US housing crisis crashes into White House race
WASHINGTON (AFP) — The maelstrom engulfing the US housing market and threatening to throw millions onto the streets is soaring up the agenda in the race for the country's most prestigious address, the White House.
US President George W. Bush unveiled on Friday measures to help some Americans keep their homes during a credit crunch that has upended financial markets, saying it was a top priority.
He acknowledged there had been "some excesses" in the lending market that helped fuel the nation's housing boom in the early 2000s.
But he insisted the federal government has only a "limited" role to play in helping millions of people now struggling to hold onto their homes amid rising interest rates.
"A federal bailout of lenders would only encourage a return of the problem. It's not the government's job to bail out speculators. Or those who made the decision to buy a home they knew they could never afford."
However, his view is not shared by many of the candidates eyeing his job in the November 2008 presidential elections.
The crisis, fueled by the so-called sub-prime mortgages granted to those with risky credit histories, attacks right at the heart of the American dream of home ownership.
Democratic Party presidential hopeful Barack Obama warned in the Financial Times last week that it was "more than a temporary blip in our economic progress, it is a cancer that threatens to spread with devastating impact to housing and to our economy as a whole."
He proposed that unscrupulous lending companies should be penalized and that borrowing criteria should be standardized.
"The rules currently governing mortgages were written in the 20th century to make borrowing easier, we need to update the rules for the 21st century," he argued.
For New Mexico Governor Bill Richardson, also hoping to snatch the Democratic Party nomination, "the credit crisis is the Katrina of the financial markets," referring to the 2005 hurricane which devastated New Orleans.
States most hit by the crisis have seen a flurry of high-ranking visitors in recent weeks, each with their own recipe for protecting homeowners.
Former Democratic senator John Edwards traveled to northern Cleveland, Ohio, where the depressed economy has left the city with one of the highest foreclosure rates in the country.
He has proposed setting up a national fund which would allow those property owners facing foreclosure to refinance their loans without losing their homes.
And former Cleveland mayor Dennis Kucinich, also running for president, has been scathing in his attacks on mortgage lenders snaring vulnerable clients by offering low-interest rates which soar after an initial introductory period.
Christopher Dodd, another Democratic hopeful, urged the Federal Housing Administration to take action after talks with Treasury Secretary Henry Paulson and the Federal Reserve chairman, Ben Bernanke.
"At such a critical time, it is essential that the FHA act effectively and prudentially to preserve homeownership for as many Americans as possible, he said.
"In addition to being an engine for creating new homeowners, the program could play a very important role in saving from foreclosure American homeowners who have been taken advantage of by unscrupulous sub-prime lenders and brokers."
In his first speech since the global markets were roiled by fears of a housing-sparked liquidity crisis, Bernanke on Friday said the Fed would act.
He said the Fed wanted to avoid "further tightening of credit conditions," which could have "adverse effects on consumer spending and the economy more generally."
Markets viewed the chairman's remarks as opening the door to a potential rate cut that could lower overall borrowing costs and stimulate frozen credit markets.
As for the leading Democratic favorite, New York Senator Hillary Clinton, she has urged that borrowers be given access to expert advice on mortgages and their risks.
Republican candidates have been less ambitious in their proposals. Former Massachussetts governor Mitt Romney said the "bad actors" in the crisis should be punished and lending procedures simplified so borrowers known exactly what they are getting into.
Former New York mayor, Rudolph Guiliani, who leads Republican hopefuls in the polls, was even more cautious about any government intervention.
"Let's get ourselves through this first, then take a look back and see what more could be required," he told CNN recently.
