WASHINGTON — Sen. Hillary Clinton rolled out a series of proposals Monday to ease the nation's housing and credit crises, including a $30 billion fund to help cities and states aid distressed homeowners, but some critics faulted it as insufficient.
"It's a nice little political gesture, but it isn't going to help many people meet their mortgage obligations," said Robert Higgs, a senior fellow in political economics at the Independent Institute, a California-based research group.
Bruce Dorpalen, director of housing counseling at ACORN Housing, a nonprofit mortgage counselor, welcomed Clinton's proposals, but said they didn't go far enough.
"We've got serious waves of foreclosures. The first problem we need to tackle is a broad fixing of interest rates that's based on people's finances," he said.
Clinton, the New York senator, announced her proposals at the University of Pennsylvania in Philadelphia. She and Sen. Barack Obama of Illinois are competing for the 158 delegates available in that state's April 22 presidential primary.
Clinton's relief program includes clarifying the legal liability of mortgage companies, permitting the Federal Housing Administration to "stand ready to be a temporary buyer" of certain mortgages, and creating a high-level working group of experts, such as former Federal Reserve Chairman Alan Greenspan, to advise what to do about the pending wave of foreclosures.
Clinton said forming that group would show that� "the president and the administration was taking our economic crisis seriously." Under her plan, it would report back to Congress within three weeks of being named.
Bill Burton, a spokesman for Obama, said that almost a year ago Obama wrote to Federal Reserve Board Chairman Ben Bernanke and Treasury Secretary Henry Paulson urging much the same approach.
"Because regulators are partly responsible for creating the environment that is leading to rising rates of home foreclosure in the subprime mortgage market, I urge you immediately to convene a homeownership preservation summit," Obama wrote.
Clinton aimed her pitch not only at homeowners, but also at African-American voters, Obama's most loyal supporters. Her campaign issued a statement noting that her "action to address at-risk homeowners restructure their mortgages will help African-American families stay in their homes."
The centerpiece is the $30 billion fund. If the Federal Reserve can help Bear Stearns address its financial problems, Clinton said, referring to last week's effort to keep the Wall Street firm from collapsing, "the federal government should provide at least that much emergency assistance to help families and communities address theirs."
Obama has proposed his own fund, a $10 billion plan to help people refinance their mortgages and offer other aid.
Clinton's plan also would aid mortgage firms that, she said, are "reluctant to help families restructure their mortgages because they're afraid of being sued by investment banks, the private equity firms and others who actually own the mortgage papers."
She plans to introduce Senate legislation that would give mortgage companies protection against such lawsuits.
Dorpalen of ACORN Housing said that was a useful suggestion.
Too many lenders, he said, "are worried that two years down the road they'll get sued by vultures, predatory lenders or hedge funds. This lawsuit issue is huge."
Obama has been pushing his STOP FRAUD Act, which would "provide the first federal definition of mortgage fraud," according to his campaign, and beef up enforcement.
Rudolph Penner, former Congressional Budget Office director, said there's simply no easy answer any politician can offer, and, he said, "Treasury is already encouraging lenders to forbear."
The problem in offering solutions like those suggested by Clinton, he said, was that "you just face this extraordinarily difficult trade-off over who to help. You don't want to encourage irresponsible behavior on the part of borrowers or lenders, and that's a tough row to hoe."
He said that funds like those proposed by Clinton and Obama often don't work as intended. "It's very hard to avoid much of the money going to people who would avoid getting out of the problem by negotiating with the lender anyway."
Chris Edwards, director of tax policy studies at the Cato Institute, a libertarian think tank in Washington, said both candidates' ideas suffer from the same malady: "They're prescriptions for corruption and waste," he said.
Higgs of the Independent Institute agreed.
"If you give this money to these local governments, you have a pretty good idea what they're going to do with it — use it in a wasteful way."
States or cities could use the Clinton fund to buy foreclosed or distressed properties. Cities and states could then sell them to low-income families or convert them to lower-cost rental housing.
Local agencies also could use the funds to provide counseling and refinancing to help families avoid foreclosure.