A refreshing repudiation of obsessive parenting

http://online.wsj.com/article/SB10001424052748704462704575590603553674296.html?KEYWORDS=erica+jong
http://www.kqed.org/a/forum/R201205110900

"We need to be released from guilt about our children, not further bound by it. We need someone to say: Do the best you can. There are no rules." - E. Jong

I've already posted about the "French parenting style", and apparently in France there was a best-selling book on parenting and feminism that basically argued that Anglo-American attachment/helicopter/

micromanaging parenting, with its "supposedly benign expectations victimize women far more than men have ever done... motherhood has been glamorized, and in certain circles, children have become the ultimate accessories. But we should not fool ourselves: Treating children like expensive accessories may be the ultimate bondage for women."

Instead of traditional sexist injustice, some liberated modern women are allowing themselves to be imprisoned by guilt and irrational expectations of the perfect mom (imaginary, unless you're rich and lucky), and/or the even more demeaning and vain mommy-fetish culture (i.e. the Kardashianization of motherhood: as a woman's beauty wanes, what better way to remain the center of attention and make other girls envious?). At least with tiger parenting, one can argue that it's done out of love with the hope of giving kids the best possible future. Treating kids as "accessories" is one of the most low-brow notions I've ever heard. We've all passively observed this phenomenon, but I never connected the dots before.

And let's remember that our species generally got by for centuries without mommy blogs, the billion-dollar parenting paraphernalia industry, paperbacks from the doctor-expert-du-jour, and airhead celebrities telling us what we should or shouldn't do for our kids. We know how flawed and emotionally dysfunctional our own parents were, and yet somehow here we stand as fairly decent people. If they could do it without the "parent-industrial complex", then what's wrong with Americans today? Family time used to come naturally (and back then it was just known as "time"), but now with all the working and consuming we have to do, we need to pencil in time for our loved ones (and even still we're checking work emails during the camping trip).

We are not a culture that embraces compromise (but we love to overreact and overcompensate), so there's this paradox of not being there when kids needs us, and trying to make up for it (and assuaging our guilt) by smothering them with attention/stuff that they don't really need. Overachievers or the privileged may not experience this trade-off, so they approach parenting as yet another way to remind you of their superiority, forcing the less fortunate rest of us into a cycle of feeling inadequate and hopelessly playing catch-up. And speaking of compensation, is it no surprise that the Sears couple (their marginally scientific books are credited as the foundations of attachment parenting) came from "broken homes"? In egalitarian spirit, it's totally acceptable if private citizens want to engage in attachment parenting or other forms of "extreme love." But can they be a bit modest about it, and not shove it down the rest of our throats as some political statement and/or affirmation of their awesomeness?

http://healthland.time.com/2012/05/10/has-motherhood-gone-to-extremes/

I'll close with another great quote (of many) from Jong:

"Our obsession with parenting is an avoidance strategy. It allows us to substitute our own small world for the world as a whole. But the entire planet is a child's home, and other adults are also mothers and fathers. We cannot separate our children from the ills that affect everyone, however hard we try. Aspiring to be perfect parents seems like a pathetic attempt to control what we can while ignoring problems that seem beyond our reach."

And as Jong also notes, control is an illusion from the start, which will become glaringly obvious once a kid reaches the tweens. Kids are not our little experiment; they are humans with their own wills and aspirations. Could all this be another ego trip, as parents think that their truly insignificant decisions will totally determine whether their little Rickey becomes a senator or meth dealer in 30 years? Attachment parenting proponents strangely claim that all the attachment leads to more self-sufficient children, though I don't see how. The cynic in me (which is most of me) wonders if the attachment technique is a subconscious effort to make kids need their mothers more, thereby making moms feel better about themselves. If you think I'm crazy, look at the trend of the Millennials moving back in with parents due to the poor labor market. For empty-nest upper-middle-class households, moms seem to actually love this, as they get to dote on their kid once more (even if it's doing the kid a disservice). Or is it just rebellion over the lack of power and control in our own lives that we need to play god with another life? Freud would have loved the 21st Century.

