Bill Clinton: Aggressive Federal Intervention To Protect Homeowners and Banks
Jan. 9, 2008 (EIRNS)Speaking on Hillary Clinton's behalf at a campaign event on Monday, former President Bill Clinton gave a relatively elaborated presentation of the sub-prime mortgage crisis, including the role of hedge funds. While still falling short of endorsing LaRouche's Homeowners and Banks Protection Act, Hillary Clinton's call for moratorium on foreclosures and a freeze on monthly mortgages payments is the only comprehensive proposal so far offered by any presidential candidate, to the spreading housing and banking crisis.
Responding to a question about the sub-prime mortgage issue, Bill Clinton pointed out that the way sub-prime mortgages often worked is that people were buying houses that cost more than they could afford, often by just paying interest for the first five years or so.
Clinton explained that "banks packaged these mortgages and sold them to investment houses and hedge funds, who then sold them as investment vehicles to others, and they turned out not to be such good investments, and when they started going down in value, it cascaded back, and the sub-prime mortgages failed as investment vehicles."
"So then they wind up back on the books of the bank as bad debt," Clinton said, and the banks come under pressure "to rewrite the mortgage, which has the effect of raising the monthly mortgage rate of the person that got the mortgage in the first place, which means we're at risk of foreclosing on huge numbers of people who never missed a single mortgage payment."
This is "dumb," Clinton declared, adding that "It will cause cataclysm in the real estate market, and throw a lot of middle class people out of their homes. Hillary asked the President to do something about this six months before they announced anything, and her program is to first have a 90-day moratorium, no foreclosures, and during that 90 days, give everybody a chance to renegotiate their mortgage in a way that will get the bank out of trouble, but has to have a five-year freeze on the monthly payments of the homeowners."
"It will require some federal money," Clinton continued. "It will be much, much cheaper take my word for it much cheaper than having all these houses foreclosed on and having the value plummet, then having them resold and having huge numbers of Americans who will never own a home again in their lives."
Clinton concluded by warning that "it's going to take a much more aggressive intervention than the government has proposed, so far to avoid that."