2009 - %3, July

We're Still at War: Photo of the Day for July 30, 2009

Thu Jul. 30, 2009 5:59 AM EDT

US Marines assigned to 1st Platoon, 2nd Battalion, 8th Marine Regiment, prepare to return fire after receiving enemy fire in Lakari Bazaar, Afghanistan, July 19. The Marines are accompanied by Afghan National Army soldiers in order to deny freedom of movement to the country's enemies. The Marine battalion is the ground combat element of Regimental Combat Team 3, 2nd Marine Expeditionary Brigade-Afghanistan. (Photo by Gunnery Sgt. James A. Burks courtesy marines.mil.)

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What You Should Have Read Yesterday

| Thu Jul. 30, 2009 5:59 AM EDT

Like most bloggers, I also use twitter. I mostly use it to send out links to interesting web content. You can follow me, of course. (David Corn, Mother Jones' DC bureau chief, is also on twitter. So is my colleague Daniel Schulman.) But for those of you who aren't too eager to hop on the tweetwagon, here's what you should have read yesterday:

Foreclosure Kabuki

| Thu Jul. 30, 2009 12:56 AM EDT

Why are so few mortgage companies willing to modify loans for delinquent borrowers even though the federal government has allocated $75 billion to keep them from taking a big hit when they refinance the loans?  What's the holdup?  Peter Goodman reports:

“It frustrates me when I see the government looking to the servicer for the solution, because it will never ever happen,” said Margery Golant, a Florida lawyer who defends homeowners against foreclosure and who worked in the law department of a major mortgage company, Ocwen Financial. “I don’t think they’re motivated to do modifications at all. They keep hitting the loan all the way through for junk fees. It’s a license to do whatever they want.”

....“If they do a loan modification, they get a few shekels from the government,” said David Dickey, who led a mortgage sales team at Countrywide and Bank of America [....] By contrast, he said, the road to foreclosure is lined with fees, especially if it is prolonged. “There’s all sorts of things behind the scenes,” he said.

....As a home slides toward foreclosure, mortgage companies pay for many services required to take control of the property and resell it. They typically funnel orders for title searches, insurance policies, appraisals and legal filings to companies they own or share revenue with.

An old gag asks, What do you call a thousand lawyers at the bottom of the ocean?  Answer: A good start.  These days, I don't think "lawyer" is the right profession for that joke.

Yet More on High Frequency Trading

| Thu Jul. 30, 2009 12:13 AM EDT

Jon Stokes has more about high frequency trading over at Ars Technica.  His piece doesn't address the allegations that HFT shops engage in front running (i.e., sneaking a look at stock prices a few milliseconds before anyone else), but focuses instead on "pure" HFT strategies.  For example:

One of the most important uses for HFT is to get the best price for very large stock orders by breaking them up into small orders of random sizes and hiding the activity from other traders, who, on sensing that a large order is in progress, might take advantage of that knowledge by making moves that would impact the stock price....Some categories of "predatory algos" closely monitor the markets in order to sniff out exactly these types of hidden large orders, so that the algo can trade against them. For instance, if a predatory algo detects that someone is trying to hide a large sell order for [Intel] by trickling it out into the market in small blocks, it might work to bid down the price of [Intel] just a bit so that it can pick up those blocks at a discount and then sell them for a profit when the share price floats back up to the market's earlier, non-manipulated valuation.

It kinda reminds me of Charlie Stross's fictional Economics 2.0 — an automated economy that runs so fast no human being can keep up with it.  In an interview at Felix Salmon's blog, Stokes adds this comment about the allegedly gigantic trading profits generated by HFT:

To justify this $20B/year “fee” you have to make the case that the market system as a whole is getting something of value to all the payers in return. So supporters will say that it’s the price of liquidity and innovation, and, besides, they’ll argue, everyone who has been participating in the markets for decades has been paying these hidden liquidity taxes (and I’d rather call them taxes than fees) to specialists and any other market maker. But when you see this tax ballooning at Internet speed — much the same way that finance has ballooned as a portion of GDP — you have to take a step back and ask, “what is the real, fundamental benefit that we’re all paying for here when we collectively direct money into this?”

This, of course, is a question we've been asking about a lot of financial innovation lately: how, exactly, does it benefit anyone other than the tiny band of Wall Street zillionaires who collect fees from it all?  And Felix adds this:

My bottom line is that HFT is a black box which very few people understand, and that one thing we’ve learned over the course of the crisis is that if there’s a financial innovation which doesn’t make a lot of sense and which is hard to understand, there’s a good chance there’s systemic risk there. Is it possible that HFT is entirely benign and just provides liquidity to the market? Yes. But that seems improbable to me.

