Democrats up the ante on foreclosures
Two leading Democratic presidential contenders raced ahead of the Bush administration Wednesday in calling for more sweeping measures to help struggling homeowners with their mortgages.
Sen. Hillary Rodham Clinton of New York, the party front-runner, said in a Wall Street speech that the plan expected to be unveiled today by President Bush was inadequate. She proposed a foreclosure moratorium of at least 90 days for distressed holders of sub-prime mortgages who live in their own homes. She suggested that if investors did not agree to the moratorium, as well as a five-year freeze on mortgage rate hikes, she would propose legislation to order the changes.
John Edwards, the former North Carolina senator, upped the ante by calling for a seven-year freeze on rates for families with mortgage problems and creation of a federally financed “home rescue fund” to help low-income homeowners negotiate more sustainable mortgages.
The Democrats’ proposals came as Bush was set to depart from the free-market approach he usually favors on economic issues and announce broad government action to help hard-pressed homeowners. The plan would include a five-year freeze on some but not all sub-prime loans, speedy refinancing for other borrowers and permission for state and local governments to use more tax-exempt bond programs to underwrite refinancing.
The fast-paced action by the Democratic candidates and the administration suggest how the foreclosure issue and the state of the economy are playing a greater role in the presidential campaign as it approaches its first tests of voter sentiment in Iowa and New Hampshire next month.
Indeed, some pollsters say the economy is fast becoming the dominant issue. “I’m calling it one of the mega-issues for 2008,” said pollster John Zogby.
Calls for government action by the White House and the Democrats have caught most of the Republican presidential candidates off guard. Loyal to decades of GOP policy, they have presented generally rosy assessments of the economy, derided Democratic calls for government action and insisted that further tax cuts and market forces would cure any economic dislocations.
Former New York Mayor Rudolph W. Giuliani, who leads the Republican field in national polls, says that homeowners bear substantial responsibility for signing up for risky mortgages and has voiced skepticism about government action.
In the transcript of an earlier interview provided Wednesday by his campaign in response to questions about where he stood on the sub-prime issue, Giuliani said: “If you’re going to get a home and you’re going to get a risky mortgage, you’ve got to pay attention to the word ‘risky.’ And that’s the choice that you make. That’s the choice that the borrower makes, and you can’t expect the rest of the economy to bail you out of situations like that.”
An aide to GOP candidate Fred Thompson said he was not aware of any comments that the former Tennessee senator had made about the foreclosure issue.
Former Massachusetts Gov. Mitt Romney, another Republican presidential hopeful, said in a television interview in October that he welcomed federal assistance in refinancing loans for people facing a sharp rise in interest rates. He said he would “lose sleep over homeowners who didn’t realize that their rates were going to go through the roof, and I think in those cases, we’ve go to go back and help refinance those loans.”
A campaign spokeswoman for former Arkansas Gov. Mike Huckabee did not return a call for comment.
Clinton, in some of the toughest language in her speech Wednesday, laid much of the blame for the recent trouble on Wall Street. “Mortgage lenders didn’t have balance sheets big enough to write millions of loans on their own,” she said. “So Wall Street originated and packaged the loans that common sense warned might very well have ended in collapse and foreclosure.
“Some people might say Wall Street only helped to distribute risk,” she said. “I believe Wall Street shifted risk away from people who knew what was going on onto the people who did not.”
Clinton warned that if loan servicers and Wall Street investors did not voluntarily go along with a rescue plan she would consider legislation to force their hands. “I am prepared to consider giving legal protection [against investor lawsuits] to servicers and others who administer these loans and who do the right thing by balancing the interest of homeowners, the investors and our economy,” she said.
Both Clinton and Edwards portrayed the Bush plan, which has been hammered out by Treasury Secretary Henry Paulson, as inadequate. Said Edwards in a statement: “Risky mortgages with hidden fees and exploding interest rates are putting millions of families in jeopardy of losing their homes.”
Such remarks reflect a widening gap between candidates in the two major parties on the importance of the economy as an issue in 2008.
More and more, the Democratic candidates are trying to tap into voter anxiety about an economic downturn. Republicans continue to sound upbeat on the economy and attack Democratic proposals as likely to increase government spending and taxes.
The contrast was on display at recent campaign appearances by Thompson and Democratic candidate Sen. Barack Obama of Illinois.
“You’re working harder for less,” Obama said at a community college in Fort Dodge, Iowa. “The cost of everything from healthcare to college to gas have all shot up. They’ve never been higher. It’s harder to save; it’s harder to retire.”
For his part, Thompson rated the economy as “fairly good” when he spoke at a coffee shop in Ames, Iowa, before Thanksgiving.
A recent Gallup poll showed that 27% of Americans rated the economy “good” or better, whereas 78% rated it “only fair” or worse.
In the face of these trends, some Republican analysts worry that the party’s candidates need to retool their message lest they appear out of touch.
“Republicans may be too optimistic, too positive about the economy,” said Neil Newhouse, a Republican pollster.
“The stock market may have been close to breaking records, but middle-class America doesn’t believe the economy is going very well. The Republican presidential contenders absolutely need to figure out how to talk about this issue, and they need to reflect Americans’ concerns about it.”