by Chana Kai Lee
The other day I found myself growing bored with the 2008 presidential campaign. Maybe just the opposite is true: I am in a funk because it has been such a very long time since the last primary or caucus. One thing is for sure: I am tired of those damn “red phone ads.”
If you are keeping the “red phone” score: Clinton 2, McCain 1. Now Clinton assures us that she is ready for international and domestic crisis: she is the ONE to protect our precious little ones as they sleep, and she is the ONE to rescue us from the foreclosure boogey man.
In his newly released "red phone ad," McCain promises to rescue us from the mortgage crisis by going after the big, bad Tax Monster. Both Clinton and McCain are hell-bent on scaring us into voting for them. And in McCain’s case, when that does not work, he has resorted to scolding individuals for home foreclosures. Straight talk from the man who admits to knowing very little about the economy and who plans to read Alan Greenspan’s Age of Turbulence for a quick tutorial. What a rocket scientist. Onward with the weird biography tour.
Forget the 3am Phone Call: There Are Real Needs to Address Here and Now
Like others who are asleep at the switch or whose interests are clearly elsewhere, Clinton and McCain hardly ever mention racial bias in “predatory lending” of subprime mortgage loans. According to Foreclosed: State of the Dream 2008, a considered and well-documented study completed by United for a Fair Economy, the losses of African American and Latina/o borrowers are substantial and disproportionate:
"We estimate the total loss of wealth for people of color to be between $164 billion and $213 billion for subprime loans taken during the past eight years. We believe this represents the greatest loss of wealth for people of color in modern US history.
From subprime loans, Black/African American borrowers will lose between $71 billion and $92 billion, while Latino borrowers will lose between $75 billion and $98 billion for the same period.
According to federal data, people of color are more than three times more likely to have subprime loans: high-cost loans account for 55% of loans to Blacks, but only 17% of loans to Whites.
If subprime loans had been distributed equitably, losses for white people would be 44.5% higher and losses for people of color would be about 24% lower. This is evidence of systemic prejudice and institutional racism." (p. vii)
Who will step up to provide relief to these Americans? I have no tears for Joe Lewis, the British billionaire and largest Bear Stearns stockholder who will “lose” $800 million. More focus has been on him than these homeowners. Surely their losses have the same ripple effect, if not a greater one. Regardless, their losses are meaningful to them, and the government needs to pay attention. Nobody is answering the red phone when they call. Their financial misfortune is all too often attributed to their poor choices or values.
Senator Clinton on Addressing the Housing Crisis:
On March 24, Senator Clinton announced a four-point plan to address the housing crisis. That plan includes:
a) Use of the FHA to restructure mortgages so people can stay in their homes
b) Formation of a “High-Level Emergency Working Group on Foreclosures to Investigate” how to go about restructuring at-risk mortgages
c) Legal protection of mortgage servicers concerned about liability when they offer help to consumers
d) A housing stimulus package of at least $30 billion for states and localities
This plan, of course, builds on her late 2007 call for a foreclosure moratorium and a freeze on subprime mortgage rates. Parts “a” and “d” are reasonable steps in the right direction. Part “b” is standard fare for politicians who care more about giving the appearance of addressing a problem in a comprehensive way (yawn). For my take on “c,” see my last paragraph.
Senator Obama on Addressing the Housing Crisis:
I favor Senator Obama's plan because it aims at the fundamental problem of structural hazards and insufficient oversight of the financial sector, and it just seems more working-class and middle-class homeowner friendly. He plans to
1) introduce a universal mortgage credit for those who do not already itemize;
2) demand more accountability in the subprime mortgage industry to discourage and punish “mortgage professionals” engaged in fraudulent, risky or abusive activity through the Obama-sponsored (and Senator Dick Durbin-co-sponsored) STOP FRAUD Act (“Stopping Mortgage Transactions which Operate to Promote Fraud, Risk, Abuse and Underdevelopment Act”);
3) require the kind of accurate loan disclosure that helps consumers understand their full loan obligation and allows them to shop for better loans using an index, a HOME (a Homeowner Obligation Made Explicit ) score;
4) create an assistance fund to help homeowners in foreclosure; the fund would be paid for partly by penalties on naughty lenders;
5) close any loopholes that allow mortgage lenders to hide behind federal law
I am for anything that puts tougher regulation back on the table. That Clinton is concerned about legal exposure for mortgage lenders is just a crock of poop. She is protecting a particular interest, and that would not be consumer interest.
I see why Clinton’s plan does not include any measurable increase in regulation. President Bill Clinton took a major step in the direction of greater banking deregulation when he repealed major New Deal legislation that stabilized the banking system during the Great Depression and beyond--Glass-Steagall (also known as the Banking Act of 1933). Without this repeal, banks were forbidden from underwriting stocks and bonds. Commercial banking activity had to be separate from investment banking. In 1999 a nearly 40-year effort to loosen Steagall was complete with the passage of the Financial Services Modernization Act. Clinton and Greenspan were out front in this effort, getting Congress to finally go along. So, we can thank the Clinton era for some of this mess. Senator Clinton is not going to go there. Discussing the repeal of Glass-Steagall or her husband’s fingerprints on part of this crisis is off limits like Chelsea is to the press. (For all of his criticisms of the Bush administration, Alan Greenspan is being disingenuous himself in that little book of his--well, more like a big-a** book of his).
Why won’t the media press Senator Clinton on the matter of banking deregulation and greater accountability from institutions in the financial sector? If she is going to run on the Bill Clinton legacy and her time as First Lady in the White House (sniper fire and all), she needs to be honest about looking back on those years in a critical way. Do what she says she has done with regard to the early mistakes around health care. Acknowledge mistakes made and adjust accordingly—for the good of the people, not personal ambition.
Some of you may have noticed heightened activity within the left-center blogosphere resulting from the rants of a big champion of the Clintons. Of course, I speak of the noted Princeton economist, Nobel-Prize nominee, former Enron consultant and New York Times columnist, Paul Krugman. On hillaryclinton.com, the campaign calls special attention to a Krugman article in support of her ideas. In some circles, he is called a hypocrite regularly these days. Here is a succinct version of Jon Taplin calling him out. I think Krugman’s liberal conscience has been asleep lately. His knickers have been in a twist over anything Obama says, does, or writes. Somebody needs to relieve him of his wedgie. He is tiring, and so unabashedly transparent.