John Hempton offers a contrary view here.  He's very skeptical of the $20 billion number that's been tossed around lately, and in any case says that trading is a whole lot cheaper today than it was in the past even if the HFT folks are skimming a cut off the top.  That's unquestionably true, but I'm not sure it's a very good defense.  If Wal-Mart overcharges every customer by a penny, it's still wrong even if you're saving money compared to the corner market.  Add in the potential systemic instabilities caused by the HFT black box, and I think the burden of proof should be on the high frequency community to convince us that what they're doing is safe and worthwhile, not the other way around.

When Should We Start Leaving Afghanistan?

| Wed Jul. 29, 2009 7:35 PM EDT

Bing West writes in the Wall Street Journal today that it's time to get the hell out of Dodge:

The Taliban are Afghans, to be dealt with by Afghans....On patrols, Afghan soldiers spot the enemy 10 times more frequently than do coalition solders. Afghan soldiers are brave, hardy, ill-disciplined, individualistic, temperamental and trustworthy.

A year from now, coalition forces should be able to gradually withdraw, replaced by robust support and adviser units embedded in Afghan security forces. We shouldn’t make this a NATO war, allowing the Afghans to stand back. We’re outsiders, no matter how many schools we build or cups of tea we drink.

Nothing West says here is especially controversial, really, except for that "a year from now" part.  But why shouldn't we begin withdrawing in 2010?  Al-Qaeda is essentially destroyed, seven years of occupation doesn't seem to have improved our ability to fight the Taliban, and bringing in the DEA isn't likely to help things.  Besides, it's not as if Bing is suggesting that we repeat the mistakes of the past and simply hightail it for the exits:

For things to turn out right for us [...] we have to gradually let the Afghans do their own fighting, while supporting them generously. Afghan forces will need $4 billion a year for another decade, with a like sum for development. The crunch in terms of American support for the war will come a year from now. The danger is that Congress, so generous in supporting our own forces today, may not support the aid needed for progress in Afghanistan tomorrow.

Obama has a plan for leaving Iraq.  He needs one for leaving Afghanistan too.

Props to Our Bad-Ass Interns

| Wed Jul. 29, 2009 7:14 PM EDT

The staff at Mother Jones knows it couldn't live without our interns, who fact-check our stories, blog, research, and generally work their butts off. But you, dear reader, may not know how cool these folks are. So, via our friends at the Village Voice, here's a sampling, in an article entitled, "You Just Graduated from Journalism School, What Were You Thinking" [emphasis mine]:

"I grew up with doom and gloom," counters Sonja Sharp, 23, who was paralyzed at eight and, despite being told she would never walk again, is now ambulatory. "So you can doom-and-gloom until you're blue in the face, and I'll yawn." She knows things are "apocalyptic" now, but believes journalism will emerge all the stronger for it. "I decided when I was nine—and in a wheelchair—that I would write," she says. "I still want to be a journalist because I'm stubborn, and dropping in on total strangers and having them open their lives to you is addictive, and I'm not a 'just say no' person."

Sharp turned down an education beat at a Los Angeles weekly in favor of Columbia, and started in the newspaper concentration. "Journalism marries the two things in the world I'm actually good at—being nosy and writing for money," she says. After graduating, Sharp landed a six-month internship at Mother Jones. "I don't know where I'll be next year, but I'll be somewhere," she says, adding that uncertainty is fine "when you're young and you don't mind living hand-to-mouth."

Sonja puts all of our woe-is-me impulses to shame, and her cohorts: interns Ben Buchwalter, Andy Kroll, Stephen Robert Morse, and fellows Steve Aquino, Taylor Wiles, Nikki Gloudeman, and Sam Baldwin are just as great. Follow those links to learn more about them and read their clips. Learn more about our awesome (and paid!) fellowship program here.

Clara Jeffery is Co-Editor of Mother Jones. You can learn more about her here and follow her on Twitter at @clarajeffery.

 

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Government To Allow Release of Guantanamo Detainee

| Wed Jul. 29, 2009 6:32 PM EDT

For nearly seven years the US government has defended its detention of Mohamad Jawad, possibly the youngest inmate at Guantanamo Bay. But in an abrupt about-face late on Wednesday, Justice Department lawyers said they will allow Jawad to be released, acknowledging that key evidence in their case had been tainted by torture. This admission could affect the cases of more detainees and complicate the administration’s attempt to close down Guantanamo by the end of the year.

The government's decision to release Jawad suggests that it may stop trying to delay the release of at least some of the detainees whose cases hinge on evidence contaminated by torture. It could also signal a real break between Obama's Justice Department and the agencies that have previously run the show at Guantanamo: the Defense Department and the CIA.

