Mass Eyes & Ears

Too Stupid Not to Fail

As if on cue the Boston Globe as a story on a big mortgage fraud arrest in Boston.  A group of lawyers and mortgage brokers were caught using false records and fake buyers to buy properties and then secure loans at as much as 165% loan to value ratio. And they easily got the loans:

Most of the cases were simpler: The defendants borrowed more money than the agreed upon sale price, paid the seller, and pocketed the extra money, the government said.

In March 2006, a property in the oceanfront community of Cohasset was purchased for $385,000, but the mortgage from New Century Mortgage in California was for $635,000 - $250,000 more than the sale price.

No doubt New Century sold the loan and it's now part of a number of AAA rated mortgage backed securities.

The Giant Chain of BS

No not the Bush administration, the mortgage crisis as told in the soothing tones of Ira Glass.  The short of it is a case study in group think, diffusion of responsibility and greed.

It's well worth a listen.

Awesome

Seriously, this is the level the Republican noise machine has sunk to, dim guys in a bar tying to sound smart somewhere between their third and sixth beer:

Elasticity Demonstrated II

Ok, looks like I neglected one response to high gas prices, changing your mode of transportation without moving.  And that too seems to be happening in the face of high gas prices:

Some cities with long-established public transit systems, like New York and Boston, have seen increases in ridership of 5 percent or more so far this year. But the biggest surges — of 10 to 15 percent or more over last year — are occurring in many metropolitan areas in the South and West where the driving culture is strongest and bus and rail lines are more limited.

Here in Denver, for example, ridership was up 8 percent in the first three months of the year compared with last year, despite a fare increase in January and a slowing economy, which usually means fewer commuters. Several routes on the system have reached capacity, particularly at rush hour, for the first time.

“We are at a tipping point,” said Clarence W. Marsella, chief executive of the Denver Regional Transportation District, referring to gasoline prices.

Transit systems in metropolitan areas like Minneapolis, Seattle, Dallas-Fort Worth and San Francisco reported similar jumps. In cities like Houston, Nashville, Salt Lake City, and Charlotte, N.C., commuters in growing numbers are taking advantage of new bus and train lines built or expanded in the last few years. The American Public Transportation Association reports that localities with fewer than 100,000 people have also experienced large increases in bus ridership.

The news isn't all good, with rising fuel prices also hitting the transit agencies and tax revenues down expanding service isn't possible for a lot of agencies.  The federal government should be stepping in to help the locals, there's obviously a demand there.

Elasticity Demonstrated

In the short term it's pretty hard for people to change their gas consumption, because much of it is based on sticky decision that are tough to change, like where they live and work and what they drive.  Probably the easiest of those to change is what you drive.  And people are, in fact, changing that.

Earlier a NYT story covered the increase in market share for small cars.  Conversely they're trying to dump SUV's:

High fuel prices are causing the value of used SUVs to plummet, often below what's listed in the buying guides many shoppers use to negotiate with dealers.

As a result, some new-car buyers think they're getting cheated by dealers who are offering them little for their SUV trade-ins.

"The dealer is going to offer a price, and the customer is going to be ticked off," says Tom Webb, chief economist for Manheim, operators of auctions where car dealers buy their used-vehicle inventories. "The guidebooks have not caught up to the market," he says.

Shopping guide Kelley Blue Book updates its values weekly at kbb.com, the online version, says Kelley's Robyn Eckard, so they should be up to date.

Webb's figures show wholesale prices on big SUVs such as Chevrolet Tahoes, Ford Expeditions and Toyota Sequoias are down 17% from a year ago. Full-size pickups have fallen as much as 15%, Webb says.

If people have to pay the true cost of oil, and are convinced the price won't decline soon, they'll consume less.  Now we just have to design an auction, cap and trade system that will keep some of that oil cost in the US and put it to use cushioning the blow to the poor and developing transit and alternative fuels.

Archie Bunker's Last Gasp

Andrew Kohut of the Pew Center gives us the shocking news that old people don't much like Barack Obama.  Kohut attributes it to their socially conservative views on race, gender and homosexuality.

But for older people it’s not just that they dislike Mr. Obama’s style. Significantly more older voters hold the highly conservative social opinions that Pew analyses have found to be associated with lack of support for his candidacy, including disapproval of interracial dating, belief that equal rights have been pushed too far and concern that immigrants threaten traditional values.

Today’s political generation gap is of course modest by the standards of the 1960s. However, the strong Democratic inclination of today’s young voters could point to the beginning of an era in which the party enjoys considerably more success than it did in the 1990s. The personal and social resistance of older voters to the party’s likely nominee could well keep a Democrat out of the White House and reverse the nationwide Democratic trend.

I think Kohut's right in a sense, older voters are going to make this race closer than it should be, and closer than it would be if the Dems nominated a white male.  I still think Obama will win given the dynamics of the race (ie the economy).  In that sense this is the perfect election to run a non-traditional candidate, the desire for change is probably strong enough to overcome any perceived 'risks' posed by having a black President. 

