Hillary Clinton on the economy: "We have a crisis of confidence"
For the past seven years, we’ve had a president who stands up for the special interests - for the insurance companies and the mortgage companies and Wall Street. Now it’s time for a president who stands up for American families, a president who will rein in the special interests and rebuild the American middle class.
Over the past week, we’ve seen unprecedented action to maintain confidence in our credit markets and head off a crisis for Wall Street banks. It’s now time for equally aggressive action to help families avoid foreclosure and to keep communities across our country from spiraling into recession.
Today, I am announcing my four part plan to Protect American Homeowners: A plan to help our families keep their homes and help communities hard hit by the housing crisis.
My plan starts with an aggressive new effort to help millions of at-risk families restructure their mortgages and stay in their homes. Of the tens of millions of Americans who have lost value in their homes, 8.8 million are struggling with these mortgages underwater. That is more than 10 percent of all homeowners -- the highest percentage since the Great Depression. If home prices fall another 15 percent, one third of all homeowners will find themselves in the same boat.
The time for action is now - not a month from now, or a year from now - but now. And the reality is that many of our families need more than just basic refinancing. That’s why I support new legislation proposed by my colleagues, Representative Barney Frank and Senator Chris Dodd that would expand the government’s capacity to stand behind mortgages that are reworked on affordable terms.
Currently, families apply to the government, and the government decides on an individual basis whether to work with them to restructure their mortgages. You heard the governor say that maybe there will be 1,000 families that will be helped in Pennsylvania. This is a slow process that helps relatively few families, and it simply isn’t enough to revive our housing market.
The Frank-Dodd legislation would move beyond this incremental approach by setting up an auction system for mortgage companies that hold hundreds of thousands of these mortgages. Through this system, these companies could sell mortgages in bulk to banks and other buyers. The buyers would be willing to purchase these mortgages - and restructure them to make them affordable for families - because they know the government will guarantee them once they are refinanced.
This would be good for families, who can keep their homes. It would be good for mortgage lenders, because it’s more profitable than foreclosures. It would be good for our economy, helping to unfreeze our credit markets.
But given the severity of today’s housing crisis, simply facilitating this auction process might not be enough to get our economy moving again. That’s why I believe the Federal Housing Administration should also stand ready to be a temporary buyer - to purchase, restructure, and resell underwater mortgages.
Just as it has in the past, this kind of temporary measure by the government could give our economy the boost it needs and families the help they certainly need. It would not require a single new federal bureaucracy, it would be designed to be self-financing over time - so it would cost taxpayers nothing in the long run.
It is a sensible way for everyone - lenders, investors, mortgage companies and borrowers - to share responsibility, keep families in their homes, stabilize communities and the economy.
In order to determine whether the approach outlined by Representative Frank and Senator Dodd is sufficient - or whether we need the government to step in as a purchaser - I am calling on President Bush to appoint an emergency working group on foreclosures. That is the second part of my plan.
We simply cannot wait until Congress passes legislation to find the best way to help millions of families.
That’s why I’m proposing an Emergency Working Group on Foreclosures. It could be led by a distinguished, non-partisan group of economic leaders like Alan Greenspan, Robert Rubin, Paul Volcker. It’s the kind of proactive step that would help re-establish confidence in our economy by showing that the President and the Administration was taking our economic crisis seriously.
I’ve been calling for several weeks for the President to show some sense of urgency. The group’s first order of business would be to determine how the government should implement the solutions proposed in the Frank-Dodd legislation - and whether this legislation goes far enough.
If it’s decided additional steps are needed, then we should investigate whether - and how - the Federal Housing Administration or other government entities, or Fannie Mae and Freddie Mac, could buy, restructure and resell underwater mortgages. The group would report back to Congress on a very tight timeline - no more than three weeks.
In the meantime, while the Emergency Working Group is being formed, we should implement the moratorium on foreclosures that I first called for in December. Every unnecessary home foreclosure just worsens the credit crisis and further depresses housing prices. Secretary Paulson and others have finally acknowledged the need for this moratorium in certain cases. I hope we will act to implement it as quickly as possible to implement it.
The third part of my plan is a new housing stimulus package to provide $30 billion directly to states and localities, like Pennsylvania and Philadelphia, hard hit by this crisis.
Right now, concentrated clusters of foreclosures are devastating some communities. A recent study of ten states by the U.S. Conference of Mayors found that the foreclosure crisis will lead to 6.6 billion dollars in lost tax revenues in just those ten states alone.