Tuesday, December 02, 2008

Delinquent Mortgages Set to Nearly Double in 2009

From WSJ:

The number of consumers with delinquent mortgages is poised to almost double by the end of next year, hitting its highest level in at least 16 years, according to a leading credit bureau. TransUnion LLC, which analyzed about 27 million consumer records in its database, predicted that the proportion of consumers with mortgages that are 60 days or more past-due will hit 7.17% in the fourth quarter of 2009.
That would be the highest level reached since the Chicago credit bureau -- which is releasing the data on Tuesday -- first started tracking ...

Stuff Environmentalists Like, Part 1

Over at Plenty Magazine.

...If an environmentalist invites you over for dinner, do not assume that your host’s primary purpose is to serve you a meal. The goal is education...

...If conversation starts to lull, it’s always a good idea to bring up a paradox that engages the entire table. The most pressing question of our generation is: local or organic?...

...Next week: Brainwashing Children

Friday, November 28, 2008

Income Redistribution

From IBD.com:

Now here's the reality: The rich are being taxed at ever-higher levels,
while more workers at the bottom of the income ladder are paying no taxes at
all. As for spending, resources flowing to those at the bottom far outstrip
those flowing to those at the top.

Worse, a 'what's in it for me?' attitude seems increasingly the norm. Once a
nation of stoic, self-reliant individualists, America now seems full of people
who think other taxpayers owe them something. They see the 'system' as a giant
cow to be milked — and damn the cow. This is backed up by polling data. In a 1994 Pew poll, 57% agreed with the statement 'Government should care for those
who can't care for themselves.' Today, it's 69%.

Thursday, November 27, 2008

New Obama Appointee Rubin on Personal Responsibility

This ought to be an interesting 4-8 years. Let's hope it's 4. Robert Rubin on the Citibank mess:

Then there's board member and former Treasury Secretary Robert Rubin, who has received over $100 million in compensation from Citi in 10-plus years, according to the New York Post."I don't feel responsible, in light of the facts as I knew them in my role," Rubin told the New York Times back in April. "In hindsight, there are a lot of things we'd do differently. But in the context of the facts as I knew them and my role, I'm inclined to think probably not."

More from the Seattle Times.

Although Rubin has been cagey about his role at Citigroup, what is
indisputable is that all of the decisions that have led to the recent troubles
were taken while he was chairman of the executive committee and were made by
executives whom he supported and with whom he worked closely day to

Tuesday, November 25, 2008

‘Teaching Unprepared Students’

Over at Insidehighered.com:
Many experts say that the United States can only truly see gains in the
percentages of adults who have a college degree if colleges and universities get
better at teaching students who arrived on campus unprepared for college-level
work. But many professors find themselves frustrated by teaching such students — and many of the students drop out....

The comments:

I never had a problem reaching and teaching underprepared students who
wanted to learn. However, the students who are both underprepared and who lack
any semblance of a work ethic are another matter. When these students have been
taught for twelve years that they will advance to the next grade regardless of
how little they have learned or how little effort they have invested, they are
incapable of performing at a college level. That is because many of them have
never even achieved a junior high school level of self-discipline. Such students
are doomed to fail not only in school, but in life. They are tomorrow’s blue-
and white-collar criminals.

The subject of the interview states “However, the reality is that right now
we have freshmen and transfer students who are not prepared, but who are
enrolled in our classes and want to learn.”
I challenge that logic. Too many
students are enrolled because they have been sold a bill of goods. They are not
their to learn. Rather, they are there to get a job. They have been told this by
high school teachers, family members, public policy makers, admission officers,
etc. All of them have said the key to getting a good job, making lots of money,
and having a great life is, all together now, a college degree.
students fail to take to ownership of their education. They will blame the
instructor for having grading standards, for demanding their work meet certain
criteria, and for inconveniencing their lives. These people do not care about

I work in a Catholic, college prep high school that sends over 95% of our
students to college. We are facing the same issues of unprepared and unmotivated
students as discussed in the article & comments. Every year it seems, we
(and all of our peer institutions in NH) admit very intelligent (high test
score) students, some who have a pathetic work-ethic; who want education to be
entertainment; and who lack basic academic skills. We have implemented a
“front-loaded” program for freshmen that involves a core of battle hardened
teachers along with various support services. Most kids catch on and eventually
become successful. But every year, there are more and more kids who arrive
without an adequate foundation. It’s scary to think about the students coming
up, what they’re going to need, and how many resources they will require. I wish
I could be optimistic but I see all of us caught in the cultural demise of what
learning and education is all about.

