Last night, Spanish language Univision and the University of Miami hosted a debate between the Democratic candidates for president. Questions about war, healthcare, and immigration took up most of the time and attention.
It was only towards the end of the evening that a single question emerged on the crisis in the nation’s housing markets.
Hillary Clinton was ready with a statistic: that 40 percent of foreclosures in the United States are accounted for by Hispanics. Barack Obama, with a recommendation for sharper regulation of unscrupulous lenders.
Whoever the Democratic candidate will be, will need to be a lot sharper than they were last night in Miami.
In general, the Democratic prescriptions can be summed up in a few words: the need to cut interest rates by the Federal Reserve, and, a bail-out for consumers.
Why neither of these options will work to stimulate an economy that is likely to be in recession in 2008 (if it is not already) needs to be explained to voters.
News late Friday that Countrywide was laying off 20 percent of its workforce, or 12,000 people, acknowledges that whatever the Federal Reserve does, in terms of cutting the key interest rate, will not bring consumers back to the housing markets.
In other words, we are in for a long haul on the fierce downside of a speculative boom in housing that the Federal Reserve helped to ignite in 2001.
Hillary Clinton nodded toward Senator Chris Dodd, the chair of the Senate Banking Committee, and argued for strenuous intervention on behalf of the millions of consumers whose mortgages are at risk.
It is all well and good to talk about bailing out consumers, or, a bill of rights to mortgagees that clearly explains what financial risks they are incurring, when they enter into an agreement with a financial institution.
But Democrats need to put the onus for the nation’s fiscal disarray where it belongs: who supplied the crack cocaine of the housing boom in the first place.
Democratic candidates for president sound best when they connect with the yearning for hope, prosperity, and opportunity. But they can’t shy away, either, from being honest about the confusion of economic priorities that have put so many Americans at risk.
Under Republican leadership, the ownership society turned into riverboat casino.
Last night Miami’s empty condo canyons were not mentioned, nor Miami suburbs filled with for sale signs and sales incentives by sputtering home builders.
When Democrats talk about “forgiving” loans, or, changing loans in mid-stream they are pandering to consumers who made a terrible mistake believing the value of homes would only go up.
There is no way to provide enough funds to Fannie Mae or Freddie Mac or any other entity to cover the staggering volumes of credit that are now at risk because Wall Street was allowed to proliferate debt to greedy investors without any meaningful regulation.
The loans have been aggregated into trillions of dollars of mortgage backed securities, collateral debt obligations, and other synthetic products that have their own legal guarantees and conditions.
Congress cannot and should not untangle those obligations: doing so would turn the United States into the world’s economic basket case.
What the Democratic candidates for president surely knew, last night, was that Miami and South Florida is the poster child for the collapse in condo and housing markets. The speculative bubble in housing was promoted by builders in Florida who form the core of the Republican donor base.
So, it remains to be seen how the Democratic candidates to be president will conform their pitches to the key issue of the 2008 campaign.
New York Times columnist Paul Krugman has it right in today's editorial, “Where’s my trickle?” Krugman writes, “As far as I can tell, America has never before experienced a disconnect between overall economic performance and the fortunes of workers as complete as that of the last four years.”
The war in Iraq and Afghanistan, health care, and immigration may help select the Democratic candidate, but it will be the candidate who best explains to the American people what happened to our economy and why there are no easy panaceas, who will be the next president of the United States.
2 comments:
Hillary didn't impress me, not remotely. Way too transparent. Obama was better but you got the sense he could have done better. Edwards was amazing, he won that debate if anybody did.
Saving money, that is a puritan value. Anyways how will the ponzi style American economy survive if immigrants don't join the revolving debt cycle as soon as they can. Isn't that the purpose of our open borders anyways? More people, more economic growth, all fueled by debt. If people were not in so much debt wouldn't they then demand increasing amounts of vacation or have time for more political activites including even strikes?
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