Larry Summers, head of the White House's National Economic Council in the early years of the Obama administration, is defending President Obama's mortgage-relief policy. In a review of "House of Debt" by economists Amir Sufi of the University of Chicago and Atif Mian of Princeton University, Summers dismisses their criticism that the Obama administration should have pushed a massive mortgage-debt reduction program during the early years of his administration.
For the most part, the programs focused on reducing monthly payments so borrowers could avoid foreclosure, rather than on reducing overall debt burdens so borrowers would feel freer to spend. Summers says large-scale principal write-downs could have damaged the banking system, and forced write-downs could have chilled new lending. However, he concedes that the administration could have made better use of Fannie Mae and Freddie Mac to repair damage left by the housing bust.