I would tend to agree with those regarding lack of work ethic. I see it
everyday. Some students have a sense of entitlement regarding their academic
performance, while others realize that their performance is a reflection of
their hard work and effort. For many students, there is a disconnect between
effort and performance. After many years of schooling this disconnect means
these students are at the bottom of a very large hill. They will need an
extraordinary amount of assistance to make any progress up the hill (forget
about getting to the top). My question is: Is this the job of the university

“Everything must be learner-centered.” I have seen first-hand, at the
secondary and post-secondary level, the debilitating effects this mantra has had
on the learning environment. Life beyond the Ivory Tower is not, and the sooner
we teach our self-absorbed students this fact, the better learners (and people)
they will become. The kumbaya feel-good vibe is something I save for students
who give a damn; I’ve been burned far too many times by diverting positive
emotional capital towards students who end up dropping or failing anyway.

Sunday, November 23, 2008

Wednesday, November 19, 2008

30 reasons for Great Depression 2 by 2011

Paul Farrell over at Martketwatch lists his 30 reasons why we'll be in a depression by 2011. He Cites greed several times, that's obvious but what about envy? It seems to me that envy drove the subprime mess. The feeling of wanting that house despite the lack of fiscal discipline and the politicians that fed that envy drove all of this. I've blogged before on the lack of fiscal discipline among groups of people (link 1, 2). It seems to me that we can't face up to the fact that we have equal oppurtunity but that doesn't give equal outcomes. And what if everyone couldn't be a homeowner? Renting, is that inhumane?

On that list of 30 items, here's the largest:

25. The 800-pound gorillas: Social Security, Medicare with $60 trillion in unfunded liabilities

We just voted in the political party least likely to fix this mess.

Tuesday, November 18, 2008

The American Voter

Over at Verum Serum:

Zogby Poll from http://www.howobamagotelected.com/

57.4% could NOT correctly say which party controls congress (50/50 shot just by guessing)81.8% could NOT correctly say Joe Biden quit a previous campaign because of plagiarism (25% chance by guessing)

82.6% could NOT correctly say that Barack Obama won his first election by getting opponents kicked off the ballot (25% chance by guessing)

88.4% could NOT correctly say that Obama said his policies would likely bankrupt the coal industry and make energy rates skyrocket (25% chance by guessing)

56.1% could NOT correctly say Obama started his political career at the home of two former members of the Weather Underground (25% chance by guessing).

And yet…..

Only 13.7% failed to identify Sarah Palin as the person on which their party spent $150,000 in clothes

Only 6.2% failed to identify Palin as the one with a pregnant teenage daughter

And 86.9 % thought that Palin said that she could see Russia from her “house,” even though that was Tina Fey who said that!!

Only 2.4% got at least 11 correct.

Tuesday, November 11, 2008

The End of Wall Street's Boom?

Over at Portfolio.com. Found at Steve Sailer's Blog:

...Long Beach Financial was moving money out the door as fast as it could, few questions asked, in loans built to self-destruct. It specialized in asking home­owners with bad credit and no proof of income to put no money down and defer interest payments for as long as possible. In Bakersfield, California, a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house for $720,000....

...Moses actually flew down to Miami and wandered around neighborhoods built with subprime loans to see how bad things were. “He’d call me and say, ‘Oh my God, this is a calamity here,’ ” recalls Eisman. All that was required for the BBB bonds to go to zero was for the default rate on the underlying loans to reach 14 percent. Eisman thought that, in certain sections of the country, it would go far, far higher....

...But he couldn’t figure out exactly how the rating agencies justified turning BBB loans into AAA-rated bonds. “I didn’t understand how they were turning all this garbage into gold,” he says. He brought some of the bond people from Goldman Sachs, Lehman Brothers, and UBS over for a visit. “We always asked the same question,” says Eisman. “Where are the rating agencies in all of this? And I’d always get the same reaction. It was a smirk.” He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S&P couldn’t say; its model for home prices had no ability to accept a negative number. “They were just assuming home prices would keep going up,” Eisman says...

