Some Great Reads on a Wintery Night

Been taking some time to recoup from back surgery (8 inch gash Lumbar area), catch my breath, and find some more interesting topics on which to write. There are some awesome reads out there if you just take some time to search for them.

– Another Christmas gift from Dean Baker; The Effort to Divert Class War Into Generational War: Lessons On Economics You Won’t Get from Jeff Bezos In 5-Easy Lessons, Dean Baker takes apart the Washington Post’s Catherine Rampell’s Drunkenmiller-style rant on how baby boomers are ripping off the younger generations. Prof. Baker gives some sound explanations on SS/Medicare, PPACA, National Debt, the Economy, and Global Warming. Hat tip to Commenter Sandi for pointing to this Christmas Day article.

– Obama, the Job Killer Paul Krugman compares Job Creation during Obamas and Bush’s Presidential tenures to date.

– Charles Dickens on Seeing the Poor Tim Taylor at Conversable Economist uses Dickens Household Words journal reporting on poverty during a textile strike and a scene at a workhouse. “I know that the unreasonable disciples of a reasonable school, demented disciples who push arithmetic and political economy beyond all bounds of sense (not to speak of such a weakness as humanity), and hold them to be all-sufficient for every case, can easily prove that such things ought to be, and that no man has any business to mind them. Without disparaging those indispensable sciences in their sanity, I utterly renounce and abominate them in their insanity;.” “A Nightly Scene in London;” Charles Dicken. Excellent read if you are of a Dicken’s mind. You can also catch Tim Taylor’s other Charles Dicken’s article; “Management vs. Labor.”

– Paul Krugman writes an article Checking up on Obamacare. It appears the “sky is falling” conservatives have been wrong so far on the PPACA coming apart at the seams. Enrollments appear to be up if you also read Charles Gaba’s blog”

” As of today, we should be appx. 1.9 million ahead of last year…but as you note, the question now is whether it will continue to stay ahead of last year *proportionately*.

11.2M vs. 9.3M = appx. 20% ahead. My 14.7M projection assumes 25% growth over 11.7M. It’s that 5% difference I’m concerned about (again, see the final week).

20% growth by 1/31 would be just over 14.0 million even. Again, I’m holding out for the Week 8 numbers before making any adjustments.”

– I had written about Brooksley Born, “The messenger wore a skirt,” says Marna Tucker, “Could Alan Greenspan take that?” a couple of years back and her efforts to regulate the derivatives market as the head of the CFTC. Greenspan, Rubin, Summers, Gramm and others fought to block her and were successful in doing so. I ran across this article by Bill McBride telling the story of Tanta, a blogger and another woman whose Calculated Risk articles were spot-on in detailing the issues leading up to the 2008 collapse. Tanta was widely read by many on the blogosphere as well as the news media.

Tanta, alias Doris Dungey, as a co-author at Bill McBride’s Calculated Risk blog had taken up reporting on the mortgage market (an industry in which she had 20 years experience) and pointing out their risky behavior prior to 2008. Here are some of her words on “piggyback mortgages, mortgage insurers, under pricing-risk, etc. (and I have already said too much) as taken from Calculated Risk (“Remembering Tantra”):

“Back to business: the mortgage insurers can raise rates all day long and it won’t do dog for them or anyone else. The whole problem is, precisely, that the “piggyback” mortgage was designed to get around MI. As long as there are second-lien lenders willing to price them cheaper than MI–and perhaps we’re seeing the beginning of the end of that–the MIs just lose business entirely in a credit bubble, since they’ve been burned before and haven’t been willing to follow the pricing down to ruin again. They remember the early 90s better than the regulators do (or did, maybe).

The real point is they have two dogs in this fight: they have lost market share because competitors (second lien and 100% lenders) have been willing to underprice risk, and they are at risk for the book of business they do have because increasing foreclosures and bubble-deflating in their market areas drag down values on insured as well as uninsured collateral. A lot of lenders and RE brokers have been dismissing the MIs for years now on the grounds that they’re just crying over lost business, but in my unhumble opinion the MIs have been pretty good risk managers in an irrational market for a long time, meaning they’re damned if they do and damned if they don’t. The fact that their interest in all this isn’t quite public-spirited altruism doesn’t mean they aren’t right. (If you remember, I’ve often made that argument about Fannie and Freddie.)

