2011 - %3, May

Slumlord Millionaire

| Fri May 6, 2011 5:00 AM EDT

A couple of days ago the Los Angeles city attorney's office sued Deutsche Bank. Why? Because it's a slumlord:

The Frankfurt, Germany-based bank has foreclosed on more than 2,000 homes over the last four years in neighborhoods across the city, according to the suit — many concentrated in the northeast San Fernando Valley, northeast Los Angeles and South Los Angeles.

Los Angeles officials say the bank has been a dreadful landlord and neighbor. Prosecutors say that during a yearlong investigation, they found evidence that Deutsche Bank had illegally evicted some tenants, let others live in squalor and allowed hundreds of unoccupied properties to turn into graffiti-scarred dens for squatters, gang members and other criminals.

Deutsche Bank, unsurprisingly, is passing the buck: they say the party responsible for keeping up foreclosed houses is the loan servicer, not the bank. But loan servicers, who make their money from the fees they collect during the foreclosure process, are notoriously unwilling to spend money once the foreclosure is finished, and they're also notoriously hard to prosecute. So Los Angeles is trying a different tack: holding the ultimate owner of the property—Deutsche Bank, in this case—responsible for the condition of their property. They're the ones who hired the slumlord, after all.

All I can say is: good for them. The foreclosure mess of the past three years has been one of the biggest black marks on both the banking industry and the Obama administration, which has essentially punted the entire issue, hoping that if it kicked the can down the road long enough the problem would just fade away as the economy improved. HAMP, its primary program for loan modifications, has not only been a miserable failure on its own merits but has failed to change the incentives in the housing industry, which are almost Dickensian in the way they reward the most egregious possible behaviors. As Mike Konczal put it a few months ago, "Obama's Treasury team took a system that had a terrible design and doubled-down on it."

The problem is simple: the HAMP program provides only modest incentives for banks to perform the kinds of loan modifications that might genuinely help distressed homeowners. Opposed to that are the lucrative fees that loan servicers make by stringing homeowners along—fees for insurance, appraisals, title searches, legal services, etc.—and then eventually allowing them to default anyway. Loan modifications, even with the HAMP incentives added in, are still net money losers. There's way more money to be made by offering homeowners a sliver of hope, collecting fees along the way, and then foreclosing after all. Peter Goodman lays out the gruesome details here.

There are plenty of ways we could change those incentives, but we haven't done any of them. So Los Angeles is trying to change them on its own. If banks are required to maintain foreclosed properties properly, that suddenly makes foreclosure a less appealing prospect and the financial incentives start to tip in the direction of making a loan modification. Sure, you take a small hit, but you avoid the cost of not being ultimately responsible for maintenance and upkeep.

Maybe it'll work. Given the bottomless legal resources of big banks, I wouldn't bet the ranch on it. But it's worth a try. Right now the foreclosure industry is practically designed to make as much money from people's misery as possible, and more misery means more money. Anything that can turn those incentives around is a step in the right direction. Here's hoping LA, as it's so often been in the past, is a trendsetter for the rest of the country.

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Another Bubble Pops?

| Thu May 5, 2011 6:17 PM EDT

So, um, we had a rough day in the commodity markets:

A surging dollar and a collapse in oil prices roiled commodity markets, as fears grow that high costs for energy and raw materials are undermining the global economic recovery....That lack of confidence was pivotal in spurring a hectic retreat by investors who had bought commodities—particularly silver and oil—as a hedge against a steadily weakening dollar.

The New York Times elaborates:

 “Pop goes the bubble,” said Michael Lynch, president of Strategic Energy and Economic Research, a consulting firm. “It seems unlikely you will see any tightening in the market in the coming months. The worst of the political threats have passed us.”

....For the day, crude oil for June delivery tumbled $9.44 a barrel, or 8.6 percent, to settle at $99.80 in New York trading. Almost all commodities prices took a tumble on Thursday. Gold for June delivery dropped 2.2 percent, or $33.90, to $1,481.40 an ounce, while silver lost 8 percent or $3.148, to $36.24 an ounce. Other metals — including nickel, copper, palladium and platinum — all fell sharply. Coffee, corn, cotton, wheal and soybeans also dropped.

