Clinton urges federal steps in housing crisis
Recommends new safeguards for lenders
PHILADELPHIA - Senator Hillary Clinton yesterday expanded her previous calls for federal intervention to stem the nation's rapidly unfolding housing and credit crisis while also recommending new protections for lenders, casting her ability to respond as a fresh test of presidential leadership.
"We need a president who is ready on day one to be commander-in-chief of our economy," Clinton said, echoing language she has used to question Democratic rival Barack Obama's fitness to handle international and military crises.
Clinton, seeking primacy on an issue crucial to working-class voters who are her core supporters, proposed that the Federal Housing Administration buy and restructure mortgage debt and called for a new $30 billion federal fund to help state and local governments fight foreclosures.
The New York senator, who a year ago proposed a moratorium on mortgage foreclosures and more recently a five-year freeze on interest rates, acknowledged that such action could be described as a bailout. But she cast her proposal as a populist parallel to last week's relief for investment banker Bear Stearns by the Federal Reserve, saying "it's now time for equally aggressive action to help families avoid foreclosure."
"Our housing crisis is at heart an 'American dream' crisis," she told a group of students, faculty, and political figures at the University of Pennsylvania. "Your home isn't just your greatest asset, your greatest source of wealth - it's your greatest source of security."
Clinton has repeatedly recommended a more active role for the federal government in the housing market than has Obama, who has warned that her proposals would lead to higher interest rates for all borrowers. Presumptive Republican nominee John McCain has opposed any bailouts that would let speculators off the hook.
In her speech yesterday, Clinton suggested creating a stimulus fund of at least $30 billion - the figure associated with the Fed's bailout of Bear Stearns - to support local governments and community groups in their efforts to stave off foreclosures, which she said would help cities and states shore up tax revenues that are declining due to falling property values. Under her proposal, the money could be used to directly help homeowners, to buy and resell foreclosed homes, or convert them into affordable apartments. The funds could also be used to pay the costs of police patrols and other programs to keep neighborhoods with high numbers of foreclosures safe from crime and blight.
Clinton also said she would introduce legislation to "clarify" the liability of companies that service mortgages, suggesting the type of limits on the ability of consumers to sue that comes more often from conservatives.
"This is too big of a crisis for us to let either ideology or fears of political demagoguing to keep us from putting every option on the table," said Gene Sperling, a Clinton economic adviser, in a conference call with reporters.
Obama's campaign said Clinton's recommendation yesterday for a "working group" comprised of financial heavyweights Paul Volcker, Robert Rubin, and Alan Greenspan to study methods of restructuring risky mortgages echoed a proposal he had made in the summer.
"One key difference, however, is the diversity and representation that Obama called for - not just some of the same people who helped to create these problems." Obama spokesman Bill Burton said in a statement.
Obama's camp also questioned Clinton's ability to follow through on her plans, saying she has a history of accepting money political action committees representing the mortgage industry. Clinton's campaign shot back that Obama has taken money from subprime mortgage lenders as well.
Globe correspondent Matt Negrin contributed to this report. Sasha Issenberg can be reached at email@example.com.