Obama adviser warned against over-regulating subprime mortgages

As storm clouds gathered over the subprime mortgage mess more than a year ago, Barack Obama's chief economic adviser warned against regulating the risky mortages too much because that could hurt minorities and others who needed the loans.

"Regulators should be mindful of the potential downside in tightening too much," Obama adviser Austan Goolsbee wrote in a column March 29, 2007 for the New York Times.

He cited a study showing that over the long run, people "tend to make good decisions" when taking out mortages to buy a home.

He also noted that new types of home loans like subprime loans historically helped people who had been excluded from getting home loans, including "the young, the discriminated against, the people without a lot of money in the bank to use for a down payment."

He said "it has allowed them access to mortgages whereas lenders would have once just turned them away."

Goolsbee, who is an economics professor at the University of Chicago, cited a 2005 study showing that a majority of home loans to African-Americans and 40 percent of the home loans to Hispanics were subprime loans.  Home ownership among both groups rose sharply during that time, he noted.

"The historical evidence suggests that cracking down on new mortgages may hit exactly the wrong people," Goolsbee said in the article unearthed by ABC's Jake Tapper.   

Comments

[Ivanv]

Goolsbee displays positive aspects of subprime loans. He's not arguing to let the existing institutions lead us to financial ruin.

Differentiate between what makes good 'press' with the economic arguments.

[mona]

I am stunned - 40 % of the sub-prime loans are hispanic, and most of the others are African American -

Come on, do they not read the fine print, are they suckers for a slick mortgage talker, did they pay anything down?" And NOW we so called rich - that saved for a twenty percent down, scrimped and saved for years, paid DOUBLE on our house payments in order to PAY our mortgages off - now we "rich" are going to have to pay for their loans. And then to find out it is my "patriotic" duty to do so no way obama, no way