Thanks to the collapse of the subprime housing industry, millions of families stand at risk of losing their homes, in large measure because of unscrupulous lending policies by some of the biggest corporate hucksters this country has seen since the dawn of the Great Depression. Now, the nation's housing industry and overall economy is paying the price: foreclosure rates are skyrocketing across the country, while the nation teeters into a recession.
There were some interesting articles in Sunday's Washington Post regarding proposed solutions to crisis. One of the articles that caught my eye came from the Obama campaign. It was written by Austan Goolsbee, a professor of economics at the University of Chicago Graduate School of Business, who serves as senior economic adviser to Senator Obama's campaign.
Professor Goolsbee, you may remember, was in the news last month when it was reported that he contacted Canadian officials to suggest that Senator Obama's harsh campaign rhetoric on trade and NAFTA shouldn't be taken seriously. Per Goolsbee, the senator's anti-NAFTA rhetoric, a Canadian official wrote, "should be viewed as more about political positioning than a clear articulation of policy plans."
Professor Goolsbee assures us in his Post article that Senator Obama would take immediate steps to fix the foreclosure crisis. There's a problem, however. Just a year ago, Professor Goolsbee was defending subprime loans against critics who suggested that when high payments kicked in, borrowers would risk losing their homes.
Writing in the New York Times, Goolsbee defended subprime loans and warned regulators to "be mindful of the potential downside in tightening too much." He praised the risky loans for increasing the number of African-American and Hispanic homeowners, and warned that "that cracking down on new mortgages may hit exactly the wrong people."
Today, Professor Goolsbee's view of the mortgage crisis has changed. Now, however, having been fooled once by Goolsbee's public proclamations on a significant economic policy, we should be cautious before we accept his newfound support for mortgage reform.
There's an important reason to doubt the Obama campaign's public expressions of support for reform of the subprime lending industry: Contributors from the industry have provided more than a million dollars to Senator Obama's campaign. In fact, Senator Obama has taken $1.8 million from the folks who have pushed these loans on unsuspecting working families. He's taken more money from the top ten subprime issuers -- more than $400,000 -- than any other presidential campaign. Even today, following his economic speech in New York, the senator scheduled a fundraiser at Credit Suisse, one of the top sub-prime underwriters in the country.
Does Professor Goolsbee's get tough approach on sub-prime lenders really reflect Senator Obama's plans? Or do the lenders who have given so much to Senator Obama's campaign know something different? Is the Obama campaign once again talking tough in public while sending private messages behind the scenes?
Senator Obama should answer this simple question: Is he planning on following the public advice of Professor Goolsbee on the subprime crisis, or is he working behind the scenes to keep his fat cat contributors happy?