America Is a Beautiful Place, Unaccountable Elite Edition

It says something about our country that the person who wrote this op-ed could, in a few short years, go on to serve as the primary economic advisor to the President. (h/t scribe)

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.”


For be it ever so humble, there really is no place like home, even if it does come with a balloon payment mortgage.

      • scribe says:

        Right and wrong are such old-fashioned, outdated, outmoded ideas, particularly when it comes to selling the empty calories of hope and change in a forward-looking ego-driven campaign.

        • phred says:

          Kinda like Coke Zero, eh? ; )

          I’ll be thankful when the current election cycle ends. It is just too painful to listen to.

          • readerOfTeaLeaves says:

            Picky, picky! You don’t like witches, world wrestling ‘execs’, and Buck in CO?

            Or no way to find out whether Osama bin Ladin has been donating to one or another Senate candidate, since Citizens United means disclosure is for wussies?


      • scribe says:

        You’d have loved where I found it: a footnote to a CLE presentation (for lawyers defending insurance cases) from late 2007 on “the coming subprime mortgage crisis”.

  1. emptywheel says:

    Adding, that Goolsbee’s problem was in taking a study that only went through 2000 and applying it to even more exotic mortgages written in 2007, all without even considering the way incomes had stagnated.

    • scribe says:

      Or the way job growth and income growth over the course of a career/lifetime had ended and, in many instances, reversed.

  2. phred says:

    EW, not sure this is the right place, so I’ll go mention it over on Jane’s thread about the update, but I see that the “Home” button is gone at the top of the page.

    Unless I’m missing something, I can no longer easily pop to your home page to switch threads. It looks like I need to go to another FDL page and come back, or click through the intervening posts. It would be nice to get that “Home” button back…

    • PJEvans says:

      Yeah, the new design is missing some useful features. Didn’t think anything but ‘Spotlight’ was broken enough to need to be fixed, or mis-fixed.

    • Mauimom says:

      Yeah, I’ve got that gripe too.

      Also, when you go to a “Just Say Now” story, you’re “trapped” there: there’s no bar across the top listing the other FDL site you might like to travel to.

      Also: who IS this asshat?

  3. Rayne says:

    I’ve said this elsewhere, but I’ll say it again here.

    Austan Goolsbee needs to watch this video about World Savings:

    And read this article:

    “We’re breaking the law.”

    They were told that. They knew it. It’s horseshit that any administration official doesn’t realize this, that there was a deliberate effort to permanently screw the underclass of the country by cramming bad mortgages on them. “Ownership Society” my ass.

    I think I’ve pointed this out before, too: the folks who were sold bad subprime mortgages like Betty in the 60 Minutes video relied on the expertise of the persons selling mortgages to them.

    I’m sure the lawyers who visit here know what I mean by that.

  4. R.H. Green says:

    The picture goes well with the quote. Face seemes to be saying, “…reached with his thumb, pulled out a plum, an’ said, ‘What a good boy am I’.”

    He sounds like an Economic Forecast salesman.

  5. jdmckay0 says:

    More purrrrfect, right.

    He sings praises of various ARMs (innovation), but no mention of mortgage machine processors (Countrywide and such) cranking these things out for sole purpose of selling mortage to WS bond machines as AAA.

    And no mention of these issuers “upselling” many, many to ARMs when they qualified for FHA standard.

    And no mention that, while he mentions job losses as regional caused by manufacturing losses, does he explain the vast, vast offshoring of so much else, distorting DOW #s describing profits as “increased productivity” (eg: Chinese labor @ under $.50 p/hr w/no environmental laws), while US incomes to support those property values/payments were disappearing and generally unrecoverable.

    Nor does he question massive (and I mean massive) marketing (and I mean marketing) of these bonds world wide, singularly nearly bringing world economy bankrupt… eg. for a UOC guy where market is God, diversification is also God. This was a one tier product which dominated WS sales everywhere… retirement/mutual funds, all kinds of derived bonds masked as something else… it’s mind boggling.

    And to me, most of all, this bubble was contrived and generated w/full knowledge of lenders he calls “more perfect”, w/entire US economic fortunes committed to housing as “wealth building” vehicle while rest of economy was disappearing. Or in other words, this bubble was not “market driven”, it was an entire market contrivance… creating an unsustainable myth.

    I can’t help but wonder if these guys became believers (deceived) by their own jargon (lies) and really don’t know WTF happened.

    In a sense, he’s just another Geithner describing this thing from view inside the bubble.

    (thanks for the post Marcy)

    • knowbuddhau says:

      Interesting idea, jd. Reminds me of something I was watching yesterday.

