Freddie Mac, WTF? Also Israeli settlements

Freddie Mac, formally called the Federal Home Loan Mortgage Corp., was chartered by Congress in 1970. On its website, it says it has "a public mission to stabilize the nation's residential mortgage markets and expand opportunities for homeownership." - NPR




http://www.npr.org/2012/01/30/145995636/freddie-mac-betting-against-struggling-homeowners



This is just unbelievable, even for mortgage finance standards. Maybe you've noticed the rush to re-fi due to the record-low interest rates now. My wife and I just closed ours, and we cut 100 basis points off our APR, which may save ~$36K in interest (2012 dollars) over the life of our loan. It was an excruciating process though, and my household has near-perfect credit (if you can believe it haha). The bank demanded everything short of a urine sample to make sure we were "qualified borrowers". I can understand if private banks are making it hard to re-fi now, since they are very risk-averse and hesitant to lose out on interest income. But FNME and Freddie Mac are "gov't sponsored enterprises" (and now nationalized as part of their $160B-plus bailout package). They want to make money for their employees and investors, but also function to promote the public good through increased home ownership (the merits of that mission, and the concept of GSE's in general, are debatable of course). Obama has chastised the banks to do more to renegotiate bad mortgages to keep more Americans in their homes and more money in their pockets (since almost everyone loses from a foreclosure). Some banks have been sued recently over improper foreclosure procedures that hastily removed good people from their homes before exhausting all other options.



Fannie and Freddie effectively act as re-fi gatekeepers, because they underwrite most new mortgages. They've made the lending standards so strict that far fewer people can quality than before. I know that lax lending standards got us into the real estate mess, but loan modifications like re-fi's entail less risk on banks (assuming property values are not underwater). If John Smith is affording his $2K/month mortgage now, then he should be able to handle a re-fi down to $1,700, right? That is extra money in Smith's pocket that he will likely inject into the consumer economy, which will help our recovery. And since banks charge re-fi fees and many homeowners don't stay in their homes over the full life of the mortgage, banks don't lose much on a re-fi if at all (or they wouldn't do it in the first place).



But here's the problem, Freddie is also an "investment house" with portfolios of mortgage-backed securities and other vehicles that it uses to generate profit to fund new loans. That sounds fine on the surface, but Freddie has sold the safest tranches of MBS's to Wall Street already, leaving them with the riskiest, most default-prone tranches that sane investors shunned. Those "equity tranches" often contain mortgages from sub-prime borrowers with very high interest rates though (hence the default risk). But they can still generate income if the homeowners keep paying. So Freddie is hoping that those borrowers won't re-fi. In addition, Freddie holds "inverse floater" tranches, where mortgage principal payments are sold to investors, and they retain the interest cash flows. So they have a financial conflict-of-interest to prevent or restrict loan re-fi's.



But you might think, isn't it good that Freddie earns a healthy return to pay off the taxpayer loans faster and loosen up credit for new home buyers? Well yes in the short-term, but no in general. By making it harder to re-fi, Freddie is depressing consumer purchasing power and increasing systemic foreclosure risk, which has economic and social consequences on America for reasons we've already discussed. Those consequences don't affect Freddie of course, which seems more interested in the bottom line than its public mission.



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http://www.npr.org/2012/01/28/146024083/israeli-outpost-pits-courts-vs-government



Also, pretty upsetting news out of the West Bank. Israeli peace activists sued their government over some illegal settlements, and the Supreme Court rules in their favor. By strict international law, all Israeli settlements in the occupied West Bank are considered illegal, but the Israeli gov't has "legalized" some settlement areas in an annexation effort based on Biblical borders. But in the case of the Migron settlement, even Tel Aviv ruled that it must be dismantled because it was built on private land seized from Palestinians (that is still illegal in Israeli law). So on one hand, the courts rule that these places must be torn down, but on the other hand, the gov't rarely acts, or pretends to act, allowing the illegal settlements to continue and even grow. But the Migron case has gotten such publicity that it will be hard to ignore. Though after hearing the news, the Zionist settlers vandalized local Palestinian property and torched their mosque in retaliation.



Is that the conduct of civilized persons? You have beef with your gov't, so then you engage in hate crimes on innocents who had nothing to do with the court ruling, and whose land you stole in the past anyway?

