I hear that Clinton has robocalls going out in primary states touting her economic plan as the only one that will deal with the current housing crisis. This doesn’t surprise me as I’ve heard and read this line all over the place over the last few weeks. I won’t bother going on my robocall rant as I trust you agree that those things are down right annoying and would do more to piss me off than make me want to vote for someone. Instead, I’ll rant a bit on this notion that Hillary will be the one woman savior of all those people who took loans on houses they couldn’t possibly afford.
First and foremost, let me piss some people off. If you were one of those people who made $40k a year and believed some online broker who emailed you that you could afford a house that cost $1.2m, you’re stupid and you deserve whatever foreclosure is coming your way. I know that’s a very un-democratic-party way to speak to one’s neighbor, but let’s just speak the truth here, why don’t we?
Now that that’s been said, let’s move on to the solution. Yes, people were stupid. But still, we can’t have thousands of people homeless because they were preyed upon by completely unscrupulous mortgage lenders. Sometimes, we do have to protect our fellow citizens from themselves and from completely greedy corporations with zero moral compasses.
The question is how best to do this. Hillary is running (and robocalling) around the country shouting that she is the only one addressing this issue in her economic plan. That’s bunk. Now that she and Barack are the only two left on the Dem’s side (I’m ignoring the Republicans on this one because they don’t really care), this is an easy kill and I encourage you to go www.barackobama.com and check out his plan. I’ll deal here with hers.
Hillary’s plan re: mortgage crisis (from her website):
FORECLOSURE MORATORIUM: Hillary will call for a moratorium on home foreclosures of at least 90 days so that a rate freeze can take effect and at-risk homeowners can get financial counseling to help them transition to affordable loans.
FREEZE ADJUSTABLE RATE LOANS:The rate freeze must last at least 5 years, or until subprime mortgages have been converted into affordable loans. A typical subprime adjustable rate loan is raising monthly payments by 30% to 40% for many families, causing a wave of housing defaults across the country. (**Note that in recent speeches, she has dropped “subprime” from this part of the plan as if to suggest to voters that all adjustable rate loans would be fair game.)
REQUIRE ACCOUNTABILITY: Hillary will ask for regular status reports on the progress Wall Street is making in converting unworkable mortgages into loans families can afford.
The flashing lights and ringing bells feature should be going off around the “freeze adjustable rate loans” for “5 years.” The New Republic calls this approach, “dishonest, a fairy tale that won’t come true.” Fortune magazine, the guru of all things financial, ran an article on January 16 called Hillary’s Modest Proposal (to wreck the housing market). Here’s an excerpt:
Interest rates on new mortgages would skyrocket – perhaps past 8 percent, as the mutual funds, pension funds and other investors who typically provide capital to the mortgage market shift their money into other investments where the government isn’t impairing returns. With higher mortgage rates eroding buying power, the downward pressure on home prices would only increase. Lower home prices would lead to even more defaults, as more folks who’d lost the equity in their homes choose to walk away from their mortgages.
Then there’s the long-term impact such a bailout would have on behavior. While Clinton’s plan would no doubt save some legitimate victims who were duped into taking out bad loans, she’d also be saving the flippers and speculators who knew the risks of low teaser rate mortgages but figured (wrongly) that they could always sell their house for a profit if the reset mortgage rate proved unaffordable. Bailing out these folks now would only encourage them to take even bigger risks down the line.
At the end of the article, Jared Bernstein, senior economist with the liberal-leaning Economic Policy Institute, is quoted, “This kind of an idea is a little bit of untying your shoes with a buzz-saw.”
Interestingly, George Bush, whom Hillary loves to bash these days as being the root of all political evil, outlined his own 5 year freeze in December. Hillary and Bush on the same team. Huh.
Hillary has shown disastrous financial planning with her campaign. They way overspent in Iowa and had nothing but a loss to show for it. Now, she’s lending her campaign money to keep it afloat (yeah, yeah, she’s raised a lot since the announcement that she’s broke … but it never should have gotten that far in the first place). I don’t think that, in the face of expert advice to the contrary, we should trust her judgment on this or any other economic issue.