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My controversial comments are not meant to attack all the humble, loving parents out there who know the world doesn't revolve around their kid, and are considerate enough to not shove their parenting issues in our faces. I know they are doing the best that they can in the world's most demanding job, and I commend and admire them for it. Just to be fair, I'll judge and psychoanalyze myself too. My "parent hating" partially stems from my laziness/frustration over not seeing a viable way to make it all work: be there for my loved ones, develop somewhat of a career, have a decent level of life pleasures & financial security, help others in need when I can, get at least 6 hours of sleep per night, and be a "good parent". My wife and I have played by the rules and did as we were told, but we can't find a way to make this work a priori (I'm not OK with just "taking the plunge" and hoping for the best). So I want to be responsible, and not overextend my resources or burden those around me just because we selfishly want a kid. How do we balance all the stuff that society told us we were naturally entitled to?

Many parents claim that they gladly gave up the other life stuff when they started a family, which became their new source of purpose and satisfaction. Maybe that can work, but I wouldn't feel good indirectly putting so much pressure on my child. Even if you don't explicitly state it, the kid eventually realizes that all your hopes and dreams are on her. So she has to grow up to be wonderful and live the greatest life ever, in order to honor and validate her parents' sacrifices. That's not fair, and I think it explains a lot of the juvenile burn-out that is all too common and unfortunately tragic at times. I guess the easier route is just to spoil the kid rotten, take pleasure in her pleasure, and let her grow into a self-centered brat? Maybe the pressure for everything to be perfect is even greater now that we're having fewer kids, and having kids is more expensive, and competition for access to a better life is harder than ever. Maybe my kids will be part of the first US generation to have it worse than their parents. A lot of uncertainty and worry over the biggest decision in life.

My feelings could also be due to jealousy of peers who seem to have it all without much compromise or sacrifice. As an example, we have a family friend whose kids are the quintessential "power couple." Two young, attractive, "perfect" SoCal specialist MDs who had a kid while the wife was in residency. You can imagine their work hours, so how do they find time to parent? Well they don't, really. "They take a lot of photos to look back on later," I was told. They can afford a good nanny, and grandma (a semi-retired cancer survivor) flies down from SF every week to babysit, so the parents can have some couple time too. She says she doesn't mind, and loves spending time with the kid, but you know it can't be easy on her. Going to such lengths so the perfect couple can have the perfect life? Good for them I guess. Even if my mom offered such generous assistance to me, I wouldn't feel comfortable accepting it just because I chose to have a kid before I could handle it.

Maybe that is an extreme case, but what do other parents do who aren't so lucky? I can't imagine what it would be like for recent immigrants working multiple unsteady jobs in a high-cost-of-living area, with no traditional social network to rely on, and maybe even family to support back home. And yet thousands of them do it just fine. But it shouldn't need to be that hard, right? Is our civilization truly advanced if it makes even the basic necessary life function of procreation so challenging? It's a fact that birth rates decline as a society gets richer and healthier, but I only wish the guilt and frustration over family decisions/compromises would decline too.

Current Congress "the worst" since the Civil War, and it's mostly due to the GOP

http://www.npr.org/2012/04/30/151522725/even-worse-than-it-looks-extremism-in-congress

These are the writers of "The Broken Branch" about Congress' dysfunction under the Bush admin. Apparently now it's even worse. Both parties have their issues, but the authors put the bulk of the blame on the GOP for espousing a dangerously extremist and dysfunctional position on most issues. And don't think that is a biased Bill Maher/New Yorker/liberal accusation, as one of the authors works at the American Enterprise Inst (and hasn't been fired for writing this book). This flies in the face of the typical "both parties are rotten and basically the same" argument, which masks GOP transgressions under an incorrect assumption of parity. Some critics may claim, "Come on, we always think present day is the worst ever, but in the long lens of history, past Congresses have been worse." Maybe so say the authors, but are we really comfortable comparing our current Congress to the one that couldn't resolve its differences and contributed to plunging the nation into the bloody Civil War? That's like saying the Afghan War is OK because it's not as bad as Vietnam.

This pretty much sums it up: "One of the two major parties, the Republican Party, has become an insurgent outlier — ideologically extreme; contemptuous of the inherited social and economic policy regime; scornful of compromise; unpersuaded by conventional understanding of facts, evidence and science; and dismissive of the legitimacy of its political opposition."

So even though BO and his administration haven't been dream leaders, let's do what we can this election season to block these GOP cancers on our nation from gaining more power. Socioeconomically, they basically want to return the nation to the "grand old 1920's" (conveniently forgetting what their policies led to), and militarily they sound fairly similar to Bush with less bravado. Then after Nov, maybe we can pressure BO into some real gov't reforms as he should be more concerned about legacy than his future in politics.

