Senator Clinton Comments On Financial Crisis
In an op-ed piece in the Wall Street Journal, Senator Clinton outlined several proposals to stabilize the markets, offer relief to homeowners facing foreclosure, provide shared equity to taxpayers, and require more accountability from companies receiving government aid. As she has since the crisis began, Senator Clinton underscored the need to rescue Main Street as well as Wall Street.
"If we are going to take on the mortgage debt of storied Wall Street giants, we ought to extend the same help to struggling, middle-class families," Senator Clinton wrote. "This is not just a financial crisis; it's an economic crisis."
Senator Clinton's call for broad economic reform to address the underlying economic challenges that set the stage for this crisis was reinforced today by troubling new economic reports. The U.S. Department of Labor reported that unemployment claims soared last week to the highest level in seven years. New York is among the states hardest hit. At the same time, the U.S. Commerce Department reported that orders of durable goods such as cars and large appliances have plunged.
The text of Senator Clinton's op-ed follows:
LET'S KEEP PEOPLE IN THEIR HOMES: By Hillary Rodham Clinton
The Wall Street Journal September, 25, 2008.
There is a broad consensus that Congress must act to stave off deeper turmoil on Wall Street. Irrespective of the final agreement yet to be reached, there are several principles that must be part of a broader reform effort that begins this week and continues in the coming months.
This is not just a financial crisis; it's an economic crisis. Therefore, the solutions we pursue cannot simply stabilize the markets. We must also deal with the interconnected economic challenges that set the stage for this crisis - and reverse the failed policies that allowed a potential crisis to become a real one.
First, we must address the skyrocketing rates of mortgage defaults and foreclosures that have buffeted the economy and ignited the credit crisis. Two million homeowners carry mortgages worth more than their homes. They hold $3 trillion in mortgage debt. Nearly three million adjustable-rate mortgages are scheduled for a rate increase in the next two years. Another wave of foreclosures looms. I've proposed a new Home Owners' Loan Corporation (HOLC), to launch a national effort to help homeowners refinance their mortgages. The original HOLC, launched in 1933, bought mortgages from failed banks and modified the terms so families could make affordable payments while keeping their homes. The original HOLC returned a profit to the Treasury and saved one million homes. We can save roughly three times that many today. We should also put in place a temporary moratorium on foreclosures and freeze rate hikes in adjustable-rate mortgages. We've got to stem the tide of failing mortgages and give the markets time to recover.
The time for ideological, partisan arguments against these actions is over. For years, the calls to provide borrowers an affordable opportunity to avoid foreclosure as a means of preventing wider turmoil were dismissed as government intrusion into the private marketplace. My proposals over the past two years were derided as too much, too soon. Now we are forced to reckon with too little, too late.
As a result, the home-mortgage crisis slowly eroded the value of debt instruments upon which Wall Street firms were depending. That is how this house of borrowed cards began to fall. If we do not take action, we'll never solve the crisis facing lenders. These problems go hand in hand. And if we are going to take on the mortgage debt of storied Wall Street giants, we ought to extend the same help to struggling, middle-class families.
Second, American taxpayers should have a voice and a stake in the resolution of this market crisis. If the Treasury proposal is enacted in its current form, the American government would assume enough financial risk to become the majority shareholder in the companies rescued by taxpayer dollars.
The American people are bearing the risk and therefore deserve to reap the rewards of a shared equity model. And mortgage securities bought by taxpayers must be valued accurately at prices disclosed in real time, with checks and reporting requirements to prevent abuse.
Third, taxpayers are being asked to bear an unparalleled degree of financial risk. We cannot allow taxpayers to take on this burden so that Wall Street and the Bush administration can hit the "reset button." This historic intervention demands a historic shift in priorities: an end to the broken culture on Wall Street, and the broken economic policies in Washington.
Corporations that will benefit must be held accountable, not only to large shareholders but also to the American people, who are rightly tired of business as usual: short-term profit at the expense of long-term viability; lax oversight and regulation; obscene bonuses and golden parachutes regardless of performance; reckless risk-taking that has placed the markets in jeopardy; rewards for foreclosing on middle-class families and selling mortgages designed to fail; and outsourcing good jobs to serve shortterm stock prices instead of America's long-term economic health. This is a sink-or-swim moment for America. We cannot simply catch our breath. We've got to swim for the shores.
We must address the conditions that set the stage for the turmoil unfolding on Wall Street, or we will find ourselves lurching from crisis to crisis.
Just as Wall Street must once again look further than the quarterly report, our nation must as well.