Senator Clinton Says Rescue Plan Is Just First Step in Addressing Economic Crisis

Press Release

Senator Clinton Says Rescue Plan Is Just First Step in Addressing Economic Crisis

Calls for Additional Action to Help Homeowners, Reassert Oversight & Achieve Broader Economic Reform

Senator Hillary Rodham Clinton today said that the bipartisan compromise to address the economic crisis should be followed by additional quick action to aid homeowners facing foreclosure, reassert effective federal oversight, and achieve broader economic reform. In interviews with three New York radio programs, Senator Clinton described the bipartisan plan approved yesterday by the Senate as a flawed but necessary compromise that would help prevent severe economic damage from spreading from Wall Street to Main Street.

"I think the passage of this, which I hope happens in the House either late tonight or tomorrow, will send a real jolt of stability and some confidence back into our markets," Senator Clinton told Rich Lamb of WCBS 880. "But this is the beginning, not the end. We have got to come in with new, tougher, smarter, enforceable regulations. Keep as many people on their homes as possible, rewrite the terms so that they can afford to stay."

On Wednesday, Senator Clinton spoke on the floor of the Senate and laid out goals for further action to address the underlying causes of the current crisis. She proposed specific steps to protect taxpayers, ensure transparency and accountability, aid homeowners facing foreclosure, and pursue broad economic reforms. For more information on Senator Clinton's work on this issue, see: http://clinton.senate.gov/issues/housing/subprime.

Excerpts from Senator Clinton's three radio interviews follow.

The Brian Lehrer Show on WNYC

Brian Lehrer: Why don't you dive into the bail-out bill? You voted yes. How has your constituent mail been running on the bill?

Senator Clinton: It's interesting because, of course, for the first week to ten days it was overwhelmingly negative, with good reason. I mean, what the Treasury and the Administration proposed was a total power grab with no accountability, and kind of a take-it or-leave-it attitude, and we left it. But I think that in the course of the last days, Congress has come up with some much better provisions to provide the kind of checks and balances and oversight and accountability that you're supposed to have in a government like ours with separation of powers. And I think that we have added some elements like warrants for equity stakes that will give the taxpayers some upside for this reigning in to some extent - not as much as many of us wanted - compensation and golden parachutes and other executive perks from any company that is going to participate in this package. We've got a minor, but nevertheless important beginning, to do what I've been advocating for nearly two years, which is let's get to the bottom of this and start trying to save people's homes and modify and rewrite mortgages so that we don't go through the declining home values and other consequences of the slumping housing market.

Brian Lehrer: And let me jump in because maybe you heard the caller at the very end before you came on who said to ask you why this can't be done as loans rather than bail-out. Maybe you saw that the nation of Ireland is guaranteeing all their bank data greater than that nation's entire GDP, but it's not a hand over of cash.

Senator Clinton: Right.

Brian Lehrer: And George Soros said the Paulson Plan is ill-conceived or not conceived at all - better to give individual banks equity as needed if they can't refinance themselves, rather than what he says, is overpaying for bad mortgage debt with tax dollars. Any reaction to Mr. Soros or these other alternatives?

Senator Clinton: Well I think that both the caller and George Soros are making an important point. There is, in my view, Brian, enough flexibility in this package for the Treasury Secretary to get started. Remember, we're talking about a short termer here. That's another one of the real challenges, is that if we could have waited until we had a new president, and in my view a Democratic President with new advisors, we all would've waited. But nobody thought we could. So I think there's enough flexibility in this package for Paulson to structure a number of different approaches. I have certainly urged that we look more at secured loans, that the equity pieces be real, not just, you know, warrants that might or might not have anything standing behind them. And it's my anticipation that once this passes we will see some psychological impact in the market, some increased confidence, and therefore a willingness for banks to begin loaning to one another because at bottom, this is a mortgage crisis that is overlaid by a credit crisis, and we've got to begin to sort of drill down the credit crisis could begin to ease soon if banks took a big sigh of relief. I talked to about, I think there were 50 bankers on a conference call that I had yesterday from Long Island to Niagara, and, you know, their concerns were that people were pulling money out of their banks. And we're talking about both huge banks that were on the call, like a representative from Bank of America, to, you know, tiny community banks in Central New York.

Brian Lehrer: Right and I think everybody supports the raising of the FDIC limit to help stave off any bankrupt.

