Clinton Gives Wall Street a Warning
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

Senator Clinton gave a clear indication yesterday that as president she would be happy to intervene in the management of the economy if she thought the free market was failing middle-class Americans.
Speaking to donors and supporters at Nasdaq’s headquarters in Times Square, Mrs. Clinton threatened legislation to regulate the mortgage lending industry closely if money managers do not come up with their own scheme to defray the effects of the subprime mortgage collapse. She also served notice on wealthy Americans that they should be prepared for tax increases.
The senator, who is seeking the Democratic nomination, described the stimulus to the economy given by President Bush’s tax cuts as inadequate and proposed that if the economy began tipping into a recession, she would provide “the right kind of stimulus” in a more broad-based set of fiscal incentives to the middle class. Mrs. Clinton demanded an immediate injection of $5 billion into the economy to help those facing foreclosure on their homes. And she proposed another $2 billion to be spent to help poor families in cold-weather states afford heating fuel.
While the tone of the address was outwardly friendly, as might be expected from Wall Street’s favorite Democratic candidate, Mrs. Clinton’s threat of a return to Keynesian management of the economy and higher taxes indicated her election to the White House would represent a sea change in federal economic policy.
Without mentioning the word “greed,” she reprimanded those on Wall Street responsible for what she repeatedly called “the subprime crisis” for deliberately engineering a mortgage system that abandoned traditional notions of lending responsibility.
The senator said that while borrowers should also be held responsible for taking out loans they could not afford, the subprime mortgage turmoil was due mostly to the indifference of Wall Street lenders to the consequences of mortgages “that were designed to fail” middle-class Americans.
“Wall Street helped create the foreclosure crisis, and Wall Street needs to help solve it,” she said.
Mrs. Clinton proposed an immediate 90-day moratorium on home foreclosures and a five-year freeze on interest rates for adjustable rate mortgages, which would provide borrowers with time for house prices to recover and to arrange new financing, and for lenders to provide regular reports on how many mortgages had been moved to fixed-rate from adjustable loans.
Mr. Bush today is expected to announce a five-year freeze on interest rates for certain subprime mortgages.
At the Nasdaq headquarters yesterday, Mrs. Clinton said that while it is important to elect “a president who understands the complexities of the challenges we face,” she said, there is no time to wait for the presidential election.
In the two months it has taken Treasury Secretary Paulson to adopt her ideas of calling a subprime crisis summit of lenders and urging states to raise money through bonds to help distressed families threatened with home foreclosure, 225,000 mortgage defaulters have been ejected from their homes, she said. She urged lenders to fix their own industry. “Don’t wait for Secretary Paulson to call. Call yourself,” she said.
Mrs. Clinton warned that if the mortgage lenders do not emerge from the subprime crisis summit with a way to help homeowners in distress along the lines she suggested, she would introduce legislation to force their hand. The new laws would include offering legal protection to mortgage advisers who work with borrowers to help modify their loans.
The federal government needs to intervene without delay to help prevent foreclosures because the effect of so many people losing their homes will soon trip more serious social problems, such as lower property values, inner city blight, and racial tension, she said.
“The concentration of foreclosures in particular neighborhoods has a negative ripple effect on communities, leading to higher rates of crime, lower tax revenues, and lower property values,” she said. She therefore demanded $5 billion in emergency federal aid to help prevent foreclosures by, among other things, providing financial counseling to those families at risk.
While lauding Wall Street as an engine that drives the American and the world economy, she said that sometimes it does not help middle-class Americans enough. “We have seen too many middle-class families struggling in an economy that doesn’t work for them,” she said. “Wall Street has played a significant contribution to their current problems.”
She called for “a new beginning” in the management of Wall Street and the economy. In the present climate, “prudence, transparency, and understanding are missing,” she said. The subprime mortgage collapse has caught not only those who were misled into taking out loans that they could not afford, but others, too, she said.
“Many people who worked hard and followed the rules got the same letter through the mail: ‘Get out now!'” she said. “Even Americans who do not face foreclosure are feeling the impact.”
As for Mr. Bush’s tax cuts, Mrs. Clinton said energy costs have risen by $2,000 a year per family since 2000, which amounts to an energy tax costing three times more than the tax break the president has awarded middle-class families.