Dumb John, blustery Barack

By Jim Stergios
April 16th, 2008

Dumb John. I am not going to link to the McCain announcement to forego gas taxes this summer. Let me get this straight. Bridges are falling down. Traffic backs up because of the need for road repairs and improvements, using more gas (congestion is up incredibly since the 70s). And we will get, what?, $50 in savings through a federal gas tax sabbatical? (Assumptions: Americans average 1,000 miles a month, around 20 miles a gallon.) Dumb.

How about giving states flexibility (fewer dumb federal rules and restrictions on new project type and delivery) and the ability to use more federal dollars for maintenance?

Blustery Barack. According to Dennis Bernstein of the Common Dreams blog:

During a recent campaign stop in south Texas, Obama met with San Antonio-area residents who had been particularly hard hit by the sub-prime meltdown. He expressed dismay over how lobbyists for the sub-prime lending industry had spent more than $185 million in the last several years for their cause.

“To give you a sense of what that kind of lobbying gets you,” Obama said, a “CEO of the largest sub-prime lender was promised a $100-million severance package at a time when more than two million Americans were facing foreclosure, including nearly 14,000 right here in San Antonio.”

I could certainly cite Barack’s relationship with Superior Bank and the Pritzkers if I was trying to make a political point. More interesting is how his attempt at a populist message directly contradicts the views of his principal economic adviser, Austan Goolsbee. In the New York Times a year ago, good Dr. Goolsbee wrote:

Almost every new form of mortgage lending… has tended to expand the pool of people who qualify but has also been greeted by a large number of people saying that it harms consumers and will fool people into thinking they can afford homes that they cannot.

Congress is contemplating a serious tightening of regulations to make the new forms of lending more difficult. New research… suggests that regulators should be mindful of the potential downside in tightening too much.

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, shows that… [new types of home loans] 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.

…
And this study shows that measured this way, the mortgage market has become more perfect, not more irresponsible.

And

[T]he historical evidence suggests that cracking down on new mortgages may hit exactly the wrong people.

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.

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

While we do need to rein in some bad actors, there is a lot of truth in Goolsbee’s view. But way too much posturing from Barack on this, NAFTA, and… the list gets pretty long.