...“With all due respect, sir,” Daniel told the C.E.O. deferentially as they left the meeting, “you’re delusional.” This wasn’t Fitch or even S&P. This was Moody’s, the aristocrats of the rating business, 20 percent owned by Warren Buffett. And the company’s C.E.O. was being told he was either a fool or a crook by one Vincent Daniel, from Queens....

Uncle Sam's Credit Line Running Out?

Over at Baron's.

Big Five

I'm a O95-C69-E53-A69-N27 Big Five!!


Monday, November 10, 2008

Derbyshire on his Obama-ness

Over at the NRO Corner Blog.

The sputtering-Left component of my email bag took particular exception to my calling Obama "shallow, ignorant, and self-obsessed." How dare I? Well, let's unpack it.

Shallow: Have you ever heard Obama say anything interesting? Me neither. I saw him on the telly the other day fielding a question about illegal immigrants. He said something like: "We can't deport ten million people. We need to find a way to bring them out of the shadows. Thet should have to pay a fine, learn English, and go to the back of the line for citizenship." Now, here is an issue that's of major concern to millions of Americans, who feel they are losing the nation they grew up in. It's been argued for years at high levels of discourse, with many fine books written. (Most recently, one by our own Mark Krikorian.) Yet Obama can address it only with the tiredest, most threadbare clich├ęs of the open-borders Left. It's plain he has never given a moment's real thought to the issue. Shallow.
Ignorant: Obama strikes me as a very intelligent person, but with that intelligence narrowly focused. He has spent his adult life among the tiny sub-class of black Americans who have grown wealthy, or hope to, via the affirmative-action rackets. He has never ventured outside that milieu, and I seriously doubt he knows much about life outside it. I doubt, for example, that he knows anything much at all about business, the military, science, work (other than paper-shuffling), or high culture. I'll be glad to be proved wrong, but nothing I've heard him say, nor my (admittedly incomplete) acquaintance with what he's written, refutes that.
Self-obsessed: A guy who publishes a 464-page autobiography at age 34 is self-obsessed, what can I tell ya? If he publishes a second autobiography at age 45, you can print "self-obsessed" in capital letters. (Yeah, I know, it's a "campaign book." The content is mainly autobiographical, though.)

Saturday, November 08, 2008

WSJ on the Death of Michael Crichton

His viewpoints will be missed. He was respected by most, and his well-founded but contrarian views were at least considered by those holding conventional wisdom.

"Crichton was sometimes accused of being a Luddite. In fact, he was a champion of good science, and never more so than in a 2003 lecture at Caltech, hilariously titled "Aliens Cause Global Warming."

"As the 20th century drew to a close," he warned, "the connection between hard scientific fact and public policy became increasingly elastic. In part this was possible because of the complacency of the scientific profession; in part because of the lack of good science education among the public; in part because of the rise of specialized advocacy groups which have been enormously effective in getting publicity and shaping policy; and in great part because of the decline of the media as an independent assessor of fact."

Thursday, November 06, 2008

2004 Generosity Index and the Red States Gone Blue

In my search for charity data in the last post I came across this piece of data from the non-partisan Catalogue For Philanthropy at Michelle Malkin's Blog:Notice that the '04 Red States that went Blue in 2008 (i.e. Iowa, Ohio, Virginia, Arizona, New Mexico, Nevada, & Colorado) were the lowest givers for the Reds in 2004. Only and North Carolina and Florida stand out as exceptions.

Note added 1:40 pm: It often gets Blue State people upset that it appears that Red Staters give more. They always focus on the church and the tithe. How does that excuse Blue Staters from giving to non-church entities?

The Didache on Abortion and Charity - Possible Modern Implications

I blogged on the Didache last year. It is an instruction manual for new Christians (primarily conversions of gentiles) and may be the earliest writings of the Apostles, dating as early as 49 AD. It's too bad that it's not better known by Christians. It has implications for the modern Christian. Specifically, on abortion and the modern welfare state.

First on abortion:

Didache 2:2 -
You shall not murder a child by abortion or commit infanticide.

