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.
Many good reads and topics to choose from today but wasn’t it Bill Clinton who gave us NAFTA and who repealed Frank- Dodd and Glass-Stiegel that set the stage for the past and current derivatives debacle? Another very good read is in todays Global Research.org article from Michel Chossudovsky “War,Terrorism and Global Econ Crisis…”. He makes 113 interesting and rather alarming points you will not want to miss that ties the whole World mess of political economics together. One cannot be sure though how much is truth or fiction…
I am glad at times you ask these questions. The process to repeal much of Glass – Steagall started before Clinton came to office. While he can be blamed for penning his name to its repeal, I think we can place much of the blame upon the great maestro hisself, Fed Chair Alan Greenspan in his irrational exuberance in believing the market place would regulate itself. What a joke that was and while Wall Street gambled, Main Street paid the tab after they skunked it. Here is a history of how it all came to be which I have used forever. http://www.freedom4um.com/cgi-bin/readart.cgi?ArtNum=74200
“wasn’t it Bill Clinton who gave us NAFTA and who repealed Frank- Dodd”
After reading this interview with Michael Burry,
I believe he should read all of Tanta’s posts, that way he can figure out what happened.
*sniff* I still miss Tanta. I have to recommend her “The compleat Ubernerd” http://www.calculatedriskblog.com/2007/07/compleat-ubernerd.html series to learn about the nitty gritty of how the mortgage market blew up. The mixture of knowledge, intelligence, and humor is rarely seen.
Saw The Big Short yesterday; read the book a few years back. I only occasionally read Calculated Risk, and was not familiar with Tanta, a deficit I intend to correct PDQ. Thank you for the introduction!
A friend who hadn’t read much about the crisis, but had heard Burry interviewed a few times, told me he blames the dumb schmucks who took out the too-good-to-be-true loans. But I pointed out to her that he is an autistic math nerd (my characterization, and not that there’s anything wrong with that), and probably not able to relate to how the little guy was basically a pawn.
The movie took a few liberties, and was maybe more entertaining than it should have been, considering the subject matter, but it stuck pretty close to the book, and for a simple soul like me, Lewis was one of the voices that brought things down to my level. Maybe Tanta did, too, and I’m sorry I missed her ‘in real time’.
My level of grasping oblique economic points isn’t as strong as I would like it to be, but I have tried to dig in and follow the threads that people like Lewis and others have laid out there. What I find particularly scary is when I look around my little under-educated, totally oblivious corner of the rural NC landscape and see slack faces that only light up when you mention guns or NASCAR. Even as they are being screwed with their pants on, too many of my neighbors want to blame the black man in the White House or too much government regulation or anyone/anything but the way the rotten system has used them up and spit them out.
There are only a few of us who were on the money is seeing this happen pre-2008. I was not one of them and certainly we had enough of a warning with LTCM blowing up as it did. Summers blew it off, Greenspan ignored it, Levitt the head of the SEC ignored it as well as Rubin the Treasury Secretary. Tanta was a nobody in the scheme of things and she was ringing the bell of disaster and few were reacting to it as the financial house of the US had caught fire. The S&P and Moody’s of the world did not dig deep enough before rating these disastrously built and tranched MBS rated by MIs and doubly insured by CDSs and naked CDS. From the time the liar and ninja loans were made to the time they ended up in these MBS there was no checks for legitimacy as there was in the past. To make matters worse, the reserves did not exist to back these financial instruments. They were all given out in bonuses and what was left was pennies on the dollar.
A market that was supposed to protect us as Greenspan and many economists explained they would do in seeking their profits and protecting their well being welfare; instead, robbed us and then asked Main Street to bail them out. As I explained this on one site using the very same website I have given to William Ryan, I had one prominent economist accuse me of concocting a story.
Few who could do nothing and those who did listen to Tanta and could do something, did nothing as there was too much money to be made from the $billion coming to the US looking for safe investments. Mortgages were supposed to be safe investments as they were thoroughly investigated and proven (even the Alt-As and ARMs). Thre was too much money to be made. And after the fact, I was a great story teller.
I have not even touched on Brookley Born or Senator Dorgan. Great stories there also. Follow the link to Brookley Born, another Cassandra like Tanta who had influence and they worked to discredit her.
More of my $.02
Allow me to add a PS to the above, having just read the Burry interview. It seems my friend must have gotten – or gave me – the wrong impression. His views are obviously more nuanced than she lead me to believe. Glad of that.
And now I’m off to catch up on the other links………….
Happy New Year to all!
The operative phrase, IMNSHO –
, did nothing as there was too much money to be made – See more at: http://angrybearblog.strategydemo.com/2015/12/some-great-reads-on-a-wintery-night.html#sthash.wjgkmuTL.dpuf
What Greenspan and the rest of his acolytes failed to take into account is human nature. That, I fear, hasn’t changed for hundreds of thousands of years, and I’m not sure it can.
Thanks again for the good reads (good as in ‘informative’, not feel good. :((
If Bill Clinton gave us NAFTA, how did he get GHW Bush to sign the agreement in 1992? President, Rhodes scholar, time traveler.
Your comments on Medicare and health care costs in general, are spot on.
I have never understood how anyone expects a for profit health care system to work, long term. Especially in this climate of demonizing social safety nets. For one thing, your patient pool will eventually be priced out of the market, or die in the process.
I guess we’re just supposed to go back to the days of the poor house, and when you are too sick/old to work, you die. End of story. If you’re not productive, you’re not worth feeding, let alone caring for when sick. And this attitude is just made more bitter by the ever-increasing costs of care.
The irony is, many of the same voices screaming about how much it costs, are the same people holding stock in Big Pharma and the ever-consolidating hospital industry, etc.
When an entity’s main focus is on how to wring the last nickle out of every transaction, how can we expect the best medical outcomes for our loved ones or ourselves?
We still have caring, compassionate doctors and nurses, but for how much longer? The ones I know are becoming disillusioned and downright pissed off that what they have been called to do – heal the sick – has been turned into something grotesque.
We can’t continue down this path. We, as a society, will have to choose which goal we most want to pursue –
“If Bill Clinton gave us NAFTA, how did he get GHW Bush to sign the agreement in 1992?”
Bush I signed the agreement, but it was not ratified until he was out of office, and the implementation legislation was signed by Clinton.
Yep, he signed it after it had been negotiated by others, signed by a president, and ratified by Congress. Unless the governor of Arkansas has one hell of a lot more clout than I think that position provides, anyone saying “Bill Clinton gave us NAFTA” is either mighty stupid, mighty ignorant, or blowing smoke.