The Limits of Transparency

| Wed Jul. 29, 2009 6:27 PM EDT

Should Barack Obama respond to the "birther" lunatics by asking the Hawaii Department of Health to produce his original birth certificate?  Should Sarah Palin be required to produce original medical records proving she's really Trig Palin's mother?  Conor Friedersdorf says no.  Elected officials may have less right to privacy than ordinary citizens, but there are limits:

As evident is that public officials are under no “transparency” obligation to address all questions. Were the right fringe to allege that Barack Obama is in fact a woman, and demand a photograph of his penis to definitively prove otherwise, and the left fringe retaliated by alleging that Sarah Palin is a man, and requested the same sort of photographic proof, Andrew [Sullivan] would surely join me in concluding that both politicians have some right to privacy. Right?

Right.  There's a level of craziness beyond which no politician is obligated to respond.  All it does is spur yet more craziness.  If you believe that the state of Hawaii has conspired to hack its computer system and produce a phony certificate of live birth, then what good would the original document do?  You'd just figure it had been forged.

If someone produces actual evidence of scandal or wrongdoing, then you have to respond.  But if mere conspiracy theorizing is all that's required, then the sky's the limit.  Bill Clinton has to prove he wasn't transporting bales of coke through Mena airfield.  Barack Obama has to prove his mother wasn't in Kenya in August 1961.  Sarah Palin has to prove she wasn't faking a pregnancy in 2008.  John McCain has to prove he didn't collaborate with the enemy while he was in a Vietnamese prison camp.

Conspiracy theorists will always be with us.  But the adult community doesn't have to humor them.  All that does is make things worse.

1 In 6 Health Workers Won't Report in Flu Pandemic

| Wed Jul. 29, 2009 5:42 PM EDT

Just in case you were counting on them… 16 percent of public health care workers will not report for work in a flu pandemic emergency—regardless of the severity.

The survey published in PLOS ONE was conducted among 1,835 public health workers in Minnesota, Ohio, and West Virginia from November 2006 to December 2007. 

Among the findings:

  • Public health workers who were concerned about a pandemic threat but also confident they could perform their roles with a meaningful impact on the situation were 31 times more likely to respond to work in an emergency than those who perceived the threat low and their jobs unimportant
  • Workers who perceived the threat of the emergency to be low yet strongly believed in the importance of their jobs were 18 times more likely to say they would respond to work than those who thought the threat low and their jobs unimportant


The survey could help public health agencies design, implement, and evaluate training programs for health workers. The authors' recommendations:

  • Motivate public health workers with a better understanding of why their roles make a difference
  • Don't downplay the threat of a flu scenario in order to calm workers' fears, since a sense of threat is an important motivator
  • Training should include assurances of workers' personal safety, since 24 percent of respondents considered their work environments unsafe

How about combat pay?
 

One-Way Tickets for Homeless?

| Wed Jul. 29, 2009 4:51 PM EDT

Since 2007, the city of New York has bought one way tickets for nearly 600 homeless families to the city of their choice. Destinations have included Florida, California, and even Johannesburg, South Africa, via trains, planes and automobiles. Mayor Michael Bloomberg embraced this program as a realistic and relatively inexpensive solution to New York's overcrowded homeless shelters. Sending the families to a new city, as long as they have a friend or relative to live with there, is much less expensive than the average $36,000 a year spent on a family in shelters. Once the families arrive at their new homes, New York social workers check in on their progress periodically and the city has on rare occasions fronted funds for rent and a security deposit.

In 2006, Malcolm Gladwell wrote in the New Yorker about a similarly creative program in Denver that could have saved the city a fortune while making strides towards solving its homeless problem. The experimental program gave free housing to chronically homeless people who had accumulated massive hospital bills, which were paid for by taxpayers.  The study found that subsidizing housing for homeless people cost an average of $10,000 a year per person, about a third of what the city would spend on social services if the people remained on the street. The idea, writes Gladwell, "is that once the people in the program get stabilized they will find jobs, and start to pick up more and more of their own rent, which would bring someone's annual cost to the program closer to six thousand dollars." By 2016, Denver hopes to create an additional 800 housing units for the chronically homeless to compound the success of this experimental program.

San Francisco Mayor (and now CA gubernatorial candidate) Gavin Newsom announced in 2005 that his Care Not Cash program, which took homeless people off welfare in favor of social services, had decreased the number of homeless people on welfare by 84 percent, disproving critics who said it could never work. This voter-approved initiative decreased monthly welfare checks to homeless people from $410 to $59 and used the money saved to pay for homeless services, including food and shelter.

On the surface, these experiements in New York, Denver and San Francisco sound like a homerun. They appease progressives because they offer social services to a disadvantaged population. And who doesn't love a goverment program that saves money? But they are far from perfect, and raise questions about where to draw the line and how to guarantee that once the cash runs out, the homeless won't end up back on the streets.