Pretty clear isn't it? Why is abortion not discussed in the gospels? My guess is that Jesus preached primarily to the 1st century Jews where such practice was not widespread. The Greco-Romans practiced abortion and exposure. Jews believed in the primacy of the fetus in that era. The Jewish historian, Philo of Alexandria discusses Ex. 21:22-23 in context of the LXX. From Philo on Jewish Identity and Culture:

“The LXX transformed these Biblical verses into laws protecting the fetus.”

Now on the modern welfare state where everyone receives (bold emphasis added):

Didache 1.5c - Woe to the one who receives. For if he receives because he has need, he is guiltless, but if he does not have need, he shall stand trial as to why he received and for what, and being put in prison he will be examined about what he has done, and he will not come out of it until he pays the last penny.

Many would disagree, but I believe that so much of the profligate ways of the modern welfare state goes to those not in need. The senior prescription drug plan is just one such example.

Also note that Didache strongly advises Christians to be charitable and defend the poor but adds this:

1.6 But of this it was also said, 'Let your charitable gift sweat in your hands until you know to whom you give'.

Christians must be discerning to who is in need. However, the modern welfare state completely abrogates this aspect of giving. It’s interesting to note the amount of charitable giving between the prosperous blue (and secular) states versus the red states.

Much of the Didache is what I would assume to be a common sense approach to ethics, not just Christian ethics.

Wednesday, November 05, 2008

Peter Schiff on Obama

The University of IdahoSchiff was one of the few hedge fund managers to predict this crisis a few years back. He doesn’t like Obama. Found at Housing Doom blog.

Tuesday, November 04, 2008

Paul Johnson on Modern Western Society

My favorite historian Paul Johnson chimes in on Forbes:
"in a nutshell: We are traveling along the high road to incompetence and poverty, led by a farcical coalition of fashionably liberal academics on the make, assorted eco-crackpots and media wiseacres. "

The rest is here.

Policy Predictions for After an Obama Victory

Over at Rasmussen' blog, a comprehensive list. Sounds like a to do list for the left.

Immigration, Affirmative Action, Bucking The Bailout - All Potential Election Winners For McCain

A Steve Sailer column on what the Republicans should have done. Well - we'll have to sit back and take it. We're moving towards a nanny state. The home mortgage defaulters, the aging baby boomers, and the young sycophants will rule the day. The dumbest of the bunch? The young sycophants as they will be paying for the mess and get very little for it.

Sunday, November 02, 2008

Moscow Idaho makes the British Press

Peter Hitchens on this little corner of the world in the Daily Mail of London.

As America approaches her most momentous presidential election for decades, I am in the True (but not specially Wild) West, the top left-hand corner of the United States, a hard-core Republican state that most visitors only fly over.

They think it's dull. How wrong they are...

Hitchens treats the average Moscow resident with respect.

On the other hand he has these representative observations about the local liberals:

...Mr Reece, a courtly retired academic-with a Colonel Sanders moustache and Danish ancestry, has Moscow's biggest concentration of posters backing Obama sprouting on his front lawn. He usually displays a good crop of placards at election times but admits that he has never put up so many before....

....Mr Reece's language about Obama is almost religious. He uses words such as 'visionary' and 'inspiration'. He also says, rather frankly, that Obama is 'not too black'. But he knows little about him.

He has never heard of Tony Rezko, the Chicago businessman recently convicted of fraud and corruption, who seems to have helped Obama buy his house, and whom Obama lobbied for.

He has also never heard of John Stroger, a dreary business-as-usual Chicago machine politician whom Obama backed against a reform candidate, rather undermining his claim to be the apostle of change, and to be much of a visionary....

...This knowledge puts him ahead of another deeply civilised Obama fan, Tom Lamar, a liberal member of the City Council and head of a not-for-profit environmental institute.

He hasn't heard of any of these unattractive and unvisionary figures in Obama's past and present. But despite being so weakly informed about his hero, he is an unshiftable supporter.

When I put it to him that Obama has been handled softly by the American media, Mr Lamar responded: 'I haven't really noticed any free pass. I don't feel that he is untested and unexamined.'....

...But he was stuck for an answer when I pointed out that an effigy of Sarah Palin, complete with glasses, red dress and beehive hair, had been suspended by the neck from a noose in a Hollywood street as part of a Hallowe'en display.