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I am not sure of the nature of Freddie's holdings, but from what the article describes, that is the nature of the business - it is not "betting against homeowners" as NPR suggests (playing the populism card). However, what is/would be problematic is the extent to which holding these positions created incentives (on which they acted) to increase the red tape associated with refinancing. This is why Freddie insists that  ``...its employees who make investment decisions are "walled off" from those who decide the rules for homeowners."

I do not know exactly how Freddie addresses these issues and if it compensates its employees in a way that avoids this conflict of interest. But it sounds as though they are at least thinking about it.

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I'm as appalled as anyone about the actions of big banks and Fannie/Freddie in the housing market.  But I'm not convinced this is a real story.

These inverse floaters may be part of a legitimate hedging strategy.  As part of its core business Freddie has a huge exposure to mortgage interest rates.  If mortgage interest rates go up, the mark-to-market value of those mortgages will drop.  That's the scenario when hedging is the right thing to do: when as part of your core business you have an exposure to market forces outside your control, the responsible action is to hedge against that risk.  It's like airlines buying oil futures to hedge against future changes in oil prices, because they buy a huge amount of the stuff as part of their core business.

We don't know Freddie's overall exposures here.  $3.4B sounds like a lot of money, but compared to Freddie's overall portfolio, and their overall exposure to the mortgage interest rate, that may be tiny.  That is, we know they've got $3.4B betting this direction, but if they've got $50B betting the opposite direction (because that's their core business, buying mortgages), it'd be obvious that their net position is actually the opposite direction.

Only knowing one piece of their portfolio doesn't give us enough information to conclude the direction of their overall financial interest.

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I agree that we don't know enough to make an informed evaluation. However, NPR did reach out to Freddie execs and their PR to give them a chance to respond, and they mostly declined. If the their portfolio positions are truly as you said, don't you think they would want to explain that to the public in order to diffuse the "betting against the homeowner" allegation? Especially now that they are a ward of the state, under a "pro-homeowner" administration, you would think there would be a better effort at disclosure and explanation. Also, PIMCO's Simon came down pretty hard on Freddie over this - he should know more about Freddie's positions, and what incentive would he have to exaggerate?

Of course we don't want Freddie and Fannie to make stupid mortgage bets (on top of the stupid bets already on their balance sheets), and they are entitled to hedge their risk. I think the Obama admin. is offering additional incentives to get them to relax re-fi rules, but can't they just force their hand through the FHFA? Maybe Congress can rewrite their protocols, but that process would be slow I suppose.

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Naked Capitalism does a long-form argument against the NPR/ProPublica piece here: http://www.nakedcapitalism.com/2012/01/propublicas-off-base-charges-about-freddie-macs-mortgage-bets.html  She argues they've just misunderstood how this trade works, that it's a hedging issue primarily, and that even if their net position is what ProPublica argues, the causality runs the opposite way (they don't set policy based on their trading book, they set the trading book based on the policy).  There's also a long explanation of inverse floaters with the technical details, which is pretty interesting (or maybe just incredibly dry, depending on your perspective!).  And towards the end there's some speculation about why PIMCO would offer the quotes they did.

Freddie does have a conflict of interest here, but it's not because of this trading position.  It's because their objectives of supporting homeowners and taxpayers are to some extent at odds with one another.  There's plenty going wrong in mortgage-land, but this trading position isn't a smoking gun, it's a distraction.  You know they're planning to wrap up the "state AG mortgage settlement" whitewash this week, by Friday?  They've done no investigation, they're just selling the banks a waiver of liability for pennies on the dollar, and the result will be to close off a whole range of serious legal abuses from any criminal charges.  If it goes through, expect bank stocks to jump up.

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Thanks for the link and I think that's pretty convincing - sorry to send everyone that trash piece (well on the bright side it was a quick refresher course in MBS's and GSE's). I would have expected better from NPR and ProPublica. If PIMCO's Simon was trying to use his comments to stir things up, you would think he would employ media with larger audiences though. Or maybe if he expressed his "shock" to the business press, they would have ridiculed him?

As you said, it's a shame that we haven't really engaged in serious investigation and punishment over mortgage and securities fraud. A few people were made examples of (and they were so foolish and egregious that Elle Woods could have gotten them convicted), but many worse offenders are still at large. There isn't the political will in DC, and after the Citizens United ruling, I think big money interests will be able to lean on and silence regulators even more.

