Hillary on housing: Clinton's foreclosure bailout plan

Sen. Hillary Clinton (pictured) made a political speech today about the foreclosure crisis, and as a political effort, it may prove fairly successful for her. But, thankfully, this is not a politics blog, so my analysis can largely ignore politics and stick to housing and economics.

Of the three presidential candidates, Clinton's fix is the most aggressive -- the biggest bailout, if you will. That makes it the most offensive to those who believe the solution to artificially inflated housing prices is, yes, a period of declining housing prices. Instead, she says the government should get ready to start buying mortgages: "... I believe the Federal Housing Administration should also stand ready to be a temporary buyer -- to purchase, restructure, and resell underwater mortgages."

She also proposes a freeze on foreclosures and a $30-billion fund so that cities and states can start buying foreclosed and "distressed" properties for possible resale or rent (Imagine the bungling, the fraud, and the favoritism, if the city of Los Angeles -- which can't even keep track of foreclosed houses -- gets a pile of federal money to start buying them).

The headline-grabber was the suggestion that the president assemble a group of economic geniuses -- an "emergency working group on foreclosure." She suggested, evidently with a straight face, that the group would be led by "nonpartisan" economic leaders like former Treasury Secretary Robert Rubin.

Now, Bob Rubin is a smart guy and all that, but he served in a Democratic administration, which his not a bad thing, but is not "nonpartisan."  Further, he works for a company, Citigroup, that, as Fortune recently reported, "has written down more than $24 billion in losses due in large part of greed, cynicism, and bad judgment." Citi has been so wounded by the mortgage mess that Rubin had to jump on a plane and fly halfway around the world to ask the government of the United Arab Emirates for money. This is a nonpartisan figure capable of objectively analyzing the mortgage crisis? This is like putting Snoop Dogg on an anti-drug panel.

Clinton manages to acknowledge that reckless borrowers bear some responsibility for the housing mess, but can't bring herself to call it what it is: the inevitable unwinding of a bubble of unsustainably high prices and disastrous lending against those prices.

She also can't bring herself to blame her good friends on Wall Street -- see Rubin, Robert -- for their role in the mess. This is not an oversight. Instead she tries to score a few points by calling attention to the Bear Stearns bailout, without actually criticizing it. Populism Lite.

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: AP

Comments

[NationalBubble.com]

What Hillary Clinton is trying to do with this mortgage bailout is disgusting.

[the problemwithcaring]

Frank Rich talks about how if one delves into most of Hillary's policy prescriptions, one eventually finds that they all culminate, somehow, in a Blue Ribbon Commission.

"No matter what the problem, she keeps rolling out another commission to solve it: a commission for infrastructure, a Financial Product Safety Commission, a Corporate Subsidy Commission, a Katrina/Rita Commission and, to deal with drought, a water summit."

Ready to ruminate on day one!

[JohnnyB]

Peter Viles,

I've enjoyed reading/posting on your blog for a while now. My last 4-5 posts haven't even been posted. Seems the “politically incorrect” radar is running a little hot amigo…

I guess for this post I’ll just say…

This Clinton lady is wrong.

[msprompt]

Completely outrageous!! An absolute insult to thinking people everywhere. Every time I think I cannot get any angrier at this mess, I open the morning newspaper or click on a blog and BAM! Freshly pissed off again.

[jaded]

wow, I'm voting for Hillary!

with enough taxpayer money and enough socialist-leaning egghead commissions, there's nothing the Feds can't solve!

which line do I stand in for my handout?

[Laker]

Clinton: "...It is a sensible way for everyone - lenders, investors, mortgage companies and borrowers - to share responsibility..."
Why do I, that acted responsible and did not buy into inflated market or refinanced the house and pulled cash to buy boats and vacations, have to SHARE responsibility with the scumbags, dead beats, and all flippers/fraudster that should have never been allowed to buy in the 1st place.....
We the TAX PAYERS do NOT want to share that responsibility. How come when the dot.com crashed in 2001, nobody share the losses. Those that were invested simply lost money.
How come nobody shared the wealth during the 2000-2006 run in prices???
And how come she does not even once mention the word affordable housing as in houses that were overinflated, and people simply can't afford them!
What a loser, I will do anything i can to convince not to vote for her.

[Inland Empire]

As with all government programs, the middle class will not benefit. I think you are right on as far as graft, greed, favortism, greased palms etc.

[jdj]

Peter,

Rubin, the 'headline-grabber'?!?
Are you kidding? The 'headline-grabber' is that she wants Greenspan to lead the group -- The guy who caused all this.

Brilliant!

[P]

I can't believe I am about to say this... if Hillary somehow manages the Democratic nomination...I will vote....*holds nose* Republican.

Luckily, it's not possible for her to win it without the delegates voting against the people's wishes. Me thinks that would not go over too well with the people.

After reading this, I wouldn't even want her on the ticket as VP.

[MyLessThanPrimeBeef]

I know how she thinks...it goes like this, boy (or girl), oh boy, (or, oh girl), we have come a long way from those 'A cave for every caveman (or cavewoman)' days. This deplorable situation in real estate is completely intolerable! We are much more civilized than those Neantherdals (just between you and me, we are not). And if every caveman or cavewoman could have a cave, then every modern man or woman must have a modern house. So, I propose everyone should have a house.

That's what is going through her mind, I think.

And if I may be so bold as to show that I can be smarter than her, I propose that everyone should be president...you might call it univeral political power sharing or something.

[treetime]

Back in the USSR, you don't know how lucky we were!!!!

Clinton is so clueless and so ignorant. All she ever accomplished in her life is getting a law degree (big deal, I have one) and she married well!!! Really well!!!

