All right, class. Everyone put away their books and their Google searches. I want to test you to see whether you’ve been paying attention, and whether you’re properly prepared for your November 4th examinations. Today’s subject is economics — stop playing with that GameBoy, Cannonball! — and your assignment is to identify the presidential adviser who wrote these analyses of the subprime lending that has crashed the credit sector.
Anyone who fails this has to stay afterwards and help form and then ridicule commissions. Ready?
- March 29, 2007, New York Times: “[The Center for Responsible Lending] estimated that in 2005, a majority of home loans to African-Americans and 40 percent of home loans to Hispanics were subprime loans. The existence and spread of subprime lending helps explain the drastic growth of homeownership for these same groups. Since 1995, for example, the number of African-American households has risen by about 20 percent, but the number of African-American homeowners has risen almost twice that rate, by about 35 percent. For Hispanics, the number of households is up about 45 percent and the number of homeowning households is up by almost 70 percent.”And do not forget that the vast majority of even subprime borrowers have been making their payments. Indeed, fewer than 15 percent of borrowers in this most risky group have even been delinquent on a payment, much less defaulted. When contemplating ways to prevent excessive mortgages for the 13 percent of subprime borrowers whose loans go sour, regulators must be careful that they do not wreck the ability of the other 87 percent to obtain mortgages.”
- September 23, 2007, Slate: “If you want to make money off the housing bubble, you’ll have to do it the old-fashioned way: Buy a place with a no-money-down mortgage and then flip it.”
- September 23, 2007, New York Times: “[P]eople who refuse to sell their houses for less than they paid for them are violating a cardinal rule of the market: stuff is worth what it’s worth. It doesn’t matter what you paid for it…”(B)y being hung up about whether your condominium will sell for what you paid for it, you aren’t just driving yourself crazy trying to get a buyer. You may be threatening the very performance of the economy and driving up the unemployment rate — provided that many others behave in a similar way.”
So who wrote these defenses of the subprime market and the advice that people have to handle their own losses? Oh, let’s not always have the same hands ….
The answer, as Jake Tapper notes, is Austan Goolsbee — presidential adviser on economics to Barack Obama. This should come as no shock, class. After all, had you paid attention to your lessons over this term, you’d already know that Obama has Franklin Raines as one of his advisers, the former CEO of Fannie Mae who had to return some of the money he made by overstating Fannie Mae’s earnings. Obama also had James Johnson as an adviser, who chaired Fannie Mae and hid up to $19 million of his compensation package from regulators during his tenure — until the Fannie Mae connection got too embarrassing for Obama.
Your essay question, class, is this: Which presidential campaign represents change and reform on economic policy, and which represents more of the same?
Extra credit: Write a 100-word essay on the previous Obama double-talk scandal in which Goolsbee was involved.