Romney, private equity, and attacks on the free market

Maybe you heard that in South Carolina, a big financier backing Perry withdrew his support and shifted to Romney after Perry accused Romney of being a "vulture capitalist" from his record at Bain. He was upset that a GOP nominee would make such attacks on free enterprise. Romney himself has said as much regarding some of his critics. I am really tired of this type of rhetoric. Question any sort of business practice, and all of a sudden you are against the entire free market and a bloody communist? If I denounce David Koresh and pedophile priests, does that mean I am against all of Christianity?

I know that America's "true religions" are business, war, and football (the three not so different), so I shouldn't be surprised if the captains of industry get defensive or hostile over even minor critiques. I guess to them, US capitalism is divine and perfect (well, it's working perfectly for them and the 1% at least). There's no need to tax or regulate or question perfection, right? If so, then why is there even a market for private equity firms like Bain Capital - which exist to help struggling companies improve? Why is 20% of business school learning about how previous firms and leaders messed up, in order to avoid those pitfalls in the future? Nothing is perfect, and we usually find out that things are much more f'ed up than advertised. If we believe in and care about something, we should constantly scrutinize it and hold it to higher standards. We can't just have blind faith and obedience that it will always turn out well. True "lovers of the free market" should want to diligently police it, because greed or scandal could cause dysfunction (i.e. lost wealth/jobs) and erode support for the whole system (we generally don't see this in practice, but we should). Those who pretend that everything is great and rebuke any critics (especially after all we've been through since 2007) are probably hiding something or struggling with their own guilt.

As usual, there's a balance and lots of gray area. We don't have to be labeled as 100% free market disciples or 100% communists, but unfortunately in politics (especially during campaigns), those type of messages carry more traction. The free market is amazing in its potential to create (and destroy) value, and affect millions of lives (for better or worse). Private equity has created and destroyed some American jobs (studies suggest there has been a net job gain vs. similar companies, see link below). It has made some money for investors (not just rich people but also public pensions), though it's unclear whether the gains are better or worse than market averages. It has helped some companies succeed and ruined others (they play a dangerous game with leveraged buyouts and such). But that is business risk - you can't win 'em all, and obviously firms like Bain must have a track record of doing some good, or clients wouldn't agree to fork over a whopping 20% of their profits to them as consulting fees. Voters just have to decide if a private equity exec has the background to be a good president or not (or at least, is he the best choice of the field?). What we do know for sure is people like Romney got mad rich from private equity, especially since they structure their compensation as capital gains for the very low 15% tax rate (like hedge fund managers do). Would a patriot short-change his nation out of millions of revenue like that, even if it was technically legal?

Private equity 101 FYI:
http://www.theatlantic.com/business/archive/2012/01/is-private-equity-bad-for-the-economy/251245/

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I agree that there's room for a more nuanced critique of capitalism, and you don't have to be 100% pro or con.  But the critiques being presented by the other GOP hopefuls aren't nuanced and aren't careful: they basically boil down to a kind of ham-fisted populism of "the rich guy got rich and some workers lost their jobs."  That's a broad brush that tars most any businessperson, because it's an attack on all forms of creative destruction.

I think the more cutting argument against private equity is that at least some part of their profits come from shifting costs from the business to the government.  That is, they use financial engineering to extract money from the taxpayer through government, rather than creating new profit.  The template of how a PE firm does this goes like this:

1 - After buying the company, have it issue a big pile of new debt and pay that out as a dividend (i.e. to the PE firm which now owns it).  Now some of what used to be the company's profits go into paying interest on the debt.  Since interest is not taxed, but profit is taxed at 35% (less deductions, which are huge, of course), this single bit of financial engineering allows you to get the government to subsidize that debt to the tune of 35% in lost tax revenue.

2 - Start breaking the company up into smaller pieces.  Sell this as being designed to "make the company more lean and efficient."  But you basically strip the company of its assets, paying out the results as dividends (back to the PE firm, helping you recoup your investment).  This has the effect of really levering up the company because you've still got a ton of debt, but now a lot fewer assets behind it.

3 - If the company does well (keeps making enough profits to cover the interest on that massive debt), that's great, good work.  If not, declare bankruptcy.  Since the company now has far fewer assets, your creditors don't have much to go after - they can't come after the dividends you've paid out to yourself.  And often in bankruptcy you can pawn off your pension benefits on the Pension Benefit Guaranty Corporation, where the government basically takes on your pension obligations.