MBA students have highest cheating rates

http://www.denverpost.com/business/ci_4433207

Undergrads seem to have much higher cheating rates (into the 80%s!) But the survey is limited by self-reporting, and the data range is fairly narrow (56-45% over most majors). Though those principled humanities and social sciences students were the most ethical, down at a 39% cheating rate (because they know that even a 4.0 GPA won't stop them from being poor for life LOL). Interestingly law students had low cheating rates too, or maybe they just lied on the survey!

Some possible reasons for this:
- With so much competition for top education and jobs (and those factors greatly influence lifetime earning and even quality of life), grades and scores are more critical than ever.
- Education is more and more seen as a means to an end, with grades as the goal instead of mastery of a subject (in that case, cheating would be counter-productive).
- Students are exposed to way more examples in the popular culture and mainstream media of cheaters prospering (or at least getting away with it), rather than cheaters getting punished and honest people prospering.
- Anti-cheating tech lags far behind cheating-enabling tech
- Parents and society are emphasizing individual accomplishment, status, and material wealth more than selflessness and personal character (maybe humanity has always been like this to a certain extent, but as an example of how character used to trump even survival under different social expectations: http://www.northcountrypublicradio.org/news/npr/150421710/why-didn-t-passengers-panic-on-the-titanic)

More on the "cheating culture" in the US: http://www.kqed.org/a/forum/R201204240900

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Yes good point. Students and their families feel like they are forking over so much $ that they are "entitled" to get good grades and good jobs. And they know they will be under financial pressure right when they graduate, which is a potent motivator. Apparently student loan interest rates may double this summer, unless Washington gets its act together and extends the deadline.

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Definitely growing up college degree was never a question in my household, it was a "must" requirement before my sister and I moved into adulthood. So we took out student loans and followed down the yellow brick road.

But we weren't talking $100k like some of these recent grads interviewed by NPR and Yahoo in recent months.

I wonder at what price point does college degree becomes "not worth it"?  When I was in college, $100k debt was something that was only associated with JD or MD, whole another 3-4 yrs of education.  However, apparently college tuition has soared since those days that college grads are leaving with 6 figure debts (either I'm really old or tuition has gone up at alarming rate)

I understand that the job market is getting tougher and college degree has become somewhat of a norm, but may be then it's time to change that social perception? May be we as regular persons and employers should be open to seeing more people not going to 4 yr college? I wonder if that is possible.

Also, what is the driver behind the rising cost of higher education, higher than that of rise of standard of living, inflation etc? most schools are classified as "non- prof" orgs so I assume it isn't for profit.I'm sure the schools have their "reasons" but where is it (money) going? who actually ends up with them?

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First off, tuition since my son started college 3 years ago has gone up 80% in that time.  Professors haven't had raises(unless they were promoted) in the last 10 years.  Meanwhile, the administrators enjoy an average 10% increase annually in that same timeframe.

Secondly, the reason tuition is going up is because the regents of these not for profit schools who, at one time, were committed to the education of Californians, have been taken over by privatization hounds.   

http://ucsdfa.org/ucsf-chancellor-susan-desmond-hellmann-corporate-privatizer-and-union-buster-wants-ucsf-out-of-the-uc-system/530
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And funding from tax dollars has become so precarious for some public schools that they are shifting the costs to students or semi-privatizing (professional schools can do this easier). And with the surge of cheap credit in the '90s and promise of lucrative jobs in the bull market, I guess the regents felt they could keep raising fees above inflation as students and their families became less price sensitive. Now that the recession has hit (it hit school endowments and donations too) and some families are over-leveraged, school really looks unaffordable, yet demand is inelastic because a bachelor's or above is so critical for better pay and more stable employment.

Since elite colleges are so pricey and hard to get into, some org's are looking into giving "substitute degrees" or "open universities" to students who learn over the web. Our economy is in such need for skilled tech labor, and there is an untapped talent pool in Asia (and at home) that can't access or afford top Western tech schools. So by getting similarly rigorous online classes and some sort of certificate, hopefully they can be eligible for jobs in the West too. I am sure it won't be a fix-all, but we need to rethink alternatives to the expensive and arguably obsolete 4-year university system - and no I don't mean Univ. of Phoenix. Maybe there can be more tiers of degree types beyond just associate and bachelor's.

http://www.kqed.org/a/forum/R201204091000

Regarding the UCSF situation, I think that is sick also. Since UCSF is a grad school, its cost structure is a lot different, and because it is an elite health science hub, of course it is more profitable than UC Riverside. But the UC charter is to serve the interests of the PEOPLE OF CA. And within the UC System, the strong should support the weak, meaning UCSF is supposed to subsidize UC Riverside. Just like there is a net outflow of federal taxes from places like NY and CA to places like AL and SC. That is part of being in a community, unless we want to espouse social Darwinism like the Romney types promote.

Greg Smith and Goldman Sachs

http://www.npr.org/2012/03/15/148654762/when-a-normal-job-resignation-wont-do


http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html?pagewanted=all



To NPR Morning Edition:



As a loyal listener for almost a decade, I have never been more upset at your organization than after hearing the March 15th story on the Goldman Sachs whistle-blower Greg Smith. Chris Arnold portrayed Mr. Smith as some caricatured whack-job burn-out, who was fulfilling a selfish fantasy (that many of us share) of publicly flaming a former employer. He even dared to compare Mr. Smith to the infamous JetBlue flight attendant Steven Slater, as well as a person who wrote his resignation letter in Cheese Whiz. Needless to say, Mr. Smith's situation bears absolutely zero resemblance.



This depiction is outrageous, and denigrates the brave and dignified actions of Mr. Smith. This is not NPR-worthy material, and you owe Mr. Smith and your listeners an apology. He is not doing this for 15 minutes of fame, or because he just "lost it" one bad day. I do not know Mr. Smith's background, but after reading his thoughtful letter to the New York Times, I believe that he has sincere love for the institution of Goldman Sachs, his peers/clients, and the important profession of financial advising, which is why he was so dismayed to watch his firm degenerate into the unfortunately all-too-typical paradigm of greedy, disrespectful Wall Street behavior that is anathema to its stated cultural values. If his allegations are accurate, the ramifications are profound.



Mr. Smith has nothing to gain from this bold action and much to lose. But I believe that his goal is to spread awareness, and get firms like Goldman Sachs to sober up and turn things around before it is too late. Goldman Sachs is too important of a global economic player to allow its ranks to engage in the type of dysfunctional behaviors described by Mr. Smith and others. It is bad for the firm, its clients, and society. I am sure that many Goldman Sachs business units are well respected, performing professionally, and delivering excellent customer service, but after several shocking revelations and a multimillion-dollar fine, the writing is on the wall that there is something fundamentally wrong at Goldman Sachs.



As we barely survived an historic financial crisis, and are just starting to dig ourselves out of the Great Recession, we can't afford to tolerate continued brazen financial services hubris, conflict of interest, and misconduct. That is what Mr. Smith was trying to advocate, and he should be commended for it, not mocked. Especially from a supposedly populist and progressive news organization like NPR.
 
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A good take on the Smith-Goldman controversy: http://www.forbes.com/sites/halahtouryalai/2012/03/14/the-real-problem-at-goldman-sachs-you-the-muppet-client/




It's like the 1% vs. the 99%. A smart friend told me that we 99% are mostly to blame, because we continue to let the 1% abuse us. Maybe because we hope to join their ranks some day, or simply that we selfishly need them to put food on our table. But despite our structural disadvantages, we can and should be able to take down the 1% if we really wanted to. But we don't, because we're incredulous, ignorant, lazy, apathetic, selfish, scared, or something. Even the illiterate, unarmed peasants during the Russian and French revolutions took out their oppressive aristocrats. What is our problem?



Yes the Goldmans of the world are "bad" for abusing their position and scamming others. But we are also to blame for letting them get away with it. Even if they are protected by gov't forces and biased laws, we can crush them if we really want to - simply by taking our business elsewhere. But we are greedy too, and we entrust our wealth to them, even if we don't really trust them to put our interests first. I guess a Goldman that does us wrong now and then is still better than no Goldman to hold our hand and help us navigate the ridiculously complex world of modern finance that they helped create for their own advantage.

"We can live with a nuclear Iran"

Economist Daniel Kahneman's Nobel-winning cumulative prospect theory (or my crude interpretation of it): humans irrationally tend to overly fear unlikely events and "worst-case" losses, and will take unreasonable measures to avoid them




http://www.washingtonmonthly.com/magazine/marchapril_2012/features/we_can_live_with_a_nuclear_ira035772.php

http://news.yahoo.com/blogs/envoy/daily-show-jon-stewart-takes-iran-war-drums-210908399.html



Isn't it funny that we only freak out about Iran's nuclear program during election years (McCain's "bomb, bomb, bomb... bomb, bomb Iran" and now the 3 GOP stooges talking tough)? The difference now is that Obama and others have convinced the UN to issue the toughest round of sanctions ever against Iran, but they are only a few months old. Yes Iran has made progress on its program since 2008 (though still years away from a functional bomb, and a primitive one at that), but their regime is weakened economically and due to heavier internal protests against their legitimacy. We and our proxies have also whacked some Iranian scientists and corrupted their computer systems, setting their program back a while.



During the recent AIPAC conference, Israeli leader Netanyahu was a broken record: "Imagine an Iranian ICBM heading towards a US city." Well Iran doesn't have ICBMs, and won't for several years at least. If they're lucky, their crappy rockets may reach London. "We are you and you are us... To Iran, the US is the 'great Satan' and Israel is the 'little Satan'... This is a regime that has vowed to wipe Israel off the map." If we are you and you are us, then why do you keep building illegal settlements when our leaders tell you not to? Why do you keep taking our money and giving us nothing in return but diplomatic headaches?



Yes, it's true that Iranian bluster has threatened to destroy Israel, and maybe America too. They clearly aren't friendly. But the Soviet Union (the 2nd strongest military empire the world has ever seen, with tens of thousands of nuclear weapons on hair-trigger alert) threatened to bury the West too, and did they ever come close? Did they ever even try? The same stereotypes and accusations were levied against them for decades: the Soviets are irrational, bloodthirsty, fanatical, can't be reasoned with, hate what we stand for, and hell-bent on world war. But in the end they chose to holster their nukes EVERY SINGLE TIME, even when war seemed inevitable in Cuba and as their regime collapsed (supposedly when they had nothing to lose). And some would argue that the Soviets have more of a penchant for suicidal behavior than the Iranians, considering Stalin's purges and whatnot. So is Iran somehow worse than the Evil Empire, despite being much smaller, poorer, and weaker? Yes they are a theocracy with too much centralized, abusive power, and have done some "crazy" things in the past. But in general, their regime has a rational track record (i.e. they are not suicidal). Launching a tiny nuke against Israel (with no guarantee of it "wiping them off the map") would be suicide. Finito. Why would a regime whose only petty desire is to retain power (by hook or by crook) suddenly decide to self-destruct? That is, unless they were prodded and provoked by warmongering opponents.



The hawks' rhetoric is illogical, and I doubt that they even believe it 100%. If Iran is truly the crazy monster than the Israelis and GOP portray, then it would be irrational for us to NOT attack them. If it's only a matter of time, and a total certainty, that they nuclearlize their "global terrorism", then why have we sat on our hands all these years? What are we waiting for!?! Shouldn't we take them out like we did to Saddam and Qaddafi? Our leaders should be FIRED for being so negligent, even hardliners Bush and Netanyahu! So I guess the truth of the matter is that Iran is not such a threat. Former CIA veteran Paul Pillar thinks so in his recent article, and so do the current and former heads of Mossad (the Israeli spy agency entrusted with protecting their tiny nation against all threats before they materialize). All nuclear nations use their warheads primarly as deterrent and bargaining leverage, and only the US has launched them against others in malice. But that was to ostensibly END a war (and signal to the Soviets that East Asia was ours), not start one.



Say that all of what I said is wrong, and we have no choice but to pre-emptively strike. Iranian air defenses are strong, so we would either absorb heavy losses, or need to resort to cruise missiles and even tactical nukes. But those weapons may not be effective against facilities buried under a lot of rock. So how do we penetrate - a ground invasion? We've seen how fanatically Iranians defended their homeland against Iraq, and we know America now has a lower tolerance to sacrifice our sons and daughters overseas vs. a non-imminent danger. And all that would definitely trigger Jihad 3.0 and oil to spike to at least $150/barrel (which would in turn cause fragile recovering markets to plunge into another global recession). Our attack would paradoxically lead to the bloodshed and misery that we supposedly want to prevent by striking Iran! So if it is unfeasible to stop Iran from getting nukes by force, what choice do we have but to "talk and talk" as Gingrich mocked? Talking does not automatically mean appeasement and defeat. But all that macho, ideological crap doesn't matter if we have no other choice. If you don't