There's a sense in which this is almost good news. If the oil/commodity bubble pops now, it will cause some damage but it will probably be manageable. But if it had gone on for another six months or a year, the damage to the global economy could have been much greater.

This is only a few days worth of data, so take it with a grain of salt. Still, it does make you wonder if we really do have a global economy these days that's inherently built on bubbles of one kind or another. Our financial rocket scientists seem almost incapable of making money in a normal economy — making enough money to satisfy themselves, anyway — so instead they spend their time seeking out smallish bubbles and then working overtime to supercharge them enough to spin out some temporary wealth before everything crashes back down to earth. One of these days we might actually get serious about regulating leverage enough to slow this down, but it hasn't happened yet. Maybe another half dozen bubbles will finally do the trick.

Domestic Terrorism No Longer a Very Big Deal

| Thu May 5, 2011 5:21 PM EDT

Matt Yglesias on the possibility of retaliatory attacks from al-Qaeda in the aftermath of Osama bin Laden's death:

To me, the main thing we’ve learned about terrorism since 9/11 is that almost nobody living in the United States of America or any country from which you can travel to the USA without a visa (Canada, Western Europe, etc) actually wants to mount a terrorist attack. We’ve done a lot of homeland security since 9/11, but it’s obviously imperfect. You never see a terrorist detonate a bomb in an airport security line, you don’t see terrorists shooting up shopping malls, rogue drivers don’t plow their cars into crowds of pedestrians, etc. There are clearly lots of people eager to fight the United States in Afghanistan and other places, but those people either don’t want to come here or else they can’t. The idea that there’s some sleeper cell waiting for the right moment to strike was very plausible in September 2001, less so in October 2001, even less so in October 2002, and less and less and less and less plausible with every passing year.

Roger that. I think it's worth pointing out that strengthened security measures are probably partly responsible for this, since they make it a lot harder to pull off attacks of any significance. If you want to set off a bomb in an airplane, you either need to hide it in a toner cartridge or in your underwear or whatnot, and that's just inherently unreliable. Even car bombs are harder to make than you think, since the precursor elements are carefully tracked.

Still, the point stands. Obviously terrorists are always trying to think of new ways of creating havoc, and we have to respond to that. Broadly speaking, though, we have responded, and that response has been pretty effective. The United States doesn't have a lot of homegrown suicide bombers, and it's really, really hard for Afghan/Yemeni/Somali/etc. suicide bombers to get over here and do anything spectacular. We're almost certain to be attacked again, but it's equally certain that attacks will be infrequent and far less damaging than 9/11. We shouldn't orient our entire worldview around increased security, and we shouldn't scare ourselves into spending vast amounts of money on it.

At least, that's true for now. In the future, who knows? There might come a time when biological weapons become easy enough to make that our security calculus needs to change. But not right now.

The Gas Wars Are Back On

| Thu May 5, 2011 2:52 PM EDT

If you drive, you don't need me to tell you that gas prices are going up. And with that recurrent phenomenon, the congressional debate about what to do is revived. In 2008, the Democratically-controlled Congress let the moratorium on drilling in the outer-continental shelf expire amid hysteria about $4 gasoline. This year, the drilling debate is back in action as House Republican leadership calls votes this week on a set of bills that would expand offshore drilling while at the same time lowering environmental standards.

The House passed the first of the bills, H.R. 1230, or the "Restarting American Offshore Leasing Now Act," on Thursday afternoon. This measure reopens lease sales for the areas of the outer-continental shelf in the Gulf of Mexico and off the coast of Virginia that were canceled after the BP spill last summer. It does so without requiring any further environmental analysis, despite the fact that the Gulf disaster last year raised some pretty real questions about impacts of a potential spill. The other two bills, which are also expected to pass, would open new areas for drilling in the Atlantic, Pacific, and Arctic oceans; speed up the process of approving drilling permits; and offer economic incentives for oil companies to use seismic technology to survey for oil reserves.