Some portion of PE firms' financial returns comes from making the businesses more lean and efficient.  Some portion also comes from exploiting loopholes in the way government works to extract money from the taxpayer.  It's not obvious what the mix is.  But that's the knock on PE firms.
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Thanks for the information, J. Certainly I'm not supporting the validity of the GOP rivals' attacks on Romney's business record. I mean, it's hilarious to watch them go after each other, but for the most part their arguments are not supported by much fact as you said (the Wash. Post gave Gingrich's super PAC's anti-Romney video "King of Bain" the lowest score for truthfulness). Still, Romney is billing himself as the only private-sector guy in the field who knows the real economy and how to create jobs, and I call BS. 

I am totally naive about PE (though my intro finance course starts next weekend haha), so I am shocked that the technique you described is their meal ticket. It reminds me of the free conferencing calling loophole (http://www.linkedin.com/answers/technology/telecommunications/TCH_ITS_TCI/222909-22366013).

I just can't believe that the client companies' boards would approve large dividend payouts early into their relationships with PE firms, especially when it's financed by new debt or fire-sales on their assets. Is it stipulated in the contract or something? These firms are struggling, hence the need to hire bloodsuckers like Bain, so they should retain every cent of earnings to invest for future profitability. BP suspended dividends after the Gulf disaster (probably anticipating big write-offs for fines and suits), and I think the big banks did too (or at least severely decreased payments) during the financial crisis. How can the PE clients' justify otherwise? Maybe there is some truth in the accusations that PE firms "loot" their clients?

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PE isn't consulting.  They come up with financing (either raising it as equity or by issuing debt), and then use that money to take over a targeted public company - that can be hostile or not, but basically they buy enough shares on the open market, then negotiate with the board to sell the remaining shares to the PE firm, taking the public company private.  At that point the target company doesn't have an independent board anymore - the PE firm owns the company outright.  And since the PE firm owns all the shares, the dividend is just a cash transfer - the dividend goes to the owners of the shares, which is 100% the PE firm.  There are laws about asset stripping, because it reduces the assets available to the creditors in bankruptcy - but these things are complicated, and there's enough wiggle room that if you've got smart folks you can find holes to get through.

That's not to say this is the only way PE firms make money.  Often they do help firms become more agile and so on.  But they can do both.  Maybe the most cutting argument you can make against PE is to ask: Without the regulatory arbitrage, without the effective government subsidy, would PE be profitable on its own?  Is PE just a form of government-subsidized welfare for the rich?  Is Mitt Romney just a welfare queen riding around in a G5? ;)

I'm not sure if you've seen Dean Baker's book "The End of Loser Liberalism" (http://www.cepr.net/index.php/publications/books/the-end-of-loser-liberalism - ebook is free to download), but it's really pretty interesting.  He basically argues that it's wrong to allow the economic arguments to be presented as "conservatives are for free markets, and liberals want to limit free markets and use taxes to transfer money to the people who lose out in the free market."  Because the economic policy choices the US has made, from trade to copyright to monetary policy, are not designed to create a free market.  They're designed to transfer income from the lower and middle classes to the rich.  Some of his suggestions can be a bit impractical, but the reframing of the whole dialog around "free markets" is really interesting.

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Thx, J. Yeah my bad on the naivete - as you said PE firms engage in leveraged buyouts and hostile takeovers. They're not angels of mercy that poor souls call on. 

Thanks for the book rec too, you are da man. The free market ruse by wealthy conservatives is like public enemy #1 to me, and I'm glad at least a few people are analyzing and writing about it. Not only do the rich strike down most efforts to redistribute for the less fortunate, but they pervert the markets and laws to actually funnel money upwards. Unfortunately, their propaganda is generally persuasive due to civilization's bad track record with tyrannical gov't and taxation (and America's narrative of rebellion against those things). Add to that The American Dream of rags to riches, and the horrible history of central planning/communist governments in the 20th Century, and you have all the public bias/support you need to maintain the status quo and resist efforts for economic reforms. Only temporary outliers like the financial crisis and Occupy Wall Street bring these issues to the forefront (but remember how little press and political endorsement OWS was getting at first?). So fairer taxation and more regulation are tough sells, especially in a down economy with the conservatives reciting the usual lines about killing jobs, socialism, lazy black people, etc.

