Friday, September 26, 2008

Φ Opposes the $700B Bailout

New to the blogroll is a link to an online petition opposing the mortgage bailout. For the same reason that borrowers don't deserve to have their poor decision making underwritten by the government, lenders ought not have the consequences of their bad decisions socialized to the rest of us. These two groups should work out their issues with each other.

Whatever a "credit freeze" is, it hasn't led to a slowdown in the number of credit card offers I receive in the mail: approximately 1 to 2 per day. I can believe that there are bad credit risks out there who are no longer receiving these offers with the same frequency, and no doubt this means that they must reduce the volume of Chinese crap they buy. It's about time.

But lest I seem unreasonable, I propose a compromise: when Frank Raines, and the politicians who took his money, are put to busting rocks on a chain gang, that sight may well be worth the $700B they're asking. Until then, the answer is no.

Tuesday, September 23, 2008

On Turning 40

- I'm now older that my professors.

- I can't really fit into 32 Haynes anymore. I have to use 32/34 Haynes.

- I wonder if maybe there was something to all those warnings about how situps would be bad for my back.

- I really can go for more than two days without sex.

- My daughter beats me at backgammon.

- I don't rate an opinion, even a bad one, from women under 30.

- My music gets played on the "Oldies" station.

- Marcia Trimble could have been a classmate.

Monday, September 22, 2008

On SNL's Palin Sketch

I didn't see the skit, but if this is a fair representation, then the point of the skit was clearly not to suggest incest in the Palin family; it was to imply the mendacity/gullibility/partisanship of the NYT editors for whom this is a reasonable exchange:

Reporter: “What about the husband? You know he’s doing those daughters. I mean, come on. It’s Alaska.”

Editor: “He very well could be. Admittedly, there is no evidence of that, but on the other hand, there is no convincing evidence to the contrary. And these are just some of the lingering questions about Governor Palin.”

Then again, this might be SNL's "New Yorker Moment": you remember that New Yorker cover art of Obama-as-Muslim? Intended as a lampoon of the rubes who think Obama might be a Muslim, the Obama people didn't think everyone would get it. Likewise, considering the "Trig trutherism" still circulating, this is exactly the kind of hoax that Andrew Sullivan would totally fall for.

Sunday, September 21, 2008

Our Cable is Back

. . . and Time Warner had better prorate my bill if they want to keep me as a customer!

I hope this means that the power grid is coming back online. We had church this morning in the dark, and there were still some families without power as of this morning.

Wednesday, September 17, 2008

Notes on the Great Blackout of 2008

Φ: Well we've been without power for a few hours now. Shouldn't we be looting the liquor store or something?

Φ Friend: Naw, this is [Φ's lily-white little burg]. We should go loot Starbuck's.

Not quite as funny yesterday morning when I got a call that our garage doors had been sprayed with graffiti. We live in one of those neighborhoods where the detached garages are accessed via an alley that runs through the back, parallel to the main streets. My garage got some sexual vulgarity or other. The garage opposite got a swastika and one of those yin-yang symbols, like on the Korean flag. I mean, Korean Nazis? What's that about?

But I have to put in a good word for our local police. They were already in the alley writing up the vandalism and looking for empty spray paint cans from which they could extract fingerprints. I asked them, "If I catch somebody doing this, how badly can I beat them?" They gave me lots of encouragement.

Seventy mph winds (or so the weather minions told us we had) aren't really all that scary unless something is actually falling on you. I hadn't really been following Ike's progress, and wouldn't have thought it would come this far north. Until it blew down the trees (the old, beautiful oaks and maples that make our little burg the envy of the city; that and the, um, schools, yeah, that's it), I just thought it was a windy day. So I took the kids out to the park to fly kites. It turns out that hurricane winds aren't really suitable for kite flying: too irregular.

We all went out to clear the trees out of the street after the winds died. One of our neighbors had a chainsaw, so we had just about everything out in a few hours. There are still a few limbs still hanging from the trunks; "widowmakers" as they are known in the lumber business.