I guess it's worth repeating that drilling in every orifice of the United States isn't going to do a damn thing to lower gas prices anytime soon, even if you wouldn't know that from listening to spin on these bills.

The question is whether these bills will go anywhere. Given the Senate's inability to pass much of anything, I would guess no. The White House also issued a statement of administrative policy on Thursday opposing two of the bills and saying that the proposed changes would "undercut" reforms made since last year's spill.

But as E2Wire points out, the White House didn't actually say the president would veto the bills, and the administration maintains that it does want "safe and responsible" offshore drilling expansion. So yes, just a year after the Gulf disaster, we are again debating offshore drilling as if it were not only safe but also a miracle cure for high gas prices.

Who You Calling Hot?

| Thu May 5, 2011 2:40 PM EDT

Back in 1985, a group of researchers decided to test the "hot hands" theory of basketball playing. That is, do players sometimes get hot, making shot after shot because they're hot, or do players have hot streaks just because statistically you're going to make a bunch of shots in a row sometimes? Their conclusion was clear: there's no such thing as hot hands. But athletes themselves, even really smart, analytical ones, have never been able to accept this. They know the feeling of being hot, and no pointy-eared academics can tell them otherwise. I once had a (really smart) boss who felt that way, for example, and Paul Waldman agrees:

After spending a few hundred hours in pick-up games, I'd say that real hot and cold streaks happened around one out of every eight or 10 games I played. Some games were better and some worse, but every once in a while, I'd have a game where I just couldn't find the basket, and every once in a while, I'd have a game when I couldn't miss.

Ball players know that feeling — the days when every time you go up for a shot, even before it leaves your hand you just know it's in the bucket....But if those good and bad days happen infrequently enough, from a statistical point of view, they look exactly like random noise. If you flip a coin a thousand times there will be runs where you'll get 10 tails in a row, and if you play a hundred games there will be some where you'll hit 10 shots in a row. They may look the same statistically, but that's only because the magical games are infrequent. But that doesn't mean that the player isn't playing differently during that game, in ways that are so subtle they're probably impossible to detect.

Hoo boy. First off, once every eight or ten games isn't infrequent at all. In fact, it's really, really frequent. And second, unless we're invoking some kind of quantum mechanical effect on our neurons, nothing in basketball is too subtle to detect. There's nothing that's even close to being too subtle to detect.

I'm not really picking on Paul here. (OK, maybe I am a little.) I just think it's interesting how unwilling most athletes are to accept the results of this study. The feeling of streakiness is so strong that we feel it just has to be true. In reality, though, most streakiness is just a combination of chance and chance. Chance #1 is the raw probability of hitting a bunch of shots in a row every once in a while. Chance #2 is what our opponents are doing. If, by chance, they make a bunch of bad plays, or happen to be guarding you badly, your shots are going to feel good. You'll have slightly better positions, slightly longer looks, and you'll make more shots. Adrenaline will do the rest.

But why did I say "most streakiness" can be explained this way? Why not "all streakiness"? Because there's always Joe DiMaggio. That 56-game hitting streak of his really was out of this world. Statistics can't explain that.

BY THE WAY: It's possible, of course, that the hot hands study has some methodological defect. I wouldn't bet on it since Amos Tversky was one of the co-authors, but you never know. On the other hand, it's also worth noting that they did four separate tests of streakiness and then added both a study of free-throw shooting and a controlled experiment with the Cornell basketball team. Result: nothing, nothing, nothing, nothing, nothing, and nothing. There's just no there there.

AND THIS: I believe the hot hands study is correct. Really. And yet....even I have to admit that it's hard to accept that players don't have good and bad games quite aside from their statistical chance of randomly doing well once in a while. It's just....hard.

Power of Communication

| Thu May 5, 2011 1:37 PM EDT

This post courtesy BBC Earth. For more wildlife news, find BBC Earth on Facebook and Posterous.

A human's need to communicate can be observed from the first moments of life. A newborn's instinct to cry lays the stepping-stone for a process which will enable every human to successfully communicate their experience of being alive.