Though gradually more people are seeing through the BS and realizing that they'll never reach the top 1% with the way things are going. If you can't join 'em, beat 'em? And I mean physically beat them, with medieval weapons. :)

What would a truly free American market look like though? Probably more oligopolies and monopolies in some industries?

Buffet takes on the GOP

http://swampland.time.com/2012/01/11/warren-buffett-to-mitch-mcconnell-put-up-or-shut-up/
http://finance.yahoo.com/news/buffett-gop-pay-211046623.html

“I’ve worked in an economy that rewards someone who saves the lives of others on a battlefield with a medal, rewards a great teacher with thank-you notes from parents, but rewards those who can detect the mispricing of securities with sums reaching into the billions... We need a tax system that takes very good care of people who just really aren't as well adapted to the market system, and to capitalism, but are nevertheless just as good citizens, and are doing things that are of use in society," [Buffet] said.

EXACTLY! Why the hell does the GOP (and the Dems to a slightly lesser extent) set policies that incentivize risky investing, and give breaks to people who are already the most wealthy and savvy capitalists in our society? Those people can make it on their own, so if you're going to help anyone, why not help the honest, humble folk who still perform vital but underpaid jobs (janitor, nurse, etc.), but don't have the knowledge/time/resources to invest their way to financial security?

The GOP keeps touting the greatness of the American free market meritocracy, a level playing field that rewards valuable contributions and where anyone can make it with hard work. If so, then why do the rich get laws passed so their resources and connections grant them an *unfair* advantage over the rest of us, and they can make vast sums of money without actually contributing anything valuable to society? In fact, they often profit by harming society, then escape punishment and underpay taxes (or steer bloated gov't contracts their way) so there are not enough resources left to help the most needy.

The GOP candidates (especially Romney) mask their wealth-gap-widening agenda with calls for reining in Washington spending and voting out a president who wants to make us like Europe (yeah, wouldn't that be terrible? The top European nations outrank us in most major health and social welfare metrics). Fine, while I may not agree with it, I respect their right to have a vision of minimal gov't. Then cut the "handouts" for everyone, starting with the worst offenders. Conservatives love to bash the Earned Income Tax Credit, welfare, and other programs for the poor, but the truth is that tax evasion and subsidies to rich families/companies are much more costly. Oh those "poor" rich people who pay taxes though the nose, and curse those unemployed deadbeats who live large off the gov't dime. While there are obviously a few anecdotes to support that narrative, we should be looking at aggregate stats. If it's so terrible to be rich in America, then why are they prospering many fold more than the other classes since the 1970's?

It goes back to the Tea Party and Occupy Wall St. discussion we had before. S said that the TP was mad about gov't spending, and OWS was mad that the gov't was spending to help the rich at everyone else's expense. OK, then cut off the rich (we're not even talking about taxing them more, but just stop giving them the extra benefits unavailable to the 99%), and re-evaluate gov't spending at that point. We may then find that we face a much smaller crisis, but if further cuts are still needed, then do it across the board or progressively.

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http://hinterlandgazette.com/2012/01/gop-presidential-frontrunner-mitt-romney-obama-divides-bitter-politics-envy.html
http://www.npr.org/blogs/itsallpolitics/2012/01/10/144938684/rivals-attack-romney-s-record-at-bain-capital

Romney is trying to spin attacks against his record at Bain as "the politics of envy" and resentful of his success. Uh no, you don't hear us bashing Buffet or Jobs or other people richer and "more successful" than Romney, because the public mostly believes that those people earned their keep. Well, I guess it's hard to justify one human being "worth" a billion dollars, but those chaps at least got rich more honestly than dictators or unscrupulous bankers.

Romney on the other hand profited from causing misery and debt for some of his clients (40% of Bain's top 10 contracts went bankrupt, yet they still got paid handsomely). So actually his critics resent his lack of business ethics and legitimate value creation, not his business "success." Like his careless $10,000 bet comment with Perry, this just shows execs like him totally don't get it. Out-of-touch people like that shouldn't be leaders. The US middle class is going through its worst stretch since the Depression (much of it caused by Wall St.), the wealth gap is near record highs, and he's talking about how real Americans should work hard to be rich, not be jealous of the rich? Well maybe "real Americans" don't want to be like you, Mitt.