Senator Clinton: Right and it's as much psychological as substantive. I think this whole package, frankly, is as much psychological. I mean that's what markets are, you know, someone once told me, you know, 90 percent psychology and 10 percent reality.

Brian Lehrer: Well you are the Senator from New York. You talked about that conference call with bankers from Long Island to Buffalo. There's an Amity Shlaes column on the Bloomberg wire this morning that says the bail-out means the transfer of wealth from New York to Washington because the government will have the power that New York banks are giving up to decide which assets to buy- meaning lots of jobs will move from here to there. Do you agree with that?

Senator Clinton: No, I don't agree with that. Where would the jobs go? You can't possibly, you know, stamp up the Treasury to that amount. No, look, I think that the banks of New York and our other financial institutions are probably the biggest winners in this, which is one of the reasons why, at the end, despite my serious questions about it, I supported it. I mean, we had a projection yesterday that we were going to lose 120,000 jobs in New York, and a lot of the direct and indirect employment that comes from a vibrant financial services industry in New York is certainly at risk. We also are fighting to remain the global capital of capital in the world. There are a lot of other places that capital can move to, and obviously you've got other cities like London, Singapore, and Shanghai that are vying for assets and that reputation right now. So actually, I think that doing this is very good for New York in the short-term. Now it has to be managed right, and that's where the rubber hits the road. I do not believe that we know yet how this is going to be implemented, and because we are dealing with a transition, within, you know, a month we're going to have a new president, hopefully Senator Obama, and he's going to have his own team and we're going to have to start, you know, figuring out how to get into whatever it is the Treasury is doing now, and I know that --

Brian Lehrer: What happens to your high priority of universal health care? With hundreds of billions going to the banks, I'm sure you heard Dennis Kucinich on the House floor. That clip is really making the rounds on YouTube, and others, saying universal health care is a major expense that will now get delayed for this kind of trickle down capitalism.

Senator Clinton: Well even before this bailout we were facing a 500 billion dollar deficit due to the irresponsible and misplaced priorities of this Administration and the Republican Congress that we had for 6 of the last 8 years. So I was well aware of the fact that in order to do what we need to in health care, in energy, in infrastructure, we're going to face some tough decisions. They've just become even tougher. But I think that - and I talked with Barack on the Senate floor last night, obviously he's going to inherit a terrible set of choices - but I think we've got to be willing to both do deficit reduction, smart implementation of this 700 billion dollar package, and make investments in health care, in clean energy, in infrastructure that will make us stronger and richer as a country. I'm not saying it's going to be easy, but I watched on a lesser level how it was done in ‘93 with a very tough deficit reduction package that was not popular initially and was one of the reasons that we lost the Congress, but I don't think we have a choice. We're going to have to proceed on a number of different fronts at once, and you know I'm not going to retreat one step from universal healthcare. We're just going to have to figure out how we can pursue it and fund it in a smart way.

The Joan Hamburg Show, WOR News Talk Radio 710

Joan Hamburg: You, the Senate of course, approved the proposal. The House, do you think this is going to happen by the end of Friday?

Senator Clinton: Well I think so because the stakes are just too high and the economy is in need of the boost of both assets, new capital to buy these assets and try to get confidence going again. And what I'm hearing from the people I am talking with around the State is a real sense of anxiety. People are really worried about their money, their jobs, their businesses, so yes I do think it is going to pass.

Joan Hamburg: With all the if you had listened to talk radio all morning all you would hear are people yelling and screaming about pork barrel stuff.

Senator Clinton: Well I think that watching legislation being made as they often say is like watching sausage being made. It's not a pretty sight. And what happened in the Senate was that we have passed on numerous occasions some very important tax benefits for alternative energy. I happen to think that we'll create a lot of new jobs if we get the money flowing into solar and wind and geothermal and all the other new forms of energy that we've got to build a market for. We put those into this and I don't think that's what people necessarily think of when they use that term because this will stimulate the economy. There was some other stuff like disaster assistance for the Midwest because they had that horrible flood this past summer. But all in all I think this whole package can offer some needed investments as well as the money that the Treasury will use to try to get banks lending to each other and get these assets off of their books.

Joan Hamburg: Do you feel the kind of alarm the fear the urgency that we have all been told is the reason we must act now?