Police have described this as a legitimate expression of opinion. Perhaps. Yet it is quite clear that if anyone hanged Obama in effigy, especially in the Lynching Belt of the Deep South, it would ignite a huge explosion of rage, and not be treated as 'legitimate'....

It's the educated elite like Reece and Lamar that will lead the USA to its downfall. The elites in this country are uncritical in their thinking and resemble the emotionalism found in primitive charismatic churches. They speak in tongues, only they channel simple Marxist blather rather any supposed divine inspiration. The elites fail to understand the basis of this republic and the role of that unique American character of the individual. The hyper-aggressive nature of that American will now be diverted away from the market that produces goods for the masses based on a profit motive towards obtaining wealth from the government. Just use the public education system as prime example number one. We spend more per pupil and get less for it than any other country in the world. Thank the hyper-aggressive teacher's unions for that.

Saturday, November 01, 2008

Savings rates in 401k's

From the Seattle PI.
Although African-Americans are enrolled in employer- sponsored defined-
contribution plans at about the same rate as whites, they save far less each
month and have a considerably smaller portfolio balance. The median monthly
amount that blacks contribute to their 401(k) plan is $169, while whites
contribute about 50 percent more, or $249 each month. As a result, the median
total household savings for retirement reported by black respondents is $53,000,
compared with $114,000 for whites.

Wednesday, October 29, 2008

Could independent colleges be the next bubble?

Discovered on PhiBetaCons from MSNBC:

By Maurna R. Desmond
updated 3:54
p.m. PT, Fri., Oct. 24, 2008

In June, 157-year-old Antioch College
decided to "suspend operations" at its flagship campus despite a push from
alumni to rescue the flailing institution. At that point, only 60 students were
enrolled, and their $40,000 per year tuition was being heavily subsidized by
Antioch's five newer campuses...

...The crunch will be particularly bitter for the institutions that drained
coffers to build "country club colleges" complete with
luxury dormitories, spas and top of the line sports
complexes to lure choice students, hoping that a sharper crowd would lead to
more accretive diplomas, entering a profitable cycle of more successful alumni
and increased donations...

Obama Accepting Untraceable Donations

From WaPo:

Contributions Reviewed After Deposits

By Matthew MoskWashington Post
Staff WriterWednesday, October 29, 2008; A02

Sen. Barack Obama's presidential campaign is allowing donors to
use largely untraceable prepaid credit cards that could potentially be used to
evade limits on how much an individual is legally allowed to give or to mask a
contributor's identity, campaign officials confirmed.

Monday, October 27, 2008

America's Most Overrated Product: the Bachelor's Degree

From the Chronicle of Higher Education.

...Among my saddest moments as a career counselor is when I hear a story like this: "I wasn't a good student in high school, but I wanted to prove that I can get a college diploma. I'd be the first one in my family to do it. But it's been five years and $80,000, and I still have 45 credits to go."...

...Even worse, most of those college dropouts leave the campus having learned little of value, and with a mountain of debt and devastated self-esteem from their unsuccessful struggles. Perhaps worst of all, even those who do manage to graduate too rarely end up in careers that require a college education. So it's not surprising that when you hop into a cab or walk into a restaurant, you're likely to meet workers who spent years and their family's life savings on college, only to end up with a job they could have done as a high-school dropout....

McCain for President

As only Charles Krauthammer can explain. From WaPo.

Embarrassed to tell people he's a journalist

Via Betsy's Page.

Foreclosures Rocket Into Outer Space

Via Bubble Markets Inventory Tracking blog.

The Age of Prosperity Is Over

From Arthur B. Laffer via WSJ.

Sunday, October 19, 2008

Equal Opportunities = Equal Outcomes?

In this discussion of Fannie/Freddie and why standards for loans were lowered there is this monster in the closet called racism. This is racism. However can we expect equal outcomes when people are given equal opportunities (EO=EO)? That seems to be the bedrock of post-modern thought. Male/female ratios must be 50/50 in all endeavors, black representation must be proportional (or even greater) than their fraction of the population (about 11%). However, what happens when numbers describing behavior defy the EO=EO principle? The cry of racism rings, subtle white male power structure is at work (implying the improbable proposition that men don't compete but hand out goodies to each other) , the test is unfair and is based on cultural biases, ....