More consequences of fracking

http://www.npr.org/2012/01/05/144694550/man-made-quakes-blame-fracking-and-drilling
http://www.csmonitor.com/Science/2012/0102/How-fracking-might-have-led-to-an-Ohio-earthquake

We've discussed fracking before, and now it is a fairly mainstream topic (but you heard about it here first!). Like the almost unreal tar sands projects in northern Canada, maybe we have to rethink our energy consumption habits if our society finds a process as zany as fracking to be economically viable: truck tons of equipment to some remote site, drill a deep hole, then pump millions gallons of chemical water thousands of feet underground just to release some methane trapped in rock pores. And of course we don't capture all the gas, so some leaks and contaminates the environment and human settlements. And then there's the question of what to do with all the waste water (or as the industry likes to call it, "produced water"). Plus, it's not like the gas firms are so diligent to recover every last ounce of their poison. They of course swear that the used water is perfectly safe. If so, then why did the industry lobby for a waiver from the EPA Clean Water Act? And why then are they pumping/trucking the water hundreds of miles for underground disposal in economically-depressed states like Arkansas and Ohio, places desperate for new jobs/investment at the cost of public safety and the environment? Like with nuclear power, maybe "green" natural gas wouldn't appear so cheap and clean if the waste management costs and other externalities were rightfully factored into the market price. I know we want to wean ourselves from foreign oil, combat climate change, and the US is sitting on huge natural gas reserves. Gas prices are at almost record lows. But nothing comes free. If we had the misfortune of living near a neighbor who sold land rights for drilling or waste disposal, we might feel a lot differently.

So on top of all these problems associated with fracking, now there is evidence that the fracking and waste water disposal may even be causing small earthquakes! Water is a lubricant, and a lot of water is very heavy and exerts pressure on its surroundings. Mix a small fault in there and what do you get? Fortunately the shale gas areas in the US Midwest are not very seismically active, but Ohioans living near waste water wells have experienced 11 quakes as high as 4.0-magnitude since the projects began. So Ohio and Arkansas are now banning waste disposal in certain sensitive areas of their states. Of course the drilling and waste companies say that no one can definitively "prove" that their activities caused the earthquakes, because many natural stimuli also contribute to quakes. The tobacco companies and their lawyers used to say the same thing about their products and human diseases. But enough correlation can usually convince sensible people.

Geology is a delicate balance of forces, and we can barely understand and predict quakes. Like with climate change, some people can't believe that tiny humans and our tailpipes could affect changes in the massive atmosphere. But small perturbations eventually accumulate into big consequences. Yes, faults and rock formations are huge compared to the relatively small volumes of water we're injecting, but a tiny pin can pop a balloon. Aware of this controversy, companies have tried to filter and recycle the waste water instead, but couldn't get the output to meet gov't purity standards (which I'm sure aren't that strict). If so, then I don't see how it makes sense to dispose of the untreated water in the ground, where it can eventually seep into aquifers and faults. There's just a lot we don't know about the consequences of fracking, but US policy is reactive - the companies say it's safe, so let them do it until there is clear proof of a problem, and then maybe take action if Congress or the courts are interested. But by that time it's too late for the first rounds of victims. And the gov't fines and litigation settlements are measly compared to the huge profits already extracted.

In the EU, drilling companies have seen the boom in North America and want a piece of the action. Shale gas exists over there too, but the French government has voted to ban domestic fracking entirely (despite sitting on the 2nd largest reserves in the EU). They have more incentive to frack too: energy prices are usually 4X as expensive in France than the US (and they are at the mercy of unstable exporters like Russia and Libya), but their consumption is probably 1/2 ours, and their energy companies seem to have less political sway. They have studied the risks and costs, and found that a moratorium is the best course of action for their people's future. Poland, with the biggest gas reserves in the EU, is pushing hard to frack (and foreign energy companies like Exxon and Conoco are salivating to get a piece of the action), as they are under more under Russia's thumb and dependent on dirty coal than Western Europe. The EU can impose union-wide environmental regulations, so the countries are sparring as to what the overall policy on fracking should be. It's tough because the EU also had ambitious carbon reduction goals, and converting to natural gas would help there (especially since nuclear is falling out of favor after Fukushima). But we shouldn't create 2 new problems to solve 1 old problem. Of course the more consequence-free solution is energy conservation, but that is not as sexy as a new technology or new exploration.

http://www.bloomberg.com/news/2011-07-01/france-vote-outlaws-fracking-shale-for-natural-gas-oil-extraction.html
http://www.economist.com/node/18867861