Hillary Clinton has just rolled out her most extensive recipe yet for addressing the subprime crisis. The plan, which includes $30 billion to purchase troubled mortgages and for foreclosure auctions, as well as a freeze on foreclosures and interest rates, is striking in two respects: 1) although the plan is wrapped in populist appeals to struggling homeowners (of whom we have many here in Pennsylvania), it seems nearly as attractive to big banks and other lenders; and 2) there’s nary a word about reforming the bankruptcy laws, a much more sensible way to help out homeowners. I suspect these two things may be related.
The connection dates back to the sweeping bankruptcy reforms enacted in 2005, which were the product of extensive lobbying by the financial services industry and which made bankruptcy more difficult for consumer debtors. As devastatingly recounted by Elizabeth Warren in her book (with her daughter), “The Two Income Trap,” Hillary Clinton staunchly opposed the reforms during Bill Clinton’s administration, persuading him to veto them in late 2000. Yet a year later, after her successful Senate campaign, Hillary voted in favor of essentially the same legislation. After joining the Senate, Warren suggests, “it seems that Hillary Clinton could not afford [her earlier] principled position. ... Big banks were now part of Senator Clinton’s constituency. She wanted their support, and they wanted hers.”
I don’t know if the banks are still whispering in Senator Clinton’s ears, but it is hard to imagine William Jennings Bryan, the patron saint of American populism, proposing a populist rescue package that offers so much for banks to like. The Clinton plan would help out many homeowners, but it would also use federal money to repay the loans, thus directing governmental largesse to lenders whose improvident lending contributed to the crisis.
A real populist appeal would sound a lot more like the old Hillary Clinton, the one who once vowed to resist the entreaties of the big banks. I personally have some gripes with traditional Main Street populism. But as between it and the new Clinton plan, I’ll prefer to honor Bryan’s memory by keeping the pot of gold away from the financial services industry.