On the other hand, if Obama does lose it will be because he ran  'too soon' demographically, though not by much.

Real Gas Savings

Hillary and McCain's dumb pandering on the Gas Tax Holiday (cue Madonna song) is a immoral failure of leadership.  Yeah, it's just a couple of bucks per person and is not likely to lower the price of gas anyway, summer driving season being when supplies are tightest.  So, why so damaging?

The whole thing is symbolic, that's why they think it's such good politics.  But the symbolism is terrible.  It's the quick fix, we don't need to change anything type of symbolism.  It's the 'We just got attacked by Al Qaeda, so let's go shopping,' kinda symbolism.  It's a 'Cause Smaller than Yourself' kinda symbolism.  McCain and Clinton know this isn't going to help, they know it's a give away to the Oil companies, but they're selling it as a quick fix.

The correct response to both our energy problem and Global Warming is some actual straight talk.  If people are told the truth that global demand is likely to outstrip supply of oil for the foreseeable future and we need to begin to transfer to a post Carbon economy now, they will respond.

Higher gas prices have already triggered a consumer response, demonstrating unprecedented elasticity:

In what industry analysts are calling a first, about one in five vehicles sold in the United States was a compact or subcompact car during April, based on monthly sales data released Thursday. Almost a decade ago, when sport utility vehicles were at their peak of popularity, only one in every eight vehicles sold was a small car.

The switch to smaller, more fuel-efficient vehicles has been building in recent years, but has accelerated recently with the advent of $3.50-a-gallon gas. At the same time, sales of pickup trucks and large sport utility vehicles have dropped sharply.

In another first, fuel-sipping four-cylinder engines surpassed six-cylinder models in popularity in April.

“It’s easily the most dramatic segment shift I have witnessed in the market in my 31 years here,” said George Pipas, chief sales analyst for the Ford Motor Company.

High oil prices a serious burden to many poorer Americans.  But they're also an opportunity for us to transform our economy into a cleaner, independent, renewable energy economy.  And an opportunity for leadership, one Clinton and McCain failed.

Externalizers

Over at Naked Capital Yves Smith has an interesting point I hadn't seen before:

A long time ago at McKinsey, one paradigm they mentioned to me was that people fell somewhere on the spectrum of internalizers and externalizers. Internalizers tend to blame themselves for what happens whether it was their fault or not. They are very conscientious and strive not to repeat their errors. Externalizers blame everyone else for their problems. They are very resilient and well suited to sales jobs. And they are incapable of learning from their mistakes, since they never make any.

The point come at the end of a post about the Milken financial services conference.  Needless to say the big boys at the conference are Externalizers, none of the current financial crisis is their fault.  None of it. It's the immigrant borrowers, the regulators that didn't stop them, or something.

Tough to say where'd I put myself on that continuum, I hope a bit to Internal side of never learning.  If I ever make a mistake we'll see.

The McCain Doctrine

From Hendrick Hertzberg puts it, via TPM:

McCain wants to stay in Iraq until no more Americans are getting killed, no matter how long it takes and how many Americans get killed achieving that goal--that is, the goal of not getting any more Americans killed. And once that goal is achieved, we'll stay.

Got it?  The Democratic candidates, realistically, want to leave Iraq as soon as it is reasonably stable.  McCain wants to pacify Iraq and then stay, to threaten, and possibly launch further wars.

 

Foreclosure Geography II

As I noted earlier, foreclosure's aren't distributed randomly throughout the country, or even within a metro area.  They're fairly concentrated in certain neighborhoods and towns.

And as these maps show, they're strongly inversely correlated to income of the community.  Let me preemptively say this isn't due to the Community Reinvestment Act, which precludes redlining poor areas for housing loans, as some conservatives keep trying to push.  As Ezra Klein noted here:

For those who left their abacus at home, that's 80% of the loans which were fully or largely outside CRA jurisdiction. More than that, the non-CRA mortgage firms made subprime loans at twice the rate of CRA-covered firms. Which basically leaves a stake in the heart of this particular theory.

Anyway, back to the maps, here's a heat map of Boston neighborhoods by income (Red means high income, blue means low):

OK, so what do you think the foreclosure heat map looks like?  If you said nearly the opposite, you're right.  (Here the red means high rates of foreclosures and blue means relatively few foreclosures).

You can follow the link here, and get the same result on nearly every metro area in the country, save those like Miami where it's bad everywhere.  So what, then? 

One this isn't terribly surprising, but it should give us pause when exceptional anecdotes are trotted out in the press as 'trends' about wealthy foreclosures.

Additionally, it shows a particular need to pass one of Barney Franks' measures to provide aid to communities dealing with the aftermath of foreclosure, which tends to be increases in blight and crime.  As well as the need to view the housing crisis through these lenses; for the most part, it's not the wealthy, the developers or the mortgage brokers getting burned on this.