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Rhetoric and Policy Proposals that Won't Be Showing Up in An Obama Speech Anytime Soon

September 17, 2008 7:49 PM

New York Times oped, March 29, 2007: "Irresponsible’ Mortgages Have Opened Doors to Many of the Excluded," a defense, of sorts, of the subprime housing market, in which the author cautions that "regulators should be mindful of the potential downside in tightening too much."

After all, the author pointed out, 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.".

In "Bubble-lusions: Why most real-estate agents aren't getting rich," published in Slate on September 23, 2007, the author wrote, "f 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."

In "A Reality Check For Home Sellers," published in the New York Times that same day, the author wrote of the conflict between economists and real people, and said "people 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. What is to be done? Well, if you are holding out for an above-market price to recoup your losses, perhaps you would do well to hear the advice that Professor Mayer gives his own family members.

"'If you want to sell your house then you list it at the market price and you sell it,' he said. "If you don’t really want to sell then don’t put it on the market. But don’t say you want to sell and then set the price so high that you spend the year cleaning up every morning, having people walk through your living room and look in your medicine cabinets and reject you. That' s just painful — and expensive.' His research offers a simple lesson for everyone out there waiting for a high price to push them back into the black: Get real."

All of the following are written by Obama economic policy adviser Austan Goolsbee, a provocative thinker whose above language will assuredly not show up in any Obama speech anytime soon.

-- jpt

September 17, 2008 | Permalink | Share | User Comments (24)

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No money down, flip it?

Don't get upset because you can't the money you put into it, out of it?

87% of Blacks/Hispanics have the creative financing but have not defaulted? (why didn't they have access to mortgages before?)

I guess the man is as plain spoken as Joe Biden. I like Joe Biden for it. I'd rather hear someone tell me what they really think than to tell me what they think will sell.

Posted by: Genna | Sep 23, 2008 2:15:26 PM

Charlie Rose had some experts on PBS and it sure helped. I like Obama/Biden they have 300 experts working on it right now!

Posted by: Kevin | Sep 18, 2008 3:25:56 PM

There is more with Obama:
Guess who is Number 2 in getting Campaign contributions from Fannie Mae & Freddie Mac?
Obama. (Nr. 1 is Senator Dodd, Obama confidant.)
------------
Penny Pritzker, Obama's national finance chair was partially responsible for one of the greater banking collapses in American history.

Penny Pritzker, Obama's national finance chair was, with her family, the half owner of Superior Bank, which was shut down in 2001 by the FDIC after it had lost nearly all of its more than $2 billion of assets on bad loans to high-risk borrowers, federal regulators said.

Pritzker also served as finance chair for Obama's Senate run, and supported him during his time in the Illinois state legislature.

One reason Pritzker may have been enamored with Obama was his willingness to press legislation that loosened state regulatory policies for land developers and multi-family property owners.

Posted by: Zank | Sep 18, 2008 1:05:23 PM

The Dems pushed the housing supply hard, via Fannie Mae and threats of increased regulation, resulting in the huge sub prime market. Now, that market is dragging the economy down. And Obama is LYING on the stump saying that is somehow McCAin's fault, who at the time of the articles you post above was fighting hard to regulate Fannie?

Why is that not a lie by Obama, but the sex ed ad is a lie by MCCain? Double standard, double standard, double standard.

Hello? Bueller?

Posted by: JG | Sep 18, 2008 11:54:12 AM

"Barney Frank allowed loans to minorities especially blacks who could not afford to pay back, hence the present economic crisis. Will Obama admit his people are responsible for the collapse under the Democratic congress !!!"

So, you are saying only minorities are responsible for this mess? No hardworking white person has had their home foreclosed on, eh? Some people are going to find a scapegoat no matter what!

vs. GROW UP!

Posted by: Tina | Sep 18, 2008 11:36:39 AM

Cut and paste can be challenging indeed....

Note the date below:
Bubble-lusions
Why most real-estate agents aren't getting rich.
By Austan Goolsbee
Posted Friday, Aug. 26, 2005, at 1:20 PM ET

When you correct your date for the above story, note you won't be able to (accurately) say this story was published on the same day, so don't forget to fix that at the same time:
A Reality Check for Home Sellers
By AUSTAN GOOLSBEE
Published: September 23, 2007

Posted by: Tom J | Sep 18, 2008 2:32:09 AM

"f 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."

If you are unable to recognize that as sarcasm, then you are willing to claim that you think no-money-down is "old fashioned"?

I think this is an error of significant claim to warrant a correction or explanation.

Posted by: supergrover | Sep 17, 2008 11:37:51 PM

The vast majority of homeowners were paying their mortgages when the rates were at 6% but they adjusted to rates of 13% or higher. They were suckered into the deal, thought they bought into the American dream, and now all of us will be paying for the mortgage companies risk-taking and greed.