Senator Clinton: I feel a level of deep concern. I'm in the middle of it so I'm trying to keep my faculties as sharp as I can. What bothers me is how credit is drying up for even good going businesses. What bothers me is how we've got institutions that were reporting good earnings being hammered down with the chance of actually going out of business. So I am concerned and when you see flagship companies like Goldman Sachs and General Electric having to borrow money from Warren Buffet.

Joan Hamburg: Amazing isn't it?

Senator Clinton: Yeah it is Joan.

Joan Hamburg: That they can just hand out billions of dollars and there it is.

Senator Clinton: Well you know he is a great investor and he has been urging me and others to go ahead and pass this package and he doesn't have any particular partisan bias.

Joan Hamburg: Absolutely.

Senator Clinton: So yes I think people should be concerned. I think that some of the stories I've been hearing about people pulling their money out of their bank and putting it under their mattress.

Joan Hamburg: They're scared.

Senator Clinton: That makes no sense at all and especially now we have, we're on the way to raising the deposit insurance amount to $250,000 which will cover not only a lot of individuals but a lot of small businesses. So I think by either by late, late tonight or tomorrow the House will have acted. Now I believe that people have every reason to be angry and upset about what has happened here because a lot of the mess we're in is due to fast moving financial operations that bordered on incomprehensibility and certainly were not transparent and even skirted illegality. There is no doubt about that and I think that the FBI conducting its investigations, the Congress conducting ours, we will hold people accountable. But it's like the drunk who causes a ten-car pileup on the freeway. You know first you've gotta get the emergency vehicles there and the get them all to the hospital, begin to stabilize the patient, including the drunk driver.

Joan Hamburg: You know the question's been raised by members of our audience, if you took the $700 billion and just put people in charge and gave it out to the banks and things, wouldn't that alleviate some of the problems?

Senator Clinton: Well that is kind of what is going to happen. The money will be used to buy these assets which will get them off of the books. See the problem is it used to be kind of simple and it was certainly safe to get a mortgage. You'd go to your local bank or your local savings and loans or credit union and get your mortgage and they would hold it, it would be 30 years. You'd pay it and then you'd burn the mortgage when you got the deed to the house. You and I remember those days.

Joan Hamburg: Yeah, they're gone.

Senator Clinton: They're gone because somebody came up with the brilliant idea of let's give people mortgages whether they can afford them or not, lets pull some fast tricks on them, so that they don't really understand some of the fine print so that we can keep upping the interest rate on them, and lets have some faulty appraisals so that we can charge them more. And then they took all these mortgages from people who never should have had homes or for people who had the resources but were frankly put into mortgages that they either didn't understand or couldn't afford. They put them all into these huge, huge debt instruments, they're mortgage-backed debt basically, and they started selling them all over the world. So if you were to walk into your bank where you think you got your mortgage and talk to the person that you were across the desk from, they'd say ‘well you know we sold that to so and so who sold it to so and so' and its ultimately in a big package of mortgages that are owned in Europe or Asia somewhere. So it all got interconnected in this global economy of ours. And in order to get these assets which nobody right now can value off the books of these banks so that they can be open for business and open for credit again, the Treasury will buy them, will hold them, and then will begin to resell them once the market has stabilized. Because remember that behind all these assets are real houses on real land in real communities in America. So they have some value.

Joan Hamburg: It's not empty paper.

Senator Clinton: Yeah, that's right.

Joan Hamburg: It's not empty paper. And of course I think Americans have to realize, that whatever we want to call this, it's a very large band aid and probably absolutely necessary for the credit story, but it can't cure all our woes. We've got to change the way we are living as a nation.

Senator Clinton: Oh Joan, I am really glad you mentioned that. People are living beyond their means. Now some of it is because incomes have not risen the last, you know, thirty plus years. We have seen most of the income gains go to the top ten percent of income earners in society. And how do people cope? Well you know, wives and mothers went to work and kids took jobs after school in greater numbers than they had before and households accumulated whatever income they could get by everybody getting out and working. And that still wasn't enough to meet the lifestyle desires of a lot of people, so they went into debt. The average American family is over nine thousand dollars in credit card debt. A lot of people live beyond their means and the idea of saving was considered sort of old fashion. So we have got to get the economy boosted again, creating good jobs that people can make a good living at, and we have go to really instill in ourselves some habits of saving and frugality again.