Our side of the street went without power for about seven hours on Sunday afternoon. The other side of the street, and pockets around the city, are still without power three days later. That's got to suck. Sunday evening, before the lights came back on, I drove to the supermarket just to enjoy the electric lighting. Fortunately, the weather has been mild, so we haven't really needed the A/C. Still though, the athletic complex is still without power. Meaning no swimming for me and no ice skating for Γ.

Ironically, my Time Warner cable (and therefore internet and phone) didn't fail until the wee hours of Monday morning, and is still out. I can dial up to Time Warner through my cell, but it crawls. Verizon offers a cellular internet service package that is supposedly pretty fast, but as long as I can connect at work, it's not really worth it. My neighbors, who have DSL, allowed me to connect to their wireless LAN, but as of this morning, that wasn't working either.

Megan on the Financial Crisis

Megan nails it:

[T]here are things that I think would have helped, but cannot see where the political will would have come from:

  • Keep Fannie Mae and Freddie Mac out of risky mortgages, and give OFHEO some teeth. Bush and several Republicans tried, and failed, to do this. My preferred solution, an explicit strip of the government guarantee and a supervised breakup, wouldn't even have gotten on the radar. Fannie and Freddie were politically powerful, as were voters who wanted to buy houses.

  • Regulate mortgage brokers at the federal level. Given the way mortgage funds now flow across state lines, this made sense. But the state governors would have screamed bloody murder. Moreover, no one knew about the fraud when it would have helped--i.e., before most of it happened.

  • Mandate 20% down payments. Political suicide. Affluent people would continue to borrow downpayments in private family loans, while the poor were shut out of the housing market. Poor neighborhoods would have been devastated by the credit cutoff. House prices would have dropped sharply everywhere.

  • Change regulatory standards to take more account of small-probability, devastating systemic risk. Nassim Taleb has been talking about this for the last few years. But I didn't hear more than academic interest in this until mid-2007. Most people on the Street really believed that they had gotten better at assessing credit risk.

  • Unify the bank regulators, including the SEC, into one agency. At least some of this crisis might be traced to the fact that the regional banks who originated many of the bad loans were often regulated by a different body from the investment banks who bought them. It might have been done, I suppose. But each of those agencies has powerful constituencies among their employees, and the firms they regulate. Moreover, the transition process would have involved some ugly internicene warfare that probably would have eroded regulatory effectiveness in the short run.

  • Mandate contingency plans for the dissolution of large firms, and other unlikely but devastating scenarios. If people had some certainty about the likely outcome of an insolvency, the panic selling wouldn't be so rampant, and people would be more willing to loan money, albeit at a discount. But again, I didn't hear anyone talking about this in, say, 2006. I certainly didn't think of it. Is it reasonable to say that this should have been utmost on the mind of Bush or his advisors, while other big priorities, like trade deals, loomed large?

  • Make subprime loans illegal. As long as most subprime borrowers are still making their payments, I can't endorse cutting them off to protect the fools. Moreover, this would simply not have been possible, no matter who controlled congress or the presidency. Cutting off subprime loans would have prevented more people from buying homes. The politics of it are terrible.

  • Make option ARMs or negative amortization loans illegal. Option ARMs are debateable-they're actually useful for people who have uneven income flows, like, er, a lot of journalists. But clearly they were abused, and negative amortization loans are nuts. However, these exotic instruments are only a fraction of the toxic subprime loans. They appeared mostly late in the process, when lenders were scraping the bottom of the barrel to keep the boom going.

  • Change the way that these securities were accounted for. Most risk models for ABS and MBS were focused on prepayment risk, not default risk, which was assumed to be fairly well known. This assumes a rather stunning level of prescience on the part of regulators or legislators.

  • Force banks to keep some amount, say 10% of the loans they originated. Spain does this, and its housing market is even more bubbleicious than ours was, believe it or not. It might have made the banks more secure. But there are good reasons to want banks, especially small banks, to have the flexibility to match the durations of their asset portfolios to those of their liabilities. When interest rates skyrocketed in the early eighties, banks were stuck with long-term mortgages at low rates, but forced to offer high interest rates on savings accounts in order to keep business. The result was, ultimately, the S&L crisis. And again, while there may have been someone proposing this somewhere, I didn't see a lot of people talking about it in 2003, when it really might have helped.

