Clinton Says Greenspan Could Help Solve Housing Meltdown
- Mar 24, 2008
Democratic presidential candidate Sen. Hillary Clinton said former Federal Reserve Chairman Alan Greenspan and other economic heavyweights should recommend whether or not the U.S. government should buy up homes to help solve the housing crisis. The government should be ready to buy, restructure and resell failed mortgages to buttress the economy, Clinton said in a speech today in Philadelphia, according to a report from Reuters. Clinton has endorsed legislation from Democrats Rep. Barney Frank of Massachusetts and Sen. Chris Dodd of Connecticut that would increase the government’s capacity to stand behind mortgages that are reworked to be more affordable. Under the proposal, the government would obtain mortgages from investors, writing new terms that would prevent foreclosure. Lenders would write down mortgages in exchange for a government guarantee. But Clinton has proposed an added step, the formation of a bipartisan group that would decide whether this approach was sufficient, or whether the government should act as a temporary purchaser, Reuters said. The “Greenspan Factor” was very much a factor in stock market moves when he served as Fed Chairman. Indeed, by the end of trading today, the DJIA had risen by 187 points to close agt 12548.64. But other news was likely more responsible for the upward swing, as J.P. Morgan sweetened its offer for Bear Stearns Cos., which sent Bear Stearns’ shares soaring, and helped other financial services stocks. The single-family home market also was responsible for the uptick, as the National Association of Realtors said single family home sales rose in February, the first such increase in seven months. In the wake of the subprime crisis, Greenspan’s reputation has been tarnished, said Robert Bach (pictured), chief economist for Grubb & Ellis Co., citing reports that late Fed Governor Edward Gramlich warned Greenspan about looming troubles with subprime mortgages. “Greenspan’s libertarian leanings got the better of him,” Bach said. Commercial real estate, as well as other sectors of the economy, have been dragged down by the housing crisis, Bach said, adding that he agreed with the former Fed chairman that the bottom of the housing market must be hit before the economy can improve.