Rich Lamb of WCBS 880

Rich Lamb: About the vote yesterday there's been some criticism that the bill is, you know, lined with pork. What about that criticism?

Senator Clinton: Well I think what people are referring to is not the original $700 billion which caused a lot of legitimate concern, but the production tax credits for alternative energy, some of the disaster assistance for Iowa and the Midwest after the big floods of last summer, and some other tax provisions that are in the bill. Those are all measures that we have passed through the Senate before and I think as a matter of legislative efficiency were added onto this. But I also believe that it will help to get votes in the House, particularly among Republicans who favored giving tax benefits to get solar and wind projects up and going because that will serve as a stimulus and will actually, we hope, begin putting people to work.

Rich Lamb: Okay then, let me ask you what you think the effect of the Senate vote will be on the House? What is your feeling on it or do you have feelers out there to see what's going on?

Senator Clinton: You know, I had a long conference call yesterday with at least fifty bankers on the call from New York, from Long Island all the way up to Buffalo/Niagara. And, you know, they told me lots of stories about people coming and asking to take their money out even though they didn't know what they were going to do with it, people who were concerned that their mortgage wouldn't go through because of the confusion and crisis in the credit markets, small businesses that were having trouble getting the credit they needed. So I think the passage of this, which I hope happens in the House either late tonight or tomorrow will send a real jolt of stability and some confidence back into our markets. It's not the stock market so much as the credit markets that are frozen up. You know, the stock market has evidenced its opinion over the last two weeks by, you know, mostly going down. But it's the credit markets. It's the fact that General Electric had to go to Warren Buffet and borrow three billion dollars. We have a lot of jobs connected to General Electric in New York. So I think that the more people actually see the potential or real consequences of this in their own lives and communities, the more support and understanding there will be for doing something that gets this economy and these markets moving again.

Rich Lamb: Senator, can you tell us have the calls changed in tone to your office from negative to positive or has it gotten to that point yet?

Senator Clinton: Well they were overwhelmingly negative in the beginning and I was too because I thought that the Treasury had overreached and was basically asking for a blank check to spend $700 billion however they saw fit, and I was not about to go along with that. But in the last days as some of the impact of the frozen credit markets has been felt by people who are out there working and hoping to keep their jobs, hoping to keep their businesses open, more people have reached out and have said, "Look, you know, I don't like it, I hate it but I think we've got to do something." Now, there's going to be a debate for a long time—is this the right thing to do? You know, in legislation often times you get what you can because you're dealing with multiple sides here. We did put in more oversight and accountability. We did put in a provision for warrants so the taxpayers could get some of the upside of these assets when they are sold. We did put in some constrains on executive compensation. I mean, we did make a lot of changes that initially the Treasury was not willing to make, which they came around to. We added yesterday raising the limits on FDIC insurance to $250,000. So we began to, you know, push back on the Bush administration and the Treasury Secretary. But when, you know, when people like Warren Buffet, who I think is viewed as being pretty independent and non-partisan on economic issues says we've got to do this, we've got to make some, you know, serious investments in our credit markets and provide more capital to our financial institutions, I think people say, well, you know, we're going to have to do this, so you hold your nose and you vote for it.

Rich Lamb: Senator, are you amazed that the nation is going through think kind of economic convulsion and that people in the markets could do these foolish things?

Senator Clinton: I think it is outrageous and disgraceful. You know, for two years I've been urging that we take action on these mortgage foreclosures and try to, you know, prevent them and slow them down so that we wouldn't have this cascading effect. For a lot longer many of us have been saying we need better regulation, we need to reign in the excesses in the financial markets. There is no transparency and accountability so we even know what it is that is being traded. The regulatory system for the twentieth century is not up to the task for the twenty-first century. So even yesterday I said, you know, I'm going to vote for this, but this is the beginning not the end. We have got to come in with new, tougher, smarter, enforceable regulations. And I still think we're going to need what I've been recommending, which is a home mortgage enterprise institution to try to do what we had to do back in the Great Depression: keep as many people on their homes as possible, rewrite the terms so that they can afford to stay. If they are irresponsible then they go. This is not for speculators or people who own second homes, this is just primary residences. But if we don't get supply up in the housing market and stabilize home values then I'm afraid even this rather unprecedented intervention is not going to be as effective as it should.

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