So what happens when the 3 major races in America are compared on equal terms, in this case FICO scores? Here's a Freddie Mac publication on that. In the following figure we see that for the same FICO score the black/Hispanic rate is about twice as high as the white rate.

Is this racism? This is EO without the EO. The Fannie/Freddie GSE's obssesed about this. Besides the lack of EO=EO on the FICO scores. More blacks have low FICO scores:
June 20, 2008 Louisiana Weekly
Fannie Mae moves to exclude: Bad credit scores could forever deny borrowers home loans
...Adams says that on the VantageScore credit scoring system, which runs from 501 to 990, 84 percent of African Americans had credit scores at the lower half of the spectrum, below 745, according to a report by the Federal Reserve Board. Such scores would require home-buyers to pay 40 percent of a home’s purchase price as the down payment....
The conversion of VantageScore to FICO (*0.86) has the 745 as 641 FICO. That puts the average black score of 641 FICO is in the 15th percentile and a probability of loan default between 15-30%. The average FICO score is 723 and most lenders won't consider a score below 700. Above FICO 700 puts the probability of default at about 2%. This means that blacks default at a rate that is about 10 times greater than the population as a whole. Zillow Blog has more data.

Why do blacks and Hispanics default at greater rates on loans? Perhaps the savings rates give a clue. From a column from the October 21, 2007 WaPo:
This year's Ariel-Schwab Black Investor Survey found that blacks had median investments of $48,000, compared with $100,000 for whites. The survey looks at blacks and whites who earn more than $50,000 annually.
Now does racism play a part in all of this? Consider that the USA savings rate as a whole is far below other nations. Who's discriminating against us?

Thursday, October 16, 2008

Limbaugh and Hanity & Colmes listeners better informed than NPR

Via Redcounty. A Pew Research study on politics of various news outlets. Limbaugh and Hanity & Colmes listeners bested NPR & New Yorker/Atlantic patrons. No surprise to me:

Here's a detailed breakdown of the percentage of individuals answering each of the three questions correctly from the different news audiences:

  • The New Yorker/Atlantic: 71 percent (correctly identified Democrats as the majority in the House), 71 percent (correctly identified Condeleeza Rice), 59 percent (correctly identified Gordon Brown)
  • NPR: 73 percent, 72 percent, 57percent
  • Hannity & Colmes: 84 percent, 73 percent, 49 percent
  • Rush Limbaugh: 83 percent, 71 percent, 41 percent
  • Colbert Report: 73 percent, 65 percent, 49 percent
  • Daily Show: 65 percent, 48 percent, 36 percent
  • NewsHour: 66 percent, 52 percent, 47 percent
  • O'Reilly Factor: 70 percent, 60 percent, 41 percent
  • C-SPAN: 63 percent, 59 percent, 35 percent
  • Letterman/Leno: 51 percent, 42 percent, 31 percent
  • CNN: 59 percent, 48 percent, 29 percent
  • National Enquirer: 44 percent, 32 percent, 22 percent

Education factor

In general, well-educated news audiences scored high on political knowledge. For instance, 54 percent of the regular readers of publications such as The New Yorker, The Atlantic and Harper's Magazine are college graduates, as are 54 percent of regular NPR listeners.

However, several news audiences with relatively low proportions of college graduates also scored well on the news quiz. Just 31 percent of regular "Hannity & Colmes" viewers are college graduates. Even still, 42 percent Hannity viewers got perfect scores on the political knowledge quiz, compared with 44 percent of NPR listeners.

Real Estate Market

Check out your local market.

Shuttle driver reflects on Nobel snub

From the Cape Cod Times. If I had the grant money I'd give him a call.

Twenty years ago, Douglas Prasher was one of the driving forces behind research that earned a Nobel Prize in chemistry this week. But today, he's just driving.

Prasher, 57, works as a courtesy shuttle operator at a Huntsville, Ala., Toyota dealership. While his former colleagues will fly to Stockholm in December to accept the Nobel Prize and a $1.4 million check, the former Woods Hole Oceanographic Institution scientist will be earning $10 an hour while trying to put two of his children through college.


After stints at a U.S. Department of Agriculture laboratory and working for NASA in Huntsville, Prasher was out of work for a year before he took a job at the car dealership.

Prasher said he has suffered from health problems and depression, some of which stems from being out of science for so long. But his sense of humor remains intact.

