Obama Names Goolsbee to Lead White House Economy Panel

[shiny!]

Austan Goolsbee [...] has been chosen by President Barack Obama to lead the Council of Economic Advisers...
President Barack Obama said he’s appointing Austan Goolsbee to lead the Council of Economic Advisers, calling him “one of the finest economists in the country.”

http://www.bloomberg.com/news/2010-0...ing-romer.html

Anybody know anything about him?

[Munger]

Re: Obama Names Goolsbee to Lead White House Economy Panel

I've seen him on a few interview -- parrots the treasury line with disconcerting ease. Not surprising though.

[ViC78]

Re: Obama Names Goolsbee to Lead White House Economy Panel

Goolsbee was praising subprime back in 2007. That is all I need to know about his credentials and judgment. Also, here is a superb takedown of that subprime article, by the late Tanta of Calculated Risk.

Dr. Austan Goolsbee, a Real Economist™, presents the third way of understanding the issue in “’Irresponsible’ Mortgages Have Opened Doors to Many of the Excluded":

A study conducted by Kristopher Gerardi and Paul S. Willen from the Federal Reserve Bank of Boston and Harvey S. Rosen of Princeton, "Do Households Benefit from Financial Deregulation and Innovation? The Case of the Mortgage Market" (National Bureau of Economic Research Working Paper 12967), shows that the three decades from 1970 to 2000 witnessed an incredible flowering of new types of home loans. These innovations mainly served to give people power to make their own decisions about housing, and they ended up being quite sensible with their newfound access to capital.

These economists followed thousands of people over their lives and examined the evidence for whether mortgage markets have become more efficient over time. Lost in the current discussion about borrowers’ income levels in the subprime market is the fact that someone with a low income now but who stands to earn much more in the future would, in a perfect market, be able to borrow from a bank to buy a house. That is how economists view the efficiency of a capital market: people’s decisions unrestricted by the amount of money they have right now.

And this study shows that measured this way, the mortgage market has become more perfect, not more irresponsible. People tend to make good decisions about their own economic prospects. As Professor Rosen said in an interview, “Our findings suggest that people make sensible housing decisions in that the size of house they buy today relates to their future income, not just their current income and that the innovations in mortgages over 30 years gave many people the opportunity to own a home that they would not have otherwise had, just because they didn’t have enough assets in the bank at the moment they needed the house.”

The first time I read this I was, actually, so speechless that I could only respond with a quotation from our wise commenter mp: toad bones. Also, dog balls.

The evidence for this view is that economist-underwritten loans in the period 1970-2000 didn’t do so badly. Sure, a few of them went down, but it’s important to understand why:

Of course, basing loans on future earnings expectations is riskier than lending money to prime borrowers at 30-year fixed interest rates. That is why interest rates are higher for subprime borrowers and for big mortgages that require little money down. Sometimes the risks flop. Sometimes people even have to sell their properties because they cannot make the numbers work.

The traditional causes of foreclosure, even before there was subprime lending, were job loss, divorce and major medical expenses. And the national foreclosure data seem to suggest that these issues remain paramount. The latest numbers show that foreclosures have been concentrated not in places where real estate bubbles have supposedly been popping, but rather in places whose economies have stagnated — the hurricane-torn communities on the Gulf of Mexico and the industrial Midwest states like Ohio, Michigan and Indiana, where the domestic auto industry has suffered. These do not automatically point to subprime lending as the leading cause of foreclosure problems.

So in this period of happily performing economist-underwritten loans, there were some losers. Apparently the causes, job loss, divorce, and major medical expenses, which could be understood to mean situations in which current expenses are substantially greater than current income—have nothing to say about the idea that it is wise to take a loan that ignores one’s current income and expenses. Lenders, it appears, may consider future income; servicers, it appears, still keep refusing to accept aspirations rather than negotiable instruments to apply to a past-due balance.

Of course it’s not surprising that Goolsbee ignores the evidence of a house-price bubble, since there can apparently be no bubbles in perfect markets. Theories do that to you.

