Opinion: Blow that bubble back up!
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Back in July, I wrote about the housing bubb, er, soon-to-be bust:
Thankfully, talk of timeouts and bailouts has cooled in Washington — for now, anyway. But with California — ground zero of the nation’s housing bubble — coming so early in the 2008 presidential primaries, and with the rate of foreclosures unlikely to crest any time soon, imperiled, debt-ridden homeowners will doubtless press the populist field of Democratic candidates to promise them a break. If conservatives can use a silly issue such as same-sex marriage in 2004, what’s to keep Democrats away from rising foreclosures in 2008? If [Hillary] Clinton resurrects her ‘foreclosure timeout,’ or if by some political miracle, bailout proponent [Sen. Chris] Dodd still has a shot in February, the presidential election could end up presenting the biggest roadblock to my hopes of eventually owning a home that isn’t in a suburb of Phoenix.
Democrats didn’t have to wait until the California primary — President Bush beat them to the punch. Still, Bush’s plan, in which lenders would voluntary freeze for five years lower introductory interest rates on subprime loans for some borrowers, isn’t exactly what Democrats (especially the ones running for president) had in mind when they called on the president to aid troubled borrowers. Indeed, both Hillary Clinton and John Edwards have already said that Bush’s plan isn’t enough. So far among the (viable) Democratic candidates, Edwards goes the furthest on the mortgage crisis, saying that, in addition to a mandatory seven-year interest rate freeze, he would use taxpayer money to create a federal ‘Home Rescue Fund.’ Clinton’s proposal falls somewhere in between, calling on lenders to freeze interest rates for five years and suspend foreclosures for at least 90 days. If lenders don’t freeze rates on their own, Clinton would push for legislation that wouldn’t give them a choice.
It’ll be interesting to see how the foreclosure mess plays out among the candidates in the run up to the Jan. 3 Iowa caucus. For now, I’d say Edwards has the political advantage, being the only viable candidate to say Washington should provide financial assistance to homeowners. (For the record, I totally disagree with any plan that would use taxpayer funds to bail out borrowers who took a chance on a risky housing market.)
Most importantly, among Democrats, Edwards’ taxpayer-funded plan is the most different from Bush’s voluntary approach, a point he can use to separate himself from Clinton and other candidates. The thing is, those same candidates are just as eager to draw distinctions between themselves and the New York senator, especially with the Iowa caucus less than a month away. Edwards has established a populist ceiling that, though economically troublesome, doubtless appeals to anxious voters.
Don’t be surprised to see other candidates move closer to mortgage plans that look more like Edwards’ and less like Clinton’s. After all, any plan that Clinton establishes is just something for other desperate candidates to move away from.