This year's physics and medicine prizes went to non-Americans. I think it's a trend.

More on Chris Dodd

The man should be in prison pinstripes not on the Senate Banking Committee. From the WSJ.

In February 2004, while Republican colleagues warned of the systemic risks posed by Fannie Mae and Freddie Mac, Mr. Dodd pronounced the mortgage market "one of the great success stories of all time." A year later, the Connecticut Democrat voted against a reform that would have limited the size of Fan and Fred's mortgage portfolios. Now that Fan and Fred have collapsed at a cost to taxpayers that could run to $200 billion or more, Mr. Dodd is also under fire for accepting sweetheart loans from Countrywide Financial, the subprime mortgage factory.

More from the WSJ on Sen. Dodd:

Dodd Bedfellows

Next up on the bubble horizon Medicare and Social Secruity

A Washington Times Op Ed Piece.

The potential taxpayer bailout for Medicare alone is 50 times greater than the recently passed bailout bill. For all entitlements, the potential tab totals 80 times today's bailout.

It's highly unlikely that an Obama Administration will face this down. More likely scenario - he adds to the entitlement pig.

Tuesday, October 14, 2008

2 studies on the role of subprime mortgages and the current crisis

Two recent papers have appeared on the causes of this the mortgage crisis. Gary Gorton of Yale has a very detailed one that describes the role of derivatives and Stan Liebowitz of UT-Dallas has another. They both pin the cause on the growth of subprime lending. Liebowitz attributes the disaster specifically on ARM's.

Gorton's paper is rich in data. For example on page 72 he shows the mind-boggling loss of $3.2 trillion in the sub-prime market. On page 52 he tracks the increases in defaults from 2003 to late 2007. For the prime market it went from 2.62 to 3.24%. For the subprime one it went from 13.04 to 17.31%.

ARM's, Alt-A, Prime Mortgages and Delinquency Rates

Delinquency rates by mortgage types and FICO scores at the Zillow blog.

China goes for methanol from coal

Now if we could also do the same. But we're sold on global warming, so no coal for us.

The production of methanol from coal gasification is a mature technology. In the United States, Eastman Chemical produces methanol from coal gasification at a plant in Kingsport, Tennessee that was built with support from the U.S. Department of Energy (DoE). Based on this experience, the U.S. DoE estimates that methanol can be produced from coal for as little as 50¢ per gallon. In China, production costs from coal are generally RMB$800-1,200 per metric ton of methanol (US$110-165/metric ton, or 33¢ to 50¢ per gallon). In addition, coke furnaces in China generate 80 billion cubic meters of waste gas each year, enough to produce 40 million metric tons of methanol, and significantly reduce pollution in the coal-producing regions. Coal-bed methane deposits of 30,000-35,000 billion cubic meters in China represent another significant energy resource as well as a hidden danger that claims miner’s lives each year. Just 1000 cubic meters of coal-bed methanol can produce one metric ton of methanol.

Fannie/Freddie, Regulations and Perpetual Motion Machines

From the Main Street Column of the WSJ:

On Capitol Hill, he notes, we had just the opposite. In terms of accountability, Fannie Mae and Freddie Mac were the worst of both worlds. On the one hand, they lacked the congressional oversight that would have come had there been an explicit and acknowledged taxpayer guarantee. On the other hand, the privileged position represented by this implicit guarantee removed the discipline that market competition forces on other private enterprises.

Mr. Baker goes further. He points out that it wasn't the unregulated part of the financial markets that got us here. It was the regulated part. In his own industry, he notes, the lack of a government guarantee means folks do a lot more due diligence before they part with their money.

That regulated part being Fannie/Freddie with its supposed congressional oversight.

A recent comment on this blog said that the GOP was in charge when F&F were starting to show signs of trouble. True enough but the past blog posts here show that the Democrats blocked all oversight attempts, effectively killing it in committee. Remember that this is a democracy where the minority party gets a say. And I must add the GOP is a afraid of the racist label, so let the idiotic schemes go along their merry way. Not much leadership in either party. We have the stupid and egalitarian party or the let's not be known as the nasty party of racists.

With the polls the way they are you Democrats may just get the presidency with a congressional supermajority. You can start implementing your grand societal schemes - schemes that you'll find that work about as well as perpetual motion machines. Next up Social Security, then Medicare.