It's just to much for a rational human being to take.

I would really like to write what should be done with the Clintons (and the Bushes), but I better not.

(I'm a woman by the way- so this is not sexism...)

[IToldu2CashOut]

Now I remember why I voted for Obama and why in the future I'm voting against every incumbent I can until this housing mess is over. McCain is a moron, but he's looking pretty good in comparison.

[Central Valley Guy]

I'm a lifelong diehard Democrat but her bailout plan for the legion of losers and DNA disasters who brought us to this crisis point is absolutely beyond the pale. If she is the representative for the Dems come November, I'll be looking at other options and convincing everyone I know to do the same. My wife and I have spent six years saving money and waiting to buy an affordable home in L.A. and now she wants to use the power of the government to make it impossible for us to do so??!!??

[treetime]

For the past two decades or perhaps the last decade, it's always the same players in politics. We really don't have a two party system anymore. Rubin, Greenspan, Bushes, Clintons, Cheney, Gore etc....they all have the same goal, to enrich themselves at the expense of the American Taxpayer and the expense of the American System.

We really do need some new leadership, although I'm not sure if it will make much of a difference. At least a new face to look at, I guess.

[mbob]

Repubicrats.

A pox on all their (leveraged) houses

[firesale]

The headline-grabber was the suggestion that the president assemble a group of economic geniuses -- an "emergency working group on foreclosure." She suggested, evidently with a straight face, that the group would be led by "nonpartisan" economic leaders like former Treasury Secretary Robert Rubin.

Just GREAT, Hillary!

Let's assemble our biggest foxes and put them in the
hen house. Isn't that how we created this situation?
Are the American people really stupid enough to listen to her sh--?

[l.a.guy]

Putting aside the issue of whether or not it's a sensible policy, I wonder where the $30B price tag comes from? Based upon the bank write downs we've already seen and the amount of loans awaiting their day of reckoning, $30B would seem to be a hugely optimistic number.

If there were a mechanism for establishing the REAL current market value of homes, and the GSE's could by the loans at 80% of the value, then it may be worth doing in order to restore confidence to the financial markets.

I know 99% of the readers of this blog will only be happy when every last commercial and investment bank has filed for bankruptcy and houses are selling for their 1950's prices, but considering what we piss away on Iraq every month, wouldn't it be smarter to invest some money here in order to shore up the US economy?

If lenders have to sale the loans at real market values they will take tremendous losses, (I'm sure some will still go out of business) and the exposure to the tax payer would be limited as long as the LTV's reflect real value, not 2007 values. I agree there is good reason to be skeptical the government could execute something like this without totally screwing it up, but we may have little choice if we want to bring this debacle to an end sooner than later.

[lefty]

hey guys, spain or france or mexico, nowhere else in the world beats metro L.A., and you know the time to buy is right now!! grab yourself a nice place and chill out for a few years, you will not regret it!

[left of lefty]

fortunately for the democrats, obama will most likely take the nomination.

though he has his own bailout plan as well.

in any case, it's hard to imagine the democrats screw up so badly that they would lose this election. so chances are some type of bailout will occur and put a floor on housing prices. it's not a bad idea to start looking at buying again.

[tom]

Ralph Nader was right when he said there is no real differences between our two parties.
we need a system like Russia where the top two vote winners have a runoff. That way people would take a chance on voting for the underdog who they really agree with without giving the election to a party they hate.

[RZ]

If she wants to have the government buy mortgages, fine. But there should be no moratorium on foreclosure. The market will never fix itself if the prices aren't allowed to adjust. And irresponsible consumers will never learn lessons if they see others get bailed out to such an extent.

[Lost in Deutschland]

In previous postings I've asked this question before, but no one answers it.

I'll ask again: If we do not have a 'bail-out' like the Clinton plan or the Dodd-Frank Bill, then what are we going to see? Are we willing to stand on our principles and see our economy go the way of Japan of the previous decade?

Wouldn't it be better to bite the bullet on this one and make a quid pro quo with the investment houses - stating we will help you out, but you need to accept regulations that will prevent this type of reckless speculation.

Because doing nothing is what the Hoover Administration did from 1929 through 1931.

[peteviles]

Lost in Deutschland writes, "Wouldn't it be better to bite the bullet on this one and make a quid pro quo with the investment houses - stating we will help you out, but you need to accept regulations that will prevent this type of reckless speculation."

Thanks Lost. That's an interesting question, but Clinton did not propose new regulations to curb reckless speculation or to regulate largely unregulated investment banks.

[Liz Wetzel]

This is the doing of the Republican Party. Their Motto is : Small Government, then let out their greedy members let loose, speculating market. I personally know one guy from Michigan, stayed in CA for a while to invest in that scam where his partner would sell a 100k house to him for a 400k. Of course he just walked out after, went back to Michigan. NOW how dumb is the democrats to take the fall. DO NOT bail out the banks, go after those scam artists, the same republicans and youll win over this creatures. Do not make us pay from our tax dollars.

[NoWayinLA]

So Hillary's big plan is - make a plan. Brilliant!

My daughter used to sound just like Hillary. She'd randomly say, "We need to make a plan." She's three. And I think she'd make a better president than Clinton. I already voted for my daughter in the primary. She's capable of accomplishing at least as much real change in the health care system as Hillary did. And she can make poopies in the potty all by herself.

Deutschland - Actually, the bailout is very similar to what Japan did. The cheap-money Fed moves this year have already set us on the path to Japan-style stagnation. The sooner home prices fall back into rational, affordable levels, the sooner transaction activity resumes and gets the economic blood pumping again.