Senator Barack Obama called Thursday for tighter regulation of mortgage lenders, banks and financial houses, even as he spoke of pumping $30 billion into the economy to shield homeowners and local governments from the worst effects of the collapse of the housing bubble.þþMr. Obama laid much of the blame for the crisis on lobbyists and politicians who dismantled the regulatory framework governing the energy, telecommunications and financial services sectors.þþSpeaking at Cooper Union in Manhattan, Mr. Obama blamed Democrats no less than Republicans for the crisis that now casts a shadow of foreclosure and insolvency over millions of Americans. He did not mention former President Bill Clinton by name, but the target of his criticism seemed clear.þþ“Under Republican and Democratic administrations, we failed to guard against practices that all too often rewarded financial manipulation instead of productivity and sound business practices,” Mr. Obama said. “The result has been a distorted market that creates bubbles instead of steady sustainable growth, a market that favors Wall Street over Main Street but ends up hurting both.”þþMr. Obama, an Illinois Democrat, proposed to rebuild a regulatory structure without clamping too tight a hand on economic innovation. But he was unsparing in his view that industry lobbyists and weak legislators had failed to deal with the risks of a more complex financial system.þþ“Instead of establishing a 21st-century regulatory framework, we simply dismantled the old one,” he said, “aided by a legal but corrupt bargain in which campaign money all too often shaped policy and watered down oversight.”þþMr. Obama also took shots at Senator John McCain, the presumptive Republican presidential nominee. Mr. McCain argued this week against a vigorous federal intervention to address the crisis, saying Washington should not bail out banks and homeowners who in his view had knowingly taken on risky mortgages.þþMr. Obama argued that such a response offered too little. “While this is consistent with Mr. McCain’s determination to run for George Bush’s third term,” he said, “it won’t help families who are suffering.”þþSenator Hillary Rodham Clinton of New York also focused on the ailing economy Thursday while campaigning in North Carolina. She announced a $2.5-billion-a-year proposal to retrain laid-off workers. þþ“We’ve had enough of a president who didn’t know enough about economics and didn’t do enough for the American middle class,” Mrs. Clinton said in Raleigh. Referring to Mr. McCain, she added, “I don’t think we can afford four more years of that kind of inaction.”þþMrs. Clinton’s speech made no mention of Mr. Obama. Instead, she wanted to train voters’ minds on a general election matchup between her and Mr. McCain. þþMr. McCain “recently admitted, ‘The issue of economics is not something I’ve understood as well as I should,’ ” Mrs. Clinton said. “And it turns out he’d rather ignore the credit crisis and mortgage crisis — or blame middle-class families instead of offering solutions on their behalf.”þþThe speeches of the Democratic candidates for the presidential nomination served as a reminder of the thin wall that separates their policy views. (Mrs. Clinton gave a speech this week in Philadelphia on the housing crisis.) Both candidates have talked about spending billions to help homeowners at risk of foreclosure, and are moving so closely in step that their subordinates have shouted about stolen ideas.þþBoth warned of a national credit crisis and advanced proposals to amend bankruptcy laws to aid those facing housing foreclosure. Each endorsed Democratic legislation — sponsored by Senator Christopher J. Dodd of Connecticut and Representative Barney Frank of Massachusetts — to create a housing security program in the Federal Housing Administration that would provide incentives to refinance mortgages carrying onerously high interest rates.þþ“They are very close; they are pointing to very similar proposals,” said John Irons, research and policy director for the Economic Policy Institute, a labor-oriented research center. “There are minor differences, but when you compare their proposals with McCain, that’s night and day. The Democrats are more like noon and 12:30.”þþStill, differences of emphasis exist. Mrs. Clinton says the nation’s financial difficulties are rooted in the housing slump. Mr. Obama took pains to cast the blame on what he said was decades of weakening of the nation’s regulatory apparatus, and talked of more oversight of credit-rating agencies and requiring stronger capital requirements for complex financial instruments like mortgage-backed securities.þþTwo of Mr. Obama’s chief advisers for his speech served under President Clinton: Joseph E. Stiglitz was chairman of the president’s Council of Economic Advisers, and Robert B. Reich was secretary of labor.þþMr. Obama said the housing slump was a result of another of the bubbles that have distorted the economy in the past decade. Few doubted, he noted, that the nation needed to reform the 1930s-era law — the Glass-Steagall Act — that had erected a wall between commercial and investment banks. But, as Mr. Obama’s aides noted, the banking and insurance industries spent more than $300 million on a successful effort to repeal that act in 1999.þþThe resulting changes, Mr. Obama said, granted far greater freedom to investment houses without modernizing the regulatory regime and demanding transparency. The same pattern played out in regulation of home mortgages to bad effect, he said.þþ
Source: NY Times
