( dpa )- US Democratic presidential hopeful Hillary Clinton Monday proposed an emergency rescue plan for struggling homeowners facing mortgage default, saying the White House should do the same for individuals that it has been doing for the investment bank sector.
Senator Clinton, 60, who is struggling to pull ahead of Senator Barack Obama , 46, for the Democratic presidential nomination, called for US President George W Bush to appoint an emergency working group on foreclosures and set up a 30-billion-dollar two-year emergency fund to help states and cities support homeowners in trouble.
The amount is, not coincidentally, nearly equal to the 29 billion dollars offered Monday by the US central bank, the Federal Reserve, to cover losses that JPMorgan Chase may experience in buying the beleaguered Bear Stearns investment bank.
"Our economic crisis is, at its core, a housing crisis, a crisis caused in part by unscrupulous mortgage lenders and brokers and unregulated transactions in mortgage-backed securities," Clinton told an audience at University of Pennsylvania in Philadelphia.
Obama and Clinton face off in the last big race of the primary season, in Pennsylvania, on April 22.
Clinton blamed the crisis on speculators trying to make a quick buck, buyers who didn't act responsibly and the White House, which "failed to anticipate and continue( d) to downplay the problems we face."
Clinton cited the latest foreclosure statistics, saying 2.2 million foreclosure notices were sent out in 2007, a 75 per cent increase over the year before.
Clinton has an average 16 per cent lead over Obama in pre-primary polling in Pennsylvania, a state she needs to win to move ahead of Obama in her bid for the nomination. She beat Obama in Ohio earlier the month, evidence of her strong appeal in working-class, industrial states.
Clinton was critical of the 400 billion dollars in Treasury securities freed up by the Federal Reserve over past weeks to help struggling investment banks.
"The president's plan was the bank lobby's dream - a plan that let banks off the hook and left homeowners fend for themselves," she said. "If the Fed can extend 30 billion dollars to help Bear Stearns address their financial crisis, the federal government should provide at least that much emergency assistance to help families and communities address theirs."
Investments in subprime mortgages to risky borrowers - which circumvented government regulations that apply to traditional banks lending to homeowners - were extremely volatile and have resulted in a US financial crisis that has spread worldwide.
Housing prices have plummeted as a result of the glut of overpriced properties on the market and banks have tightened up credit supplies.
For existing housing alone, prices have dropped 8.2 per cent from February 2007, the National Association of Realtors said Monday.
There was a ray of light in the crisis on Monday, when the Realtors' group said that month-to-month sales of existing homes rose 2.9 per cent in February, the first increase in months.
But the ongoing crisis has prompted calls for stricter regulations of investment banks after years of deregulation opened up loopholes that allowed the current crisis to occur.
In a commentary column Monday in The New York Times, Paul Krugman described investment banks like Bear Stearns as the "shadow banking system" which relies on "complex financial arrangements to bypass ... safety regulations."
"Now, the shadow banking system is facing the 21st-century equivalent of the wave of bank runs that swept America in the early 1930s," Krugman wrote.
He criticized the government rush to bail out the banks, writing: " If Wall Street companies can count on being rescued like banks, then they need to be regulated like banks."
US President George W Bush has defended the government moves, saying "the United States is on top of the situation."