Wednesday, October 08, 2008

More on Fannie/Freddie

The Fannie/Freddie debacle from Beliefcorner.com

In 1938, Fannie Mae was established by an act of Congress to provide liquidity to the mortgage market during an economic crisis known as the Great Depression. (Fannie history)

In 1970, over three decades later, Freddie Mac was established by an act of Congress to counteract Fannie Mae's growing monopoly of the secondary mortgage market. (Freddie history)

In 1977, the Carter Administration passed the Community Reinvestment Act (CRA) that required banks to offer an even disbursement of credit throughout the financial market in an attempt to curb past lending practices that targeted more desirable markets. At the time, republican critics charged that such an act would impose unnecessary regulatory burdens on lending institutions and distort credit markets by forcing banks to offer loans to under-qualified applicants.

In 1995, the Clinton Administration pushed even harder to increase the supply of affordable housing to low-income families by offering performance-based incentives (Lowered Standards) . According to economist Stan Liebowitz, these developments led to a loosening of lending standards that required no verification of income or assets, little consideration of the applicant's ability to make payments, and no down payment payments. The net effect was an inevitable collapse of Fannie Mae and Freddie Mac at the cost of its investors.

In April of 2001, the Bush Administration first red flagged Fannie and Freddie stating that "financial trouble of a large GSE could cause strong repercussions in financial markets, affecting Federally insured entities and economic activity."

On September 10th of 2003, Treasury Secretary John Snow recommended to the House Financial Services Committee that Congress enact "legislation to create a new Federal agency to regulate and supervise the financial activities of our housing-related government sponsored enterprises" and set prudent and appropriate minimum capital adequacy requirements.

In October of 2003, less than a month later, Fannie Mae disclosed 1.2 billion dollars in accounting errors.

In November of 2003, the Bush Administration upgraded their warning to a "systemic risk" that could very well extend beyond the confines of the housing market. In a July report, written by external investigators, it concluded that Freddie Mac manipulated its accounting to mislead investors. And other critics pointed out that Fannie Mae did not adequately hedge against rising interest rates.

In November of 2003, Council of the Economic Advisers, Chairman Greg Mankiw, argued that "legislation to reform GSE regulation should empower the new regulator with sufficient strength and credibility to reduce systemic risk." And in order to do such, the regulator would have "broad authority to set both risk-based and minimum capital standards" and "receivership powers necessary to wind down the affairs of a troubled GSE." (Remarks of Dr. N. Gregory Mankiw Chairman Council of Economic Advisers at the Annual Meeting of the National Association of Business Economists)

Saturday, October 04, 2008

Where are we headed? From the WSJ.

The Wall Street Journal comments on the state of the housing bubble.

... Experts say that an additional 10% to 15% decline in house prices is needed to get back to the prebubble level. That decline would double the number of homes with negative equity, raising the total to 40% of all homes with mortgages. The mortgages of five million homeowners would then exceed the value of their homes by 30% or more, which could prompt millions of defaults...

NY Times on Fannie

A fairly good description of the debacle.

...Fannie, a government-sponsored company, had long helped Americans get cheaper home loans by serving as a powerful middleman, buying mortgages from lenders and banks and then holding or reselling them to Wall Street investors. This allowed banks to make even more loans — expanding the pool of homeowners and permitting Fannie to ring up handsome profits along the way...

...Fannie never actually made loans. It was essentially a mortgage insurance company, buying mortgages, keeping some but reselling most to investors and, for a fee, promising to pay off a loan if the borrower defaulted. The only real danger was that the company might guarantee questionable mortgages and lose out when large numbers of borrowers walked away from their obligations....

...Whenever competitors asked Congress to rein in the companies, lawmakers were besieged with letters and phone calls from angry constituents, some orchestrated by Fannie itself. One automated phone call warned voters: “Your congressman is trying to make mortgages more expensive. Ask him why he opposes the American dream of home ownership.”....

Monday, September 29, 2008

C-Span clips on Freddie/Fannie hearings from 2002-2004

An 8.5 minute video of C-Span clips of various Democrats defending Fannie/Freddie back in the early 2000's when Bush, McCain and company were trying to regulate this GSE. Found at Colossus of Rhodey.

Saturday, September 27, 2008