Exhibit B to Alan Blinder’s (#5) Exhibit A of the elites in name only who provide economic counsel to presidents. Goolsbee was an economic advisor during Barack Obama’s successful campaigns for Senator (2004) and President (2008). Goolsbee then served for several years, 2009 – 2011, on President Obama’s Council of Economic Advisors (CEA). Goolsbee, like Blinder, was a proponent of the economically inane “cash for clunkers” program.
Goolsbee’s contribution to the financial crisis – like the numerous other MIT PhDs on this list – results from providing academic and intellectual bona fides to the speculative madness that was spawned by President Clinton’s housing central plan. Unlike most other MIT PhDs on this list, Goolsbee had the bad sense to continue to endorse the housing bubble long after it started to collapse. On March 29, 2007 Goolsbee authored an editorial in the New York Times that extolled the virtues of “irresponsible” mortgages because they opened the doors to homeownership. In the article he cited a report from two Federal Reserve economists and a Princeton economics professor who credit sub-prime mortgages for “making the mortgage market more perfect, not more irresponsible.”
To put some context to Goolsbee’s educated idiocy, note the following events occurring before or just after his March 2007 editorial;
- Sep. 2006 – Grant’s Interest Rate Observer predicts huge losses on trillions in mortgages securities and describes the features of mortgage bonds most likely to default.
- Fall 2006 – a Deutsche Bank trader had made his case for shorting mortgage securities to hundreds of investors at Deutsche Bank sales conferences.
- November 13, 2006 – Peter Schiff tells mortgage bankers mortgage bonds will go to ‘0’
- February 07, 2007 – HSBC announces huge set asides to cover mortgage losses
- March 30, 2007 – Kathleen Brown (#7) resigns from the board of Countrywide Financial
- April 02, 2007 – New Century Financial, 2nd largest sub-prime lender, goes bankrupt
- Early July 2007 – A Deutsche Bank mortgage trader informs his mortgage credit default swap counterparty at Morgan Stanley, “Dude, you owe us $1.2-billion.”
Goolsbee’s praise of “irresponsible” mortgages in March 2007 was not the sort of run of the mill ignorance that people have come to expect from MIT PhDs in economics. (This list of the fifty people most responsible for the financial crisis is littered with MIT PhDs in economics.) It was ignorance of the largest financial bubble in world history! Amazingly, Goolsbee is still feted as some sort of expert when his March 2007 praise of the mortgage market proves he can’t possibly know anything of real value regarding economics. Completely unsurprisingly, Goolsbee is still regularly featured on the Federal Reserve’s principal propaganda arm - CNBC.
See Alan Blinder (#5) for more information on “cash for clunkers.” See Bill Clinton (#12) for details on the housing central plan Goolsbee was endorsing in March 2007. See Steve Kaplan (#30) for another University of Chicago professor whose knowledge of economics appears seriously incomplete. See Steve Liesman (#33) and Martin Wolf (#50) for more information on how establishment figures like Goolsbee are able to maintain their reputations even after their ridiculous ideas have been exposed as completely bankrupt.