Mike Konczal: In 2008 you co-wrote a plan with Chris Mayer on the housing market that called for mass refinancing and principal reduction through the GSE. In 2011 you released another plan with Mayer that just featured the mass refinancing. Why was there the change?
Glenn Hubbard: It wasn't principal reduction; it was setting up a Home Owners' Loan Corporation model.
Konczal: There was a debt-to-equity swap in your proposal.
Hubbard: Right. What we focused on in 2011 was trying to give direction to the Obama administration, which was bungling the mass refinancing so badly. That's why we focused on that. I still think it would be a good idea to have a Home Owners' Loan Corporation. But the point of that piece was that the Obama administration had bungled every housing plan, so we were trying to provide some guidance.
Konczal: Earlier this year, HARP, the Home Affordable Refinancing Program, was relaunched as HARP 2.0.
Hubbard: It's still a failure.
Konczal: After the relaunch, we are seeing a large increase in refinancing on very underwater homes, particularly those with loan-to-value over 125 percent.
Hubbard: It's still a failure. If you compare it to the number that Chris Mayer and I had argued, it's trivial.
Konczal: Compared to the number of possible refinancing?
Hubbard: Yes. The reason is the GSEs have stood in the way, and the Obama Treasury has not managed the GSEs in such a way as to facilitate its own policies. It's really quite sad.
Konczal: But that's an FHFA problem, is it not?
Hubbard: I'm sorry, but you can't duck the FHFA.
Konczal: So you think President Obama should have done a recess appointment [to replace Ed Demarco] at the FHFA?
Hubbard: I don't manage the Obama appointments, but I do know that the FHFA has mismanaged the president's own plan.
Konczal: What would a President Romney put forward in the housing market?
Hubbard: What Governor Romney wisely is focused on is the long term in housing. We need to wind down the portfolios of the GSEs and reassess the governmen'st role in such a way to get more private capital back into housing.
Konczal: In 2008 you argued that cramdown, or some sort of bankruptcy reform, was a bad idea because it could impact long-term growth. In retrospect, do you still think that?
Hubbard: Yes. I still believe that. I absolutely think that was the correct call.