March 24, 2008 / 4:05 PM / 10 years ago

Clinton proposes steps to ease housing crisis

PHILADELPHIA (Reuters) - Democrat Hillary Clinton proposed steps on Monday to boost the ailing U.S. economy and ease the housing crisis in a pitch for support from blue-collar workers ahead of next month’s presidential showdown with Barack Obama in Pennsylvania.

Clinton called for President George W. Bush to appoint a high-level group of economic experts led by former Federal Reserve Chairmen Alan Greenspan and Paul Volcker and former Treasury Secretary Robert Rubin to determine if the government should buy up homes to stem the country’s housing crisis.

The New York senator and former first lady said the Federal Housing Administration should stand ready to buy, restructure and resell failed mortgages to strengthen the ailing economy.

“Just as it has in the past, this kind of temporary measure by the government could give our economy the boost it needs and families the help they need,” Clinton said in a speech in Philadelphia.

“It would not require a single new government bureaucracy, and would be designed to be self-financing over time -- so it would cost taxpayers nothing in the long run,” she said.

Clinton said she would propose legislation to provide mortgage companies with protection against the threat of lawsuits from investors who have bought the loans.

“Many mortgage companies are reluctant to help families restructure their mortgages because they’re afraid of being sued by the investment banks, the private equity firms and others who actually own the mortgage papers,” she said.

Clinton is in a heated battle with Obama, an Illinois senator, for the Democratic nomination to face Republican presidential candidate John McCain in November’s election.

Their next battleground is Pennsylvania, a state with a large bloc of blue-collar workers who have been a pillar of her support. Clinton has emphasized her economic leadership while campaigning in states like Pennsylvania, which has been hard hit by the housing crisis and job losses.

Obama campaign manager David Plouffe said her proposals were in line with steps Obama has proposed, including a call by Obama for a homeownership summit. But Plouffe said Clinton was not in a position to carry through on her promises because she had taken contributions from special-interest lobbyists.

“She would operate within the current system and has said that repeatedly. Our belief is we need to change the system,” Plouffe told reporters.

Clinton endorsed legislation in Congress proposed by Democratic Rep. Barney Frank of Massachusetts and Sen. Chris Dodd of Connecticut to expand the government’s capacity to stand behind mortgages that are reworked on affordable terms.

Under the plan, the government would take failing mortgages off the hands of investors and write new terms that would prevent foreclosure. It would see lenders write down the mortgage amount in exchange for a government guarantee.

But she said a bipartisan group should determine whether that approach was sufficient or whether the U.S. government should be more proactive and step in as a temporary purchaser.

With the April 22 vote in Pennsylvania still weeks away, both candidates have been making policy speeches and laying the groundwork for a lengthy campaign that is likely to stretch through the end of the primaries in June.

Obama leads Clinton among pledged delegates who will vote on the nominee at the party convention in August, but both candidates are wooing the nearly 800 superdelegates who are not bound to support a candidate and who are likely to decide the nomination.

In her speech, Clinton also repeated her proposal made last week for a new economic stimulus package that would focus on the housing slump.

The proposal includes a $30 billion emergency housing fund to put cash in the hands of local governments and nonprofit organizations to buy and resell properties to low-income people or turn them into affordable rental housing units.

(Writing by John Whitesides; editing by David Wiessler )

To read more about the U.S. political campaign, visit Reuters "Tales from the Trail: 2008" online at

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