Business/Finance

Clinton promises mortgage reform–by adopting right-wing talking points and policymakers

By Martin Bosworth

Right now the Clinton campaign carnage is focused on whether or not falsely claiming to be shot at on a Bosnian tarmac qualifies you to be ready to answer the red phone at 3 am. But there are other, subtler issues surrounding her that give me serious pause when considering whether or not she can truly be a progressive, or even Democratic president.

Her approach to dealing with the mortgage meltdown and resultant economic crisis is generally sound, especially in terms of endorsing the plans put forth by Barney Frank and Chris Dodd, both of whom have been doing some serious heavy lifting on this issue for the past few years.  But Clinton runs the risk of sabotaging the plan in a major way by putting none other than Alan “Irrational Exuberance” Greenspan himself in charge of the working group handling the initiative.

This proposal has already been viciously savaged by anyone with a lick of common sense as a prime example of setting the fox to guard the henhouse–you simply don’t put the guy who was chiefly responsible for this mess thanks to his slashing of interest rates and encouragment to buy dangerous adjustable-rate mortgages in charge of fixing the problem.  Greenspan is thoroughly discredited and should be left to rot on the speaker circuit, collecting hefty fees and blaming Communism for the decline of the American economy on his watch. Like Joe Sudbay says, if there’s anyone to be heading this up, it should be Paul Krugman.

It doesn’t end there. As part of her mortgage rescue proposal, Clinton has proposed shielding reputable mortgage lenders from lawsuits brought by angry shareholders and investors, particularly if said lenders agree to freeze mortgage interest rates (emphasis mine):

Democrat Hillary Rodham Clinton proposed several remedies to the nation’s home mortgage problems Monday, including one tool more often associated with Republicans than Democrats. The New York senator proposed greater protections for lenders from possible lawsuits by investors, a variation of so-called tort reform. For years, GOP leaders have called for restrictions on what they consider unwarranted lawsuits against businesses. Democrats have often resisted them on grounds they limit injured parties’ legitimate rights to redress. “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,” Clinton said in what she billed as a major address on the economy at the University of Pennsylvania.

Now, this bad framing may just be the result of a hack job by writer Charles Babington. And as a colleague pointed out to me, it is sensible to ensure that mortgage lenders actually have incentive to  restructure mortgages without fear of being sued into oblivion. But let’s face it–if this passes, it opens the door for a treasured plank of the moneyed class…the limiting of consumer lawsuits to seek redress for injury, especially class action lawsuits, under the principle of “tort reform.” I discussed this in depth last year while addressing the infamous $54 million pants lawsuit, and you would do well to read the work of the Drum Major Institute’s excellent Tort Deform blog as they deconstruct the continuing Republican war on consumer access to the courts.

Rather than opening the door to crushing a major progressive avenue of reform, Clinton should be ensuring that many of the “voluntary” mortgage reform plans advanced by banks, lenders, and the Treasury in recent weeks actually get enforced. She definitely should not be touting her expertise as a selling point in her candidacy if she’s going to use moves like these as examples of the good work she’ll do. There’s a right way and a wrong way to do things, and if the last eight years have taught us anything, it’s that right now, the “right” way is the wrong way. She ought to know better.

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