The Housing Chronicles Blog: Obama's response to foreclosures seen as tepid by some liberals

Thursday, February 7, 2008

Obama's response to foreclosures seen as tepid by some liberals

In contrast to Hillary Clinton's more forceful approach to re-write mortgage contracts, Barack Obama's plan is decidedly more centrist. And, according to this article in The Nation (hat tip to banker Brian McDonald), that may not be enough:

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...

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.

"One advantage to the tax credit is that there's no moral hazard involved," one of Obama's economic advisers explains. "There's no sense in which you're rewarding someone for taking too big a risk. If you lied about your income in order to get a bigger mortgage, then you're not qualified. Do you really want to give a subsidy to the guy who wasn't prudent?" Obama has used similar language on the campaign trail. "Innocent homeowners," he has promised, those "responsible" borrowers "facing foreclosure through no fault of their own," would get help restructuring their loans. But no such luck for those "claiming income they didn't have" or "lying to get mortgages."...

If Obama is serious about his community organizing roots, then he would do well to take a lesson from groups like the Rainbow/PUSH Coalition and ACORN, which are calling for a moratorium on foreclosures of a year or longer and for the creation of a massive government loan agency on the scale of the Reconstruction Finance Corporation of the 1930s. "We need some serious federal government intervention to restructure loans, not repossess homes," says the Rev. Jesse Jackson. "Because it's not just the borrowers anymore, it's the economy itself. We're in for a very difficult economic season."

1 comment:

Anonymous said...

A little update would be in order.

Now we get to see the difference between candidate Obama and president Obama. The new plan will cost slightly more than $500 apiece.