It has been said that words are man's greatest achievement. The first utterances of symbolic language emerged 2.5 million years ago, setting solid foundations for modern articulation. Yet many would argue that speech and language was developed not out of want, but out of need. Therefore in what ways do humans communicate without using words?

Music has long been a way of communicating for necessity as well as pleasure. For example, using a lullaby to sooth, a folk song to warn, and a chant to call to arms. But in what ways do we use rhythm and melody to communicate with nature itself? In the case of the people of the Banks islands in the South Pacific, they can only communicate their message of thanks to the sea by literally playing the water. Waist deep in water, women and young girls alike will stand side by side and begin to play a complex set of rhythmic patterns, each one as unique as the female player herself.

In the video below from the BBC Series "South Pacific," this syncopated drumming can be seen in excellent HD quality.


The history of humans on these volcanic islands indicates precisely why these rituals still take place. Archeologists have found evidence that this region of the Pacific has been inhabited since at least 2000BC, yet with only 1% land to 99% water, and in a climate of volatile cyclone-prone seas, life in the South Pacific is far from idyllic. But Vanuatu's listing as the happiest nation on the planet by the Happy Planet Index couldn’t have hurt!

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GOP's Favorite Fake Historian Spins The New York Times

| Thu May 5, 2011 1:00 PM EDT

Last week, Mother Jones took a hard look at the words and influence of pseudo-historian David Barton, a Republican activist and minister who's devoted his life to bringing religion into politics. The separation of church and state, Barton claims, is a perversion of the Founding Fathers' intention to create a Christian nation.

As we reported, Barton's enduring popularity among the evangelical community is the secret sauce that endears him to the Republican Party's heavy hitters, including possible presidential contenders Mike Huckabee, Newt Gingrich, and Michele Bachmann. But Barton's message (among other things, he has said that Jesus would oppose the capital gains tax and the minimum wage; that global warming is "self-correcting"; and that the nation's homeland security apparatus has been infiltrated by members of the Muslim Brotherhood) is built on a foundation of distortions. Barton is not a student of history, but a manipulator of it.

But today's front page story on Barton by Erick Eckholm in The New York Times almost makes it sound like there's a legitimate debate over his view of history. Eckholm makes only fleeting mention of the fact that Barton has zero formal training in history, referring to him only as "self-taught," and his "research" as merely "disputed" and considered "flawed" by historians.

In lieu of any careful examination of Barton's record are laudatory passages about Barton's drive. "Keeping an exhaustive schedule, he is also immersed in the nuts and bolts of politics and maintains a network of 700 anti-abortion state legislators," Eckholm writes. And there's this:

It is hard to know when Mr. Barton finds the time to pore over documents and write, let alone ride the horses he keeps on a small ranch. Beyond his hundreds of speeches, he tapes a daily radio program, manages a staff of 25 and keeps in touch with his national network.

"He doesn’t sleep much," said his wife, Cheryl, who stayed near through an interview and helped him recall key dates in his improbable career.

Meanwhile, Barton's no spring chicken in the conservative crackpot coop; he's a formidable political player, the man picked by George W. Bush to sell his message to pastors around the country in 2004. Eckholm notes some of this history, but fails to explore how, as Barton's political influence has deepened, he has increasingly distorted history (and the bible) to fit GOP talking points. 

If The New York Times isn't going to take Barton to task, at least Jon Stewart is. Barton appeared on the show last night. Watch a clip below:

The Daily Show With Jon Stewart Mon - Thurs 11p / 10c
Exclusive - David Barton Extended Interview Pt. 1
www.thedailyshow.com
Daily Show Full Episodes Political Humor & Satire Blog The Daily Show on Facebook

 

And check out Right Wing Watch's point-by-point take down of the arguments Barton made last night.

Chart of the Day: New Unemployment Claims

| Thu May 5, 2011 12:41 PM EDT

From the Wall Street Journal: "New claims for jobless benefits unexpectedly surged last week to their highest level since last summer, according to data giving another sign of the economy's struggle in creating jobs. Separately, U.S. productivity slowed in the first quarter as the economic recovery stumbled and labor costs started to rise again."

