borrowers, we’ll never solve the crisis facing lenders. These problems go hand in hand. And if we are going to take on the mortgage debt of storied Wall Street giants, we ought to extend the same help to struggling, middle-class families.
Second, American taxpayers should have a voice and a stake in the resolution of this market crisis. If the Treasury proposal is enacted in its current form, the American government would assume enough financial risk to become the majority shareholder in the companies rescued by taxpayer dollars.
The American people are bearing the risk and therefore deserve to reap the rewards of a shared equity model. And mortgage securities bought by taxpayers must be valued accurately at prices disclosed in real time, with checks and reporting requirements to prevent abuse.
Third, taxpayers are being asked to bear an unparalleled degree of financial risk. We cannot allow taxpayers to take on this burden so that Wall Street and the Bush administration can hit the “reset button.” This historic intervention demands a historic shift in priorities: an end to the broken culture on Wall Street, and the broken economic policies in Washington.
Corporations that will benefit must be held accountable, not only to large shareholders but also to the American people, who are rightly tired of business as usual: short-term profit at the expense of long-term viability; lax oversight and regulation; obscene bonuses and golden parachutes regardless of performance; reckless risk-taking that has placed the markets in jeopardy; rewards for foreclosing on middle-class families and selling mortgages designed to fail; and outsourcing good jobs to serve short-term stock prices instead of America’s long-term economic health.
This is a sink-or-swim moment for America. We cannot simply catch our breath. We’ve got to swim for the shores. We must address the conditions that set the stage for the turmoil unfolding on Wall Street, or we will find ourselves lurching from crisis to crisis. Just as Wall Street must once again look further than the quarterly report, our nation must as well.
Mrs. Clinton, a Democrat, is a senator from New York.
You know there is a lot of talk and anger (rightly so) about the bailing out of the big Wall Street Investors and the irresponsible people who took loans they could not afford. The fact is a lot of the blame here also lies with some lenders who out of greed made loans that they should have known were high risk at best.
The fact remains though that not every family facing foreclosure is in this situation because they were irresponsible or because they fraudulently acquired credit they could not afford. Are there some who did that? Yes. Are all of them in this situation for those reasons? No.
A lot of people went out to buy homes and they could afford a payment and the maintenance on said home. They work hard and pay their bills like most everybody but then the lenders said “With rates this low you can afford so much more and you can just re-finance before the rate goes up.” And then oil went to record breaking highs and the prices of gasoline and groceries and heating bills went higher and higher. People who could afford their payments suddenly found themselves in a crunch.
Enter the lenders who expected to win either way and the rates go up, the payments go up and with the other expenses rising people began feeling more than a crunch. They were now caught in a vise. The lenders figured either way they would win because the families would either continue to pay with the higher interest rates or they would re-finance giving the lenders another chance to make a nice chunk of change for that.
What they didn’t count on was all the other economic factors, the inflation, the Wall Street crowd suddenly waking up to the fact that some of the loans that were packaged and sold were not going to pan out and should never have been made in the first place. Then suddenly we have a tightening of credit standards (better late than never?) and the people who were told to refinance suddenly can’t qualify.
The payments continue to go up, other expenses go up and the number of options available to them goes down. It seems to me that the average, working, responsible homeowner is now caught in a very bad situation not (at least not entirely) of their own making.
Now enter the Congress and Bush who decide we need to stop the bleeding in the market but where is the help for the homeowner who wants to be responsible? They want to keep thier homes and pay for them.
Look at it this way if we do not help those homeowners by giving them an option that allows them to stay in their homes we have more foreclosures and the very families that get ousted will now have to spend the money they would have paid on a mortgage on rent! They will not be better off in fact they will be far worse off and at the mercy of the rental market. At that point they no longer have any chance of hedging against inflation in their housing. They are at the completely and truly screwed. They will still be buying a house just for someone else.
Maybe there are some who willingly entered into risky deals that should then pay the price for bad decision making but we cannot hold every borrower responsible for the rouges. It is in our best interest to allow as many people to stay in their homes as we can and have them paying those mortgages rather than turning homeowners into a money machine for the investor class and thereby increasing the size of the lower-middle and lower classes. Rather than lifting them up and promoting healthy economic growth it will simply place a lower ceiling on it. Rather than empower the average American it will empower the wealthy investors who need no help to grow.
Hillary knows what we need to do to turn this crisis around and she knows how deep it runs for all those involved. She’s not just worried about Wall Street and the markets. She’s worried about the average Joe or Jane and she’s working to see that they don’t get forgotten.
Obama has yet to come up with any plan economic or otherwise that he didn’t steal from someone wiser and more savy. It’s what he does. He plagerizes speeches and he takes others’ ideas, tweaks them just a bit and tries to grab the credit. This guy wouldn’t know a solution if it hit him in the ass!
He’s not the President but he plays one and he just knows he could do it! “Come on! Howard, Donna and Nancy promised it was MY turn!”
Can we please have Hillary back now?