[ViC78]

Re: Obama Names Goolsbee to Lead White House Economy Panel

Goolsbee was praising subprime back in 2007. That is all I need to know about his credentials and judgment. Also, here is a superb takedown of that subprime article, by the late Tanta of Calculated Risk.

Dr. Austan Goolsbee, a Real Economist™, presents the third way of understanding the issue in “’Irresponsible’ Mortgages Have Opened Doors to Many of the Excluded":

A study conducted by Kristopher Gerardi and Paul S. Willen from the Federal Reserve Bank of Boston and Harvey S. Rosen of Princeton, "Do Households Benefit from Financial Deregulation and Innovation? The Case of the Mortgage Market" (National Bureau of Economic Research Working Paper 12967), shows that the three decades from 1970 to 2000 witnessed an incredible flowering of new types of home loans. These innovations mainly served to give people power to make their own decisions about housing, and they ended up being quite sensible with their newfound access to capital.

These economists followed thousands of people over their lives and examined the evidence for whether mortgage markets have become more efficient over time. Lost in the current discussion about borrowers’ income levels in the subprime market is the fact that someone with a low income now but who stands to earn much more in the future would, in a perfect market, be able to borrow from a bank to buy a house. That is how economists view the efficiency of a capital market: people’s decisions unrestricted by the amount of money they have right now.

And this study shows that measured this way, the mortgage market has become more perfect, not more irresponsible. People tend to make good decisions about their own economic prospects. As Professor Rosen said in an interview, “Our findings suggest that people make sensible housing decisions in that the size of house they buy today relates to their future income, not just their current income and that the innovations in mortgages over 30 years gave many people the opportunity to own a home that they would not have otherwise had, just because they didn’t have enough assets in the bank at the moment they needed the house.”

The first time I read this I was, actually, so speechless that I could only respond with a quotation from our wise commenter mp: toad bones. Also, dog balls.

The evidence for this view is that economist-underwritten loans in the period 1970-2000 didn’t do so badly. Sure, a few of them went down, but it’s important to understand why:

Of course, basing loans on future earnings expectations is riskier than lending money to prime borrowers at 30-year fixed interest rates. That is why interest rates are higher for subprime borrowers and for big mortgages that require little money down. Sometimes the risks flop. Sometimes people even have to sell their properties because they cannot make the numbers work.

The traditional causes of foreclosure, even before there was subprime lending, were job loss, divorce and major medical expenses. And the national foreclosure data seem to suggest that these issues remain paramount. The latest numbers show that foreclosures have been concentrated not in places where real estate bubbles have supposedly been popping, but rather in places whose economies have stagnated — the hurricane-torn communities on the Gulf of Mexico and the industrial Midwest states like Ohio, Michigan and Indiana, where the domestic auto industry has suffered. These do not automatically point to subprime lending as the leading cause of foreclosure problems.

So in this period of happily performing economist-underwritten loans, there were some losers. Apparently the causes, job loss, divorce, and major medical expenses, which could be understood to mean situations in which current expenses are substantially greater than current income—have nothing to say about the idea that it is wise to take a loan that ignores one’s current income and expenses. Lenders, it appears, may consider future income; servicers, it appears, still keep refusing to accept aspirations rather than negotiable instruments to apply to a past-due balance.

Of course it’s not surprising that Goolsbee ignores the evidence of a house-price bubble, since there can apparently be no bubbles in perfect markets. Theories do that to you.

[BuckarooBanzai]

Re: Obama Names Goolsbee to Lead White House Economy Panel

According to Wikipedia, he's a Yale grad, member of Skull and Bones, and a former journalist who worked for the NYTimes and Slate... perfect One-World-Government Elitist credentials.

And judging by his picture, looks like a grade-A shit-eating douchebag.

[oddlots]

Re: Obama Names Goolsbee to Lead White House Economy Panel

Wow. That is just unbelievably stupid. I've just lost all hope.

[seanm123]

Re: Obama Names Goolsbee to Lead White House Economy Panel

Goolsbee got the job because he cannot be vetted by the Senate and he was voted The Funniest Celebrity in Washington in 2009.
We now have a Stand-up comedian trying to shape economic policy.


http://blogs.wsj.com/economics/2009/...-up-economist/