Jake - you need to correct your post. "Bubble-lusions" was posted in August of 2005.

Posted by: cincyr | Sep 17, 2008 9:51:34 PM

One difference between McCain and Obama, and the reason why it hurts Obama, is that Obama believes his own mythology. He acts holier-than-thou and he is a typical politician, just like the rest of them. Look at his ethics 'reform' bill in Illinois. This bill set up his mentor Emil Jones to retire with $578,000 in campaign funds. I would advise Obamophiles to read something other than his own books to get information. There is plenty out there and some is actually in the HuffPo, The Nation, etc. Try a google search for 'Subprime Obama," or a little article called 'Barack Obama and Me."

Get over it Obama fans, he is not the second coming of the community organizer, he is just a politician. Your only hope is that he does better nationally than he did in reforming Chicago and Illinois. Check out this morning's Chicago Trib article "Obama Sidesteps Reform in Illinois."

Posted by: Chris | Sep 17, 2008 9:26:28 PM

"Goolsbee's article was about game theory and the annual income of real estate agents."

If he's talking game theory, then forget about many people understanding what the hell he is discussing.

Posted by: Ryan C | Sep 17, 2008 9:21:54 PM

Anyone who clicks on the 'Bubble-usions' story realizes the line Jake clipped was sarcasm. Goolsbee's article was about game theory and the annual income of real estate agents.

As for when Goolsbee was being serious, he was correct. Perhaps Jake knows as little about economics as McCain does. The problem was overvaluing the securities, subprime mortgages or not.

Posted by: Tom J | Sep 17, 2008 9:14:04 PM

Your article has a factual error.

You say: "In "Bubble-lusions: Why most real-estate agents aren't getting rich," published in Slate on September 23, 2007.."

Clicking on the link provided you will see that the article was actually "Posted Friday, Aug. 26, 2005, at 1:20 PM ET"

Posted by: David | Sep 17, 2008 9:12:08 PM

David,

I'm not sure what you mean that Austan Goolsbee didn't "sign on to the campaign until late."

The Wall Street Journal recognized him as one of Obama's top economic advisers in an April 24, 2007. That was a grand total of TWO months after Obama declared his candidacy.

Posted by: RAM | Sep 17, 2008 9:07:22 PM

"McCain supported reform."

Yes he cosponsors a bill that went nowhere.

Obama on the other hand AUTHORED a bill that went nowhere.

Slight egde Obama. ;-)

Also Obama has put had a plan to deal with the financial markets on his website and just gave a major speech on this a month or so ago.

McCain has to reference a stance he took 3 years ago while he's on tape some 22 times talking about how the economic fundamentals of our country were strong. The American worker was never mentioned until Obama made fun of McCain's impression of Kevin Bacon at the end of Animal House.

McCain's political philosophy and voting record depict a man wary of any and all government regulation and a true believer in the unfettered free market.

Who in their right mind thinks he's the right guy for oversight and regulation of our financial markets?

Posted by: Ryan C | Sep 17, 2008 8:59:58 PM

vs,

It isn't just blacks that have foreclosed on homes. It is whites, hispanics, asians, etc.

All races are capable of flipping properties? Why would you think otherwise? The flippers are the culprits.

Obama/Biden 08!

Posted by: Common Sense | Sep 17, 2008 8:46:31 PM

Frieda's post on McCain is absolutely right. McCain supported reform.

Sen. Dodd was too busy getting favorable loan treatment from the industry he was supposed to be watching to act on it.

Posted by: katmandu | Sep 17, 2008 8:41:21 PM

Jake - not sure if you know this. Austan Goolsbee didn't sign on to the campaign until late...

Moreover, if you want to talk about economic advisers, where's your mention of Phil Gramm, or Donald Luskin, who, INCREDIBLY wrote an op-ed in the Washington Post JUST A COPULE OF DAYS AGO SAYING EVERYTHING IS FINE.

Sunday night (monday morning) WAPO paper. Check it out.

Posted by: David | Sep 17, 2008 8:38:30 PM

Well, that's why you have multiple advisers. It's good to get different perspectives. The Bush economy is showing us what happens when you don't.

Posted by: TruthSeekr | Sep 17, 2008 8:35:00 PM

Barney Frank allowed loans to minorities especially blacks who could not afford to pay back, hence the present economic crisis. Will Obama admit his people are responsible for the collapse under the Democratic congress !!!

Posted by: vs | Sep 17, 2008 8:33:28 PM

Obama will NOT defend the Govn't bail outs - he lacks the knowledge & judgment to make a decision. Obama is the puppet of the DNC - but - they sure picked the wrong, weak guy - he will NEVER be elected.

Posted by: Abby | Sep 17, 2008 8:21:58 PM

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