Democrats' Advisers Weigh In on Market Turmoil
Listen Now [6 min 55 sec] add to playlist All Things Considered, March 18, 2008 ·
With the continuing financial turmoil on Wall Street, many are wondering what steps the next president will take to avert panic and steady a shaky economy.
The campaign of Sen. John Cain (R-AZ) issued a statement Monday expressing confidence in the Federal Reserve and its chairman, Ben Bernanke.
Economic advisers to Sen. Hillary Clinton (D-NY) and Sen. Barack Obama (D-IL) say both candidates believe that federal intervention is appropriate under certain circumstances — so long as the measures help people from across the economic spectrum, and not just Wall Street and the wealthy.
Gene Sperling, a senior economic adviser to Clinton, cites the New York senator's proposed $30 billion fund for state and local governments, which is meant to "empower more people on the ground."
Such a plan, he says, would address not just the foreclosure crisis, but would prevent "the same downward spirals that you're trying to prevent for Bear Stearns" from affecting local communities.
Daniel Tarullo, a senior economic adviser to Obama, says the Illinois senator supports aggressive and appropriate action — including the Bear Stearns deal — to stabilize the financial system amid uncertainty.
One area in which Obama feels more action is needed, Tarullo says, is the mortgage market. For this reason, he has joined with Sen. Chris Dodd (D-CT) to support legislation that would provide federal guarantees for mortgages revalued to reflect lower actual market values in order to stem foreclosures.
Tarullo says there are many similarities between the prescriptions the two Democratic candidates have for dealing with the shaky economy. But he thinks the primary difference between Obama and Clinton is that Obama made it clear from the outset that he was going to focus on the economic squeeze on the middle class and elderly with a plan that would simplify the tax-filing process, reduce taxes and ensure credit for interest paid on mortgages.
Sperling says what distinguishes Clinton from Obama is that she has been out "early and often with a more systemic response to what is a systemic mortgage and housing crisis." For example, he says Clinton called early on for strengthening of the Federal Housing Administration and for a 90-day freeze on foreclosures and a voluntary freeze in interest rates for adjustable-rate subprime mortgages.
Tarullo counters that the Bush administration also supported a voluntary proposal to address adjustments in mortgages. He also disputes Sperling's "early and often" statement, noting that after he was elected to the U.S. Senate — well before he was running for president — Obama proposed legislation to deal with the problems of predatory and improper mortgage lending.