House on fire: Hillary opens a new front

After weeks of 'kitchen sink' attacks (and some defense) on matters of identity and character, Hillary Clinton made a strong bid today to shift the nomination battle to ground that plays to her strengths.

She delivered an economics speech that focuses almost entirely on the housing crisis -- from the homeowners' point of view. The speech isn't elegant, and may leave Hillary vulnerable on several policy points. But it may nonetheless give increased traction to her claims that she's ready with solutions to our most pressing problems.

The speech's rhetorical frame: Hillary casts the prospect of mass foreclosure as the the crisis threatening the middle class today. The Bush Administration is fiddling while home is burning, but Hillary will act as vigorously to protect Main Street as Bush has to protect Wall Street:

Last week when it became clear Wall Street was on the brink of a financial melt down, the Fed and the administration sprang into action. The Fed extended a $30 billion lifeline to prevent Bear Stearns from imploding and took unprecedented action to provide tens of billions of dollars in credit for other struggling investment banks as well. Homeowners, on the other hand, have received next to no assistance. Well, let's be clear. When families are losing their homes, that's also a financial crisis. When people’s greatest source of wealth is losing its worth, as college costs and health care costs and food and gas prices shoot up, that’s a financial crisis too. When "for sale" signs line streets across our country, when cities and towns are struggling with the costs of foreclosed properties, that is also a financial crisis.

The policy thrust is to move on multiple fronts to forestall foreclosures, guarantee loans, and create incentives and conditions under which lenders will renegotiate loans to keep people in their houses. In effect, bail out everyone: homeowners, with guaranteed renegotiated loans and/or with interest freezes; states, with money to buy foreclosed properties; mortgage companies, with protection against lawsuits by securities holders if they renegotiate loans. And of course, create another commission: an Emergency Working Group on Foreclosures, calling on Greenspan, Rubin, Volcker and presumably other ghosts of Christmas Past.

The political thrust: I've been out early and often on this issue. I've called for urgent action for a year, and I've got a comprehensive plan. I'm the one to get it done:

Now, a year ago in March 2007 I called for immediate action to address abuses in the subprime market, and I laid out detailed concrete proposals for how to do so. I warned this administration that the problems in subprime mortgages would soon spill over into regular mortgages.....I called for immediate action and laid out concrete proposals to prevent foreclosures and help states hard hit by this crisis.I also called for tighter regulation of the housing market....I also called for greater regulation of mortgage lenders...I’ve also proposed that we amend the bankruptcy code to give judges the discretion to write down the value of struggling families' homes.

Obama has not been slow on this issue, or short on proposals for easing the pressure on homeowners. But Hillary is upping the ante, putting the crisis and a web of proposed legislation to cope with it front and center. This marks a shift in the center of gravity on bread-and-butter Democratic economic issues. Obama will have to engage her in a sustained way if she keeps this up.

Mind you, there's plenty to engage. Hillary's plan can be hit from more than one direction. First, a blanket rate freeze on adjustable mortgages is a radical retroactive price control that would give a free lunch to lots of people who went into ARMS with eyes open. Second, another blue-ribbon commission will sound to some like another can kicked down the road. And to put forward Greenspan as Wise Man No. 1 is an eye-popper -- there's something like consensus, even among Greenspan admirers, that he bears considerable responsibility for blowing up the housing bubble -- by leaving interest rates too low too long, and by refusing to regulate mortgage lenders more vigorously when warned of excesses. To pair him with Rubin recalls what many Democrats regard as the Clinton Administration's excessive friendliness to business and acquiescence to Republican-driven bank deregulation.

Hillary may get caught between two stools -- advocating almost socialist price control on mortgages on one hand, and showing deference to yesterday's deregulators on the other. But Obama will have to pivot.

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