Not good news. Chart below, modified from this.

Liberals and David Koch Agree: Trump's Presidential Bid Is a Stunt

| Thu May 5, 2011 11:24 AM EDT
A sign at a pro-labor rally outside the Wisconsin Capitol in February.

Believe it or not, David Koch, the billionaire donor to right-wing think tanks and political advocacy groups, and liberals have something in common: They both see Donald Trump's presidential bid as a PR stunt by a man who's not suited to run the country.

Koch, dubbed by some as the "tea party's wallet," had some less-than-flattering words for Trump in an interview with New York Daily News earlier this week. Koch described Trump's political positions over the past decade as "highly variable and unusual," adding, "He's a wonderful guy, but I don't think he should run for office." Koch went on to say, "At some point, I think he's going to drop out of the race when he realizes that he's really not qualified to be president." Ouch.

Koch also dealt a blow to 2012 frontrunner Mitt Romney, who counted Koch as a supporter in the 2008 race. At this point in the 2012 race, Koch told the Daily News he hasn't settled on a candidate yet, despite the fact that Koch hosted a major shindig for Romney last summer in the Hamptons and multiple Romney staffers insisting that Koch remains a Mitt supporter.

The potential loss of Koch as a backer comes amidst the news that a key Romney campaign chairman from 2008 cut ties with Romney. As I reported on Wednesday, Bruce Keough, the chair of Rommey's New Hampshire campaign in 2008, declined to sign on for 2012, citing the candidate's ever-changing political identity. Romney, Keough says, "manages to say things that cause people to think, 'Wait a second: I thought I knew him, and now I'm not so sure.'" As for the impact of Keough's departure, one veteran New Hampshire political analyst said, "If somebody like Keough said that to the campaign, it's going to be very interesting to see how that plays out up here."

The Revival of GM

| Thu May 5, 2011 11:09 AM EDT

Jon Cohn turns his attention to Detroit:

Will the voters will ever give President Obama credit for rescuing the American auto industry? I have no idea. But it looks more and more like they should. On Thursday General Motors announced that, for the fifth consecutive quarter, it had made a profit. And not just a measly one, either. The $3.2 billion was higher than experts had predicted and more than three times the profit of the same quarter in 2010, when the company was still struggling to emerge from its bankruptcy.

...."Reducing excess capacity" is a Wall Street euphemism for eliminating jobs. A lot of people suffered, and still are suffering, because they lost their livelihoods. Still, if not for the Obama Administration's intervention, the entire American auto industry might very well have collapsed and taken the Midwest with it. Instead, the industry is on the rebound, at least for now.

Back in 2009, when the rescue of GM and Chrysler was up in the air, I remember that my main thought was, "I'm sure glad I don't have to make this decision." Philosophically, after all, a bankrupt company ought to be allowed to die. The government just shouldn't be in the business of rescuing badly run industrial behemoths, especially in an industry with the kind of massive global excess capacity that the auto industry has.

At the same time, would you want to be the guy who lets GM shut down at the height of the biggest recession in 50 years, potentially losing a million jobs and sending the economy into an even bigger tailspin? Not really. It was just a classic rock and a hard place.

In the end, though, Obama almost certainly made the right call. We don't know for sure what the impact of letting GM and Chrysler fail would have been, but it quite likely would have been grim. And in the end, despite the endless yowling about "Government Motors" and Obama's "secret socialist agenda," the fact is that his team rammed through a pretty good deal, GM has recovered, Obama was fastidious about letting GM's managers run the company,1 and taxpayers will likely take only a modest loss. It's not something anyone wants to repeat — and GM's board better understand that it's unlikely it ever will be — but under the circumstances it was the best we could do. And Jon is right: voters ought to give Obama more credit for it than they have.

1Why? Because Barack Obama is actually a boring, gray-flannel-suit, garden variety American capitalist pig. Like just about everyone else in the country, he has no interest in controlling the means of production and wants only to regulate capitalism's excesses, not replace it with socialism. But you knew that already.