Democratic presidential candidate Hillary Clinton gave a major policy address yesterday at the University of Pennsylvania's Houston Hall on the emerging housing crisis that she said is at the heart of the "crisis of confidence" in the economy.
"In today's world, trouble that starts on Wall Street often ends up on Main Street," the New York senator said, with Philadelphia Mayor Michael Nutter and Pennsylvania Gov. Ed Rendell at her side.
Clinton outlined a four-part plan she said would relieve the increasing foreclosure rate and help unfreeze the housing market.
Since 2006, the foreclosure rate on homes in the United States has increased by 75 percent - with 2.2 million foreclosure notices going out in 2007.
In recent polls, voters have consistently named the economy as their top concern leading up to Pennsylvania's April 22 primary.
In an interview before Clinton's address, Rendell said that Pennsylvanians desire "good, high-paying jobs that can't be outsourced," such as those in the life sciences, renewable energy and infrastructure.
In the first part of her proposal, Clinton said she supports legislation in Congress that would "expand the government's capacity" to support mortgage companies that buy and restructure mortgages to make them "more affordable for families."
She then said the Federal Housing Commission should "be a temporary buyer" on subprime mortgages, which would adjust their value to make them more available for low-income families.
In her second proposal, Clinton called for the creation of an "Emergency Working Group on Foreclosures" that would advise on the implementation of the new legislation.
Recently, the Federal Reserve lent $30 billion to JPMorgan Chase to buy up Bear Stearns Corporation to address Bear Stearns' financial crisis and prevent possible collapse.
Clinton said that if the Fed can do that, then it should also "help families and communities" deal with the subprime mortgage crisis.
She called for the creation of a "one-time emergency $30 billion fund that would go directly into cities and states," which would be used to purchase foreclosed or distressed properties and sell them as affordable housing.
In the speech, Clinton compared her plan to proposals already in place in Philadelphia and Pennsylvania, including Rendell's similar emergency program that has "saved up to 40,000 homes" in the state.
The final point aimed to protect mortgage companies that try to restructure mortgages for families but that are at risk of being sued by investment banks.
However, not all market experts agree with Clinton's plan.
Wharton finance professor Jeremy Siegel, who is widely regarded as an authoritative financial analyst, said there are a "number of problems" with Clinton's proposal.
Siegel said he expects the Fed to "get back every penny" of its $30 billion loan to prevent Bear Stearns' collapse.
Siegel also said the Fed would get back nothing if it lent that same amount to localities, where he said there is "a lot of room for corruption."
He added that the plan would not help the banks that face the most risk right now.
"To worthy people who were misled, some relief is worthy," Siegel said, but he added that the overall economy would be better served through assistance to financial institutions.
© 2008 Daily Pennsylvanian via U-WIRE