As I have been saying for years now, the reports from the MI companies ought to scare the crap out of Alt-A RMBS holders, but it never seems to. If the sector of the industry whose whole function is to underwrite default risk won’t touch that stuff at the (then) current market price, what makes anyone think the risk is adequately managed by a structured security? What are we going to do here, “make it up on volume”? (Inside joke: mortgage lenders always think they can keep slicing off risk premiums and ‘make it up on volume.’)”

What makes the story of Tanta interesting are several things:

– Her articles on Calculated Risk are crystal clear and go right to the heart of the issue which took me months of reading many difference sources and I still do not have as clear a picture as Tanta did. The articles are still there for those who wish to gain insight.

– “One of the criticisms of the movie ‘The Big Short’ is there are no women lead characters. That is a huge oversight, especially since Tanta was a key source for understanding the mortgage industry for many hedge fund managers!” Here was an expert right in the midst of us.

– Bloomberg’s “Odd Lots” has picked up on this missing and important element of a person’s story sounding the alarm of the coming collapse. Odd Lots: How One Woman Tried To Warn Everyone About The Housing Crash Joe Wisenthal and Tracy Alloway report on Tanta, “Tanta,” a pseudonymous mortgage industry professional who was trying to blow the whistle on the problems she saw emanating from her industry.”

I never got to know this Cassandra, Tanta, or read her words till much later than 2008 when she died and I had later joined Angry Bear. It is a great read by an interesting and very real person who was on the mark with what she reported on the mortgage market. Bloomberg took the time to recognize her as well as the WSJ, Boston Globe, WaPo, NYT, etc.

– A conversation I was having with a PPACA expert:

“Reform is a process and not an event (I was complaining of the lack of reality by commenters) — and the process is happening. By about 2020 I think we will see results that will begin to make you & I, (not to mention folks like Elliot Fisher, Don Berwick, Diane Meier, etc. happy)

Medicare is beginning to negotiate better pricing (paying hospitals and docs for value, to volume) and in 2-3 years it will refuse to pay for many overpriced drugs. (This will make many Americans angry. They think they should have any drug that they think they need–or that their doctor tells them they need (even though their doc hasn’t read any medical research in 15 years) and that the rest of us should pay for it. Eventually, people will adjust.”

Much of the issue with healthcare is the uncontrolled cost of it. Pharma, hospital supplies, and doctors pretty much charge what they want to with little interference due to Congress. Whether it is a two-tier system of public and private funded healthcare or single payer; the control has to be put in place to administer cost and pricing the same as other advanced countries do. There is no magic bullet and it is un-nerving to me the insistence Single Payer is the magic bullet without the cost controls in place.

– T.S.A. Moves Closer to Rejecting Some State Driver’s Licenses for Travel Not all Driver’s Licenses meet the requirements of being used for air travel identification. You may be pushed into a passport or a TSA Travel ID

– U.S. Corporations Don’t Need Tax Breaks on Foreign Profits

Yves here. Notice that the justification for tax breaks so that corporations can show more profits is “competitiveness” that we’ve debunked repeatedly. As we wrote last year:

. . . ” Those provisions also serve corporations and the wealthy generally, since they further the use of tax reduction as an illusory economic stimulus. In fact, the main effect is a race to the bottom on corporate taxes, which results in a shifting of the tax burden to regressive consumption taxes and not-very-progressive personal income taxes. In other words, tax avoidance has long been a means for redistributing income to the capitalist classes.”

– Sandwichman’s Lump-of-Labor Odyssey Part II ” Sneering at the so-called Luddite fallacy under the conviction that productivity would inevitably create more jobs than it destroyed used to be known as the ‘economic law’ that ‘supply creates its own demand’ — a faith that was once said, by John Kenneth Galbraith, to have “sank without trace” in the wake of John Maynard Keynes’s refutation of it.” A different view and one in which I agree.