      Gore Vidal’s History of the National Security State
      The Real News Network

      In it, the acerbic old-guard Liberal says Truman and Ike knew the whole “The Russianss are coming!” thing was a myth made up for the purpose of scaring the public into accepting a permanent war economy.

      And myth is the most apt word. As in, the power of myth. It’s extremely interesting (to me, at least) that Joseph Campbell himself began lecturing at the State Dept’s Foreign Service Institute in 1956.

      Vidal’s assertion, from personal first-hand knowledge, is that JFK believed the hype. Can you say, Camelot on the Potomac? It’s my firm belief that from then on, right up to today, deliberately malicious myth-making has been one of our most successful methods of jacking voting blocs great and small.

      Fools like Goolsbee probably believe wholeheartedly in the myth of America the Exceptional.

      We can simply do no wrong, by definition, it asserts. We’ve all been so steeped in this malicious myth so deeply for so long, most people take it for granted that our rightful role is to rule the world.

      That puts the full force and majesty of the Throne of Heaven behind the Bully Pulpit. To question the gov’t in general is entirely conflated with challenging god almighty. God bless America, dammit! Support the troops or go to hell!

      Can’t have a massive Perkinsian hit job without its supporting myth. What myth was used to jack us to hell and back this time, sticking us with the bill in every freakin’ way? The American Dream of Home-ownership has been usurped, weaponized, and turned against us.

      It’s madness of literally mythic proportions, right? So what to do? Obviously, bust those myths! And replace them with our own shared narrative, not one foisted on us by usurpers.

      That’s why I so enjoy hanging out here at the Lake, most people here don’t believe the hype, and we go at the BS myths with gusto.

  6. bobschacht says:

    For be it ever so humble, there really is no place like home, even if it does come with a balloon payment mortgage.

    This is just so extremely BS that I almost shouted at my monitor. My wife has an ARM that is due to balloon next year. She can’t refinance because her credit is bad due to a foreclosure in 2008, and I can’t help. We’re not going to be able to afford the new mortgage. We’ll have to sell it.

    Goolsbie should be forced to get a balloon ARM on his home. Let’s see if he likes it then. What a tool.

    Bob in AZ

    • uneasyone says:

      When you have a “permanently rising” market like housing was said to be, that papers over all the cracks. That ARM with balloon would be no problem if the house in question was worth 10% or more more than it was in 2007 instead of however much less. Some solution would present itself. At worst, you might have to take a big profit by selling.

      When “everybody knows” that one particular commodity “always goes up” in value, that’s when the alarm bells and sirens should be going off in your mind, because the end of that is very near. Sell while you can.

  7. behindthefall says:

    *grump, grump* I can’t find out whether I’m logged in by glancing at the top of the page any more. Actually, I can’t see that the bottom of the page (a _terrible_ place to put logged-in info) tells me, either.

    *grump* There’s no easy way to jump to the “home view” of the FDL sub-site you’re viewing.

    Ya know, when you’re going to muck about with something that so many people use and are used to, you might want to run the proposed changes by the people who are going to have to use the result. That’s probably why they called those heavyweight docs that guide(d) the Internet “Requests For Comments” (RFCs).

    • bmaz says:

      Oh, there was a whole lot of very hard work, by very dedicated people that went into this and there was extensive test driving behind the scenes before the rollout by a lot of the contributors and backstage wizards who make things go; but still it was a very complex rejigging and recoding of the entire platform and there are few things that need to be fine tuned yet. Considering how complex FDL as a whole is – with numerous heavily trafficked individual blogs, it has all gone remarkably smoothly and is a tremendous credit to the tech staff and managers.

      Give us a little time to get little minor kinks ironed out. You have no idea how much work goes into this enterprise to make the finished product that appears magically on your screen as Emptywheel and the greater FDL family of blogs and services.

      • bobschacht says:

        I take my hat off to the staff working behind the scenes. I like the new FDL toolbar with “My Diary” and the Notifications features. I wish I had the notifications thing going back 3-4 years….

        I’ll be changing my facebook page to reflect “My Diary”.

        Bob in AZ

    • nonplussed says:

      You’d certainly think the elite team from Firedoglake’s Software Department Human Factors Engineering Division would have detected such obvious irregularities with the user interface… *g*

  8. qweryous says:

    What a tool.

    There seems to be no lack of them.


    I hope that threaded comments will not be implemented here at EW. Or that as a minimally acceptable alternate, the user is given a choice of display options. There are some other changes that I am not enamored with- but threaded comments are a definite negative.

    • qweryous says:

      Understand the complexity, work in progress etc…

      Is it intended for the edit feature to function? It’s elimination would be another sorely missed feature. Thus necessitating additional comments like this one. Which would have been ADDED AS AN EDIT….

  9. prostratedragon says:

    Goolsbie’s passage is so awful —it reads more like a script, down to that screamer of a last line, than like the product of someone who was actually thinking about something— that I had to look up the whole article. It’s a real tasty treat of a tossed salad.

    For instance, Goolsbie whose article appeared March 29, 2007 as a commentary on testimony before the Senate Committee on Banking, etc.:

    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.

    But, Martin Eakes, CEO of CRL (and community bodies that did subprime lending), on February 7, 2007, before the Senate Committee:

    The subprime mortgage market today is a quiet but devastating disaster. […] Our analysis of subprime mortgages made in recent years shows that 2.2 million families will lose their home to foreclosureâforeclosures that were, for the most part, predictable and entirely avoidable through more responsible lending practices. As housing appreciation slows down in many areas of the country, it is clear that the problem will only grow worse. All indications are that subprime mortgage loans are headed toward the worst rate of foreclosures in modern mortgage market history.


    [… H]omeownership is the best and most accessible way most families have to acquire wealth and economic security. If home loans are actually setting citizens back rather than helping them build for the future, there are serious ramifications for local economies and the nation as a whole. The problem is particularly serious for communities of color, since more than half of African-American and 40 percent of Latino families who get home loans receive them in the subprime market. If current trends continue, it is quite possible that subprime mortgages could cause the largest loss of African-American wealth in American history.

    I would argue with Eakes’s premise about building wealth, and would have done so then, but at least he does re-examine the premise in light of what had clearly begun to take place at the time, in the world of real people.

    There is more from 2007 on “non-traditional” loans and the nascent foreclosure problem at CRL’s site here, and especially in their comment on proposed regulations in North Carolina, here. I emphasize them only because of Goolsbie’s dragooning of them into his position; in fact there was already a great deal of negative evidence piling up throughout the financial blogosphere and beyond on subprime loans and their effects on homeowners by early 2007, with CRL just one of the leading voices.

    • emptywheel says:

      THanks for that.

      And on top of that he brags about how subprime lenders targeted people of color, when it was already pretty clear that was racism in action, targeting people of color even when they qualified for prime.

      • prostratedragon says:

        Oh yeah. There’s a new study [rummage, rummage] ah, here, that goes to some length making precisely that point. Some earlier studies, including some more or less contracted out by the gov, got to the racial biases in subprime origination several years ago (Where was Austen?). But this new Massey & Rugh takes advantage of deteriorating events by going all the way to foreclosure as the variable to be explained.

        (Think I’ll read their methods section to see whether they found direct or latent effects.)

      • thatvisionthing says:

        Sounds like Catherine Austin Fitts was on target in the 90s — see comment I left in book salon yesterday.

        FITTS: In 1995, a senior Clinton Administration official shared with me the Administration’s targets for Fannie Mae and Freddie Mac mortgage volumes in low- and moderate-income communities. We had recently reviewed the Administration’s plans to increase government mortgage guarantees — most of these mortgages would also be pooled and sold as securities to investors. Even in 1995, I could see that these plans would create unserviceable debt loads in communities struggling with the falling incomes expected from globalization. Homeowners would default on mortgages while losses on mortgage-backed securities would drain retirement savings from 401(k)s and pension plans. Taxpayers would ultimately be hit with a large bill . . . but insiders would make a bundle. I looked at the official and said that the Administration was planning on issuing more mortgages than there were houses or residents. “Shut up, this is none of your business,” the official snapped back.

        I wish I knew more about her; I’m basically following a lead in a comment on a linked Zero Hedge post a few days ago. Also:

        She also links this to CIA narcotrafficking, money laundering, economic warfare on minority communities here and globally:

        One of the dirty little secrets behind the housing bubble is the long standing partnership of narcotics trafficking and mortgage fraud and the use of the two in combination to target and destroy minority and poor communities with highly profitable economic warfare. This model is global. It is operating in counties throughout the world as well as in US communities.

        This includes disenfrancisement of poor minority communities by CIA-sponsored narcotrafficking. Man, she has a lot to say:

        No history of the 1980s is complete without an understanding of the lawyers and legal mechanisms used to legitimize drug dealing and money laundering under the protection of National Security law. Through the MOU, the DOJ relieved the CIA of any legal obligation to report information of drug trafficking and drug law violations with respect to CIA agents, assets, non-staff employees and contractors.[23] Presumably, this included the corporate contractors who, by executive order, were now allowed to handle sensitive intelligence and national security outsourcing.

