WASHINGTON (Reuters) - New York Senator Hillary Clinton said the federal government should establish a special entity that would buy mortgages from Americans and later sell them just as it did during the Great Depression.
Congress set up the Home Owners’ Loan Corp in 1933 to help stave off home foreclosures amid the economic downturn that followed Wall Street’s crash in 1929.
That program “worked very effectively to buy up mortgages, about a million homes were saved. Over time, those mortgages were sold and, frankly, the (U.S.) Treasury made money on it,” the former Democratic presidential candidate told CNBC television. “I think it’s imperative that we start considering such an entity like this.”
Barney Frank, chairman of the U.S. House of Representatives Financial Services Committee and a Democrat, also supports such a plan, Clinton said.
Congress should start crafting legislation now, but they also need the administration of President George W. Bush to commit to such a plan, she added.
Treasury Secretary Henry Paulson and others seeking to craft a bailout plan this week for the U.S. banking industry also need to include authority for the Treasury Department to modify home mortgages, Clinton told CNBC.
Any bailout plan should also include the framework to allow such powers and Congress could take further steps when it returns after the U.S. elections in November, she said. Congress is expected to adjourn Friday.
Additional reporting by Tim Dobbyn; Editing by Brian Moss and Andre Grenon