Obama’s Economic Adviser Was Proponent Of Subprime Loans
That’s right. Austan Goolsbee, who has been chosen to be Obama’s Chief of Staff at the Economic Recovrery Advisory Board and in that role will be helping to guide Obama as he seeks to fix the current economic predicament we’re in, was an outspoken proponent of the sort of loans that got us into this mess in the first place.
Goolsbee believes that incentives matter, and because of this he believes that goverment can, therefore, manipulate tax rates and market prices (through various fiscal and regulatory tools) to get people to act more along the lines the policy-makers would like.
One form of intervention that Goolsbee favored was extending mortgage loans to the the uncredit worthy. In a March 29, 2007 op-ed for “The New York Times,” he said that it was good that financial institutions were being prodded to lend money to those who would not meet normal standards for home loans.
Why? Because people should be evaluated on the basis of what their future income is likely to be in deciding whether or not they can offord to buy a house and meet the monthly payments, not their present income status.
Banks and other lending institutions were clearly misjudging who, therefore, was a “good risk” by only looking at someone’s ability to make a reasonable downpayment and meet those montly payments today.
Thus, Goolsbee was delighted that political and regulatory tools were being used to get those uncredit worthy into new homes. The private sector was not thinking far enough ahead, and that’s what the government needed to get them to do, Goolsbee said.
That’s not change we can believe in.
You’d think that Obama would want someone who didn’t think subprime loans were a good idea to get us out of an economic crisis that subprime loans caused.