        With the DOJ-CIA Memorandum of Understanding, in effect from 1982 until rescinded in August 1995, a crack cocaine epidemic ravaged the poorer communities of America and disenfranchised hundreds of thousands of poor people into prison who, now classified as felons, were safely off of the voting roles. Meantime, the U.S. financial system gorged on what had grown to an estimated $500 billion-$1 trillion a year of money laundering by the end of the 1990s. Not surprisingly, the rich got richer as corporate power and the concentration of investment capital skyrocketed on the rich margins of state sanctioned criminal enterprise.

        Return to top, I think this is a loop.

    • uneasyone says:

      Anything that reliably “always goes up” in price is a wonderful way to build wealth; particularly if that anything is something you have to have anyway, like a place to live.

      The problem is, of course, is that nothing goes up in price forever, and a good indication that the price is due for an imminent crash is that “everybody knows” that a particular market is exceptional to that particular truism and any ignoramus on the street can explain it to you.

      • thatvisionthing says:

        Per Bill Black, on assuming growth, No Fed Member Has The Spine To Find Out The Truth Of Our Banking System:

        IIF released an interim study in June 2010 claiming that Basel III’s higher capital requirements would reduce signatory nations’ GDP by three percent. These studies are easy to create. If one assumes (1) that banks will be (really) profitable (as opposed to creating fictional accounting income and real losses) and (2) that the banks’ incentives and real successes will be unaffected by even exceptional leverage, then it follows that the greater the leverage the greater the bank lending and profitability. If one then assumes that greater bank loans will fund productive investments, thereby causing greater real growth (as opposed to inflating asset bubbles, which reduce real growth) and that this relationship is continuous (e.g., the more commercial real estate we finance in Atlanta the faster Atlanta’s economy will grow — forever), then extraordinary bank leverage must expand GDP. The optimal bank capital requirement is no requirement.

        None of these assumptions, conclusions, or predictions is valid, and we have just seen that the opposite can be true, but theoclassical economists’ dogmas have proven impervious to reality.

  10. prostratedragon says:

    Another anti-threadist here; even with demarcations, following an evolving discussion entails an annoying amount of retracing with that structure.

    But, those other of the new site functions that are optional seem pretty nice, for those who opt.

    • phred says:

      I’m with you, as I mentioned on Jane’s thread earlier (anti-nester here ; ) Thought it wouldn’t hurt to mention it here though, just in case to nest or not to nest can be variably implemented (i.e., on some pages, but not others) and assuming EW is keeping track of preferences…

  11. Hoofin says:

    I don’t understand, if the government has given away, every year, a $100 billion subsidy to mortgage payers—the Mortgage Interest Deduction—that they can’t set up a low-interest refinance program that’s easy to qualify for.

    They’ve been giving away money for decades. And now, for some reason, they can’t act at all. It does not make sense.

  12. jdmckay0 says:

    FWIW, in larger picture, I’ve 100% given up hope in politicaly sourced smart, intelligent, (even modicum of attempt towards) equity and justice in both this thing and… generally, economy as whole, education commitment w/ensuing vision of what could be accomplished w/said education that we as a society sorely need.

    Things are so far out of tilt… un-reality based abstraction built upon multiple layers of the same, where’s “hope” in that? Rather, putting one’s faith in anything I see proffered looks like a guaranteed fools game to me.

    In short, I see little/no fundamental momentum in US society to fuel an economy which accomplishes what society needs, and does so in a just(ice) manner. Repubs/Libertarians just plain lie & ignore reality, demonize anyone else, and wrap legalized gov. endoresed theft as freedom/free market (whatever) and “liberty”.

    Dems don’t understand much, have no backbone, and given this round w/BO’s presidency & congressional majorities… at best, they nibbled around the edges of major major issues exhibity little courage or understanding (let alone put it into action) to fundamentally shift corroding critical mass momentums which have turned US society into canibalism… and selling the same to US public as ensuring “our feedoms” and such.

    I think things are so far gone, we need something completely, totally new. Entirely new pardigms for just about everything society does to provide everything and generate econ activity, and these paradigms need to be integrity bound and based on unflinching, carefully and intelligently accessed current point-in-time reality checks.

    Essentially, as far as I can see, there are approx. -0- ideas in public political forums which provide a believable framework to go forward successfully.

    Would be inlightening, I think, to put every lawmaker, every pundit, every judge under oath… sit them in a booth and require them to answer the question: what is the truth?

    I suspect, currently, responses would make MAD magazine look like a scholarly archive.