Clinton WSJ interview on economic issues: Fears Japan-Style Malaise; Plan to Buy Troubled Mortgages

[DeepModem Mom]

Clinton Fears Japan-Style Malaise
Economic Proposal Pushes Plan to Buy Troubled Mortgages
By BOB DAVIS and AMY CHOZICK
March 27, 2008; Page A3

Hillary Clinton said she fears the U.S. is slipping into a Japanese-style economic malaise that will overwhelm the Federal Reserve's considerable powers. The Democratic presidential candidate said the U.S. government should be ready to buy troubled mortgages from investors and lenders to spur a recovery and avoid a lengthy period of stagnation because of unaddressed weaknesses in the financial sector. "We might be drifting into a Japanese-like situation," she said Wednesday in a wide-ranging interview with The Wall Street Journal on economic issues. "I don't think we can work our way out of the problems we're in in the broad-based economy with monetary policy alone. I think the Japanese tried that and tried and tried that."

Sen. Clinton laid out new details of her plan to have the Federal Housing Administration purchase underwater mortgages -- those in which homeowners owe more than houses are worth -- from investors and lenders. Such a program could work in combination with a federally backed system to auction mortgages in default....Sen. Clinton said that, if the government's buying and eventual sale of the mortgages is handled well, "over the long term, the government involvement would be self-financing."...

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Sen. Clinton made her comments before heading off on a six-day "Solutions for the American Economy" tour of North Carolina, Indiana and Pennsylvania. Many of her economic proposals are similar to Sen. Obama's. But she has gone further than Mr. Obama in calling for a government response to housing problems....

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In the interview, Sen. Clinton, a New York Democrat, said even the specter of taking office during a recession hadn't changed her determination to boost taxes on the wealthiest taxpayers by reversing the Bush tax cuts. Those tax cuts are set to expire at the end of 2010. She dismissed the argument that taxpayers look ahead at what their tax bill may be in the future. "I don't buy it," she said. "The tax rates of the '90s did not slow down investment and wealth creation."

On trade, she deepened her criticism of trade agreements such as the North American Free Trade Agreement with Mexico and Canada, which her husband pushed through Congress in 1993. She has said she might pull out of the agreement if she were president. While Nafta is benefiting parts of the country, she said, "we haven't come to grips with some of the comparative disadvantages we have suffered because of our trading agreements." "There have been some very positive results of trade," she continued. "But I don't think you can generalize and argue that trade has really broadly affected the people of a lot of the countries with whom we trade. There is still too much of the benefits of trade and the global capital markets favoring elites and multinational companies in a way that isn't spreading prosperity."...

http://online.wsj.com/article/SB120658212569867477.html

[MrTriumph]

1. self financing?

if the government's buying and eventual sale of the mortgages is handled well, "over the long term, the government involvement would be self-financing."...

Say what?