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

Sep 17, 2008 7:49pm

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

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