LET'S EXAMINE OBAMA'S POSITION ON THE SUBPRIME MORTGAGE CRISIS

[Orwellian_Ghost]

As the subprime mortgage debacle drives a recession that threatens financial markets around the world, the Democratic presidential candidates are pushing plans to address the crisis. John Edwards and Hillary Clinton are pledging substantial federal resources to stabilize the mortgage market and intervene on behalf of borrowers. Barack Obama's proposal is tepid by comparison, short on aggressive government involvement and infused with conservative rhetoric about fiscal responsibility. As he has done on domestic issues like healthcare, job creation and energy policy, Obama is staking out a position to the right of not only populist Edwards but Clinton as well.

Edwards's plan includes a mandatory moratorium on foreclosures, a freeze on rising interest rates for at least seven years, federal subsidies to help homeowners keep up with payments and restructure loans, and explicit measures to rein in predatory lenders and regulate the financial sector. Clinton's plan is weaker--a voluntary moratorium, a shorter freeze, less commitment to new regulations--but she has promised $30 billion in federal aid to help reeling homeowners and communities.

Only Obama has not called for a moratorium and interest-rate freeze. Though he has been a proponent of mortgage fraud legislation in the Senate, he has remained silent on further financial regulations. And much like his broader economic stimulus package, Obama's foreclosure plan mostly avoids direct government spending in favor of a tax credit for homeowners, which amounts to about $500 on average, beyond which only certain borrowers would be eligible for help from an additional fund.

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"There's been less emphasis from the Obama campaign on the really dysfunctional role of the financial industry in the subprime mess," says Josh Bivens of the Economic Policy Institute. "Edwards and Clinton talk much more about regulation of the financial industry going forward, and to the extent that blame is placed, they tend to place it on the lenders for steering people into loans they couldn't afford."

Obama's disappointing foreclosure plan stems from the centrist politics of his three chief economic advisers and his campaign's ties to Wall Street institutions opposed to increased financial regulation. David Cutler and Jeffrey Liebman are both Harvard economists who served in the Clinton Administration, and they work on market-oriented solutions to social welfare issues. Cutler advocates improving healthcare through financial incentives; Liebman, the partial privatization of Social Security.

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http://www.thenation.com/doc/20080211/fraser


Examining Clinton & Obama’s Stances on the Subprime Mortgage Crisis, Universal Healthcare, Privatizing Social Security and Nuclear Energy
With Senators Hillary Clinton and Barack Obama in a dead heat, we look at their stances on some of the most pressing domestic issues with Robert Kuttner of the American Prospect, Max Fraser of The Nation and Paul Gunter of Beyond Nuclear.
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JUAN GONZALEZ: Could you outline the differences between—the major differences between the candidates? And it would be instructive also to talk about John Edwards’s policies, as well.

MAX FRASER: Sure. Well, when he was in the race, Edwards’s plan was by far the most comprehensive and aggressive, insofar as it really committed the government to intervening on behalf of homeowners and resolving the crisis in such a way that it would keep people from losing their homes. Edwards called for a mandatory moratorium on foreclosures, a freeze on rising interest rates, a real kind of redoubled efforts to not only regulate the mortgage markets, but financial markets generally.

Clinton and Obama fall short of that, and Obama falls short most significantly. He is the only one of the three who hasn’t called for a moratorium on foreclosures or a freeze on interest rates, which really are the most effective short-term measures that can be taken to keep homeowners in their homes. And beyond that, his plan calls for the least aggressive government intervention, the most limited spending to bail out homeowners and to especially borrowers who are at risk of defaulting on their mortgages and to help them restructure their loans in such a way that they’re affordable moving forward. And his plan actually really most relies on a pretty insignificant tax credit, which comes out to about $500 on average for homeowners, which might make a difference for those who are just barely falling behind, but not for those who are falling further and further behind.

AMY GOODMAN: Max, in your piece, “Subprime Obama,” you talk about his three main economic advisers.

MAX FRASER: Right.

AMY GOODMAN: Tell us who they are.

MAX FRASER: Well, there are these three young economists: David Cutler, Jeffrey Liebman and Austan Goolsbee. Cutler and Liebman are Harvard economists who hail from the Clinton administration. Goolsbee, who does the lion’s share of the work on this issue, comes from the University of Chicago. They’re all centrist market economists, I mean, what you would call them Clintonian in their politics, and that’s really where they’re coming from. They are oriented towards, you know, market-based solutions to social welfare issues. Cutler writes about incentivizing the healthcare industry as a way to improving care. Liebman has endorsed the partial privatization of Social Security. And Goolsbee also is one of the kind of market faithful.

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http://www.democracynow.org/2008/2/8/examining_clinton_obamas_stances_on_the