  • I don't understand all of this, but the parts I do sound right. Let me stand in the line in favor of finding the political will!

    Megan continues:

    Then there are the things that people think would have helped, but which wouldn't have done anything I can see:

  • Repealing Gramm-Leach-Bliley, or at least the provisions that repealed Glass-Steagall's ban on commercial banks entering other lines of financial business. If this were part of the problem, it would be the commercial banks, not the investment banks, that were in trouble.

  • Lowering CEO pay. Whaaaaaa? If Dick Fuld had been paid a dollar a year, we'd be in exactly the same mess. Probably worse, because what kind of CEO do you get for a dollar a year?

  • Raising the Fed Funds rate. The MBS money was long money, not overnight funds. And when a bubble is truly going, raising rates may just attract more long money, without deterring speculators who are expecting double-digit annual returns.

  • Requiring better disclosure of loan terms. Disclosure of loan terms is already quite exhaustive, including a term sheet right on top that provides a congressionally mandated summary. You can't make people read things, and the extra disclosure you mandate goes into the "fine print" that people claim they can't read. Moreover, the fundamental problem for most borrowers are things that aren't hard for buyers to understand, like "I have an adjustable rate mortgage"; "Interest rates can go up"; and "My housing payment should not be two-thirds of my gross income".

  • Changed the neo-liberal "culture". The president and congress are not the parents of Wall Street, and believe me, bankers do not look towards Washington for moral guidance. The "Miasma Theory" of political influence is the last refuge of partisans who know they are full of it.

  • Saturday, September 13, 2008

    Live Blogging Sarah Palin's 20/20 Interview

    Okay, not quite live. DVR'd. Who wants to stay up past 10:00 p.m.?

    Going in, I can't help thinking that this interview is pretty foolish. Why would any candidate consent to a taped (and thus editable) interview with any but friendly media? Always do hostile interview live; it prevents selective editing that makes the interviewer look smart and the respondent foolish. It also limits the ability of the show to do what 20/20 just did: put together a highly tendentious account of all of the policy disputes and "scandals" in which Mrs. Palin is involved, and run it right before the interview.

    To give a flavor of this kind of thing, Gibson says that Palin got rid of the governor's jet, but then spent $43K on commercial flights. No cost comparison with the jet is offered; the $43K is left to stand by itself.

    Another example: Gibson mentions the firing of her brother-in-law as a state trooper, with no mention of why (policy brutality, as I recall).

    Example three: 20/20 replays identical segments of her stump speech given in separate venues. Ha, ha, see, it's the same words! (Well, yes, it's a stump speech.)

    On the other hand, the McCain campaign might have reasoned that only Democrats watch 20/20 anymore, so what's there to lose?

    Gibson starts off asking Palin about what she would change. Answer: Control spending, cut taxes, improve agency oversight.

    Gibson asks where the spending control comes from. Palin replies that it comes from increased efficiency. Smart politically, I guess, but pretty dumb policy. On the one hand, any specific spending cuts would prove hugely unpopular with some noisy constituency or other. On the other hand, government is what it is, and inefficiency is built in to the system. A smarter answer would have been across the board caps on discretionary spending.

    Palin handles the "Bridge to Nowhere" questions well. It turns out that "thanks but no thanks" meant that she chose to spend the general infrastructure money appropriated by Congress on other projects, not that Congress offered the money for the bridge and Alaska wouldn't take it.

    Hot button issues: Abortion, stem cells, gun control, and "book banning".

    Abortion: Charlie Gibson wants to focus on the rape and incest exceptions, which Palin "personally" opposes. Just once, I'd like to hear a candidate say, okay, I'll give you the rape and incest exceptions, and a few others before, if you'll give me the other 99% of abortions. No? Then let's debate what we actually disagree on!

    Gibson's losing the whole "book banning" issue, and rapidly shifts to troopergate.

    Troopergate: Palin handles this deftly, pointing out that this guy had actually threatened members of her family.

    That's it!?! Why did I bother? The video editing here is bad: Palin is obviously cut off in mid sentence on multiple occasions. I'd like to see the original footage; until then, I'd have to call the contest a draw. Palin comported herself well, but never fought on favorable terrain.

    Monday, September 08, 2008

    "For the Love of Joshua"

    This is not your father's liberalism.

    Does anyone remember the television show Quincy, M.E. that ran from 1976 - 1983? Jack Klugman played Quincy, an forensic autopsy guy given to fits of moralistic dudgeon over this or that injustice. The show wasn't on childhood "approved T.V. list" (which was pretty much limited to Little House on the Prairie) but I caught a few times at other people's houses.

    Two episodes stand out in my recollection. "For the Benefit of My Patients" concerned a private hospital that wouldn't provide ER care to anyone without the means to pay, something they evidently could still do back in 1979. Of course, now this is against the law, which has bankrupted many ERs in the southwest for the reasons you might expect. But then, racking up unintended consequences was what seventies-era liberalism did, which is why they've been kept out of elected power for twenty-eight years.

    Oh, and that second episode I remember? "For the Love of Joshua" was about a hospital that denied treatment to babies born with Down's Syndrome. (By "treatment" I mean food and water. The children were simply wheeled into a room and left to die.) I forget the details, but Quincy forces an investigation into the practice, and the episode featured an actor who actually had Down's Syndrome that is brought to a hearing to plead the case of Down's babies.

    The times, they be a-changin'.

    Now, confronted with a mother actually doing the right thing by her disabled child, the Left has erupted into paroxysms of rage, essentially calling for little Trig's death. That whole "wheeled into a room and left" thing is now considered the responsible course.

    Where is Quincy when we need him?

    Wednesday, September 03, 2008

    On Vice-Presidential Experience

    Ross quotes Frum:

    Yes, if I had been a Democratic donor back in 2006, I'd sure worry about whether Barack Obama had what it took to be president. That was before he took on the toughest political operation in America, before he beat Bill and Hillary Clinton, before he won 18 million primary votes.

    Obama's nomination was not handed to him. He fought hard for it and won against the odds. "Qualifications" predict achievement. Once you have achieved, it doesn't matter what your qualifications are. Who cares whether the guy who built a big company from nothing didn't have much of a resume when he started? But if you are applying to run a big company built by somebody else, the resume matters ...

    According to Redstate, Obama himself has picked up on this meme and is testing out its mileage, asking us to count his presidential campaign as "executive experience".

    There is a little dishonesty going on here. First, Obama comparing his campaign to the mayoralty of Wasilla, AK, is beside the point now that Palin is a governor. Second, I suspect that Obama "runs" his campaign the way Brit Hume "runs" Fox News: without slighting Obama's political skills or Hume's journalism skills, the "executive experience" credit properly goes to David Axelrod and Roger Ailes, respectively.

    But let's stipulate Frum's point: in the course of his successful primary campaign, Obama has outperformed his portfolio on the national stage in a way that Sarah Palin hasn't yet.

    But let's turn this question around and ask, what does this say about Joe Biden? His 36 years in the Senate have been a study in mediocrity: not stupendously bad, but neither especially good. His two runs for the Democratic presidential nomination miscarried early, and he's widely known as a gaffe machine. (This last is his most endearing quality, actually. But still.) In summary, the man has dramatically underperformed his portfolio, but Obama and the media want to wave this away, much as if Ken Lay, were he alive and seeking gainful employment, were to ask interviewers to consider his "experience" running a large company but not the fact that the company tanked.

    Obama and his defenders can't have it both ways. If credentials matter, then Palin has more executive experience over larger enterprises than the other three candidates combined. If only successful campaigns matter, then Obama's VP pick is a proven failure. It will be very difficult for the Obama campaign to articulate an objective standard of preparation by which it will compare favorably to McCain-Palin. How did we even get here? This should have been a race between Romney and Richardson, with McCain and Biden contending for VP. Instead, out of all the people in public life, we have three senators, none with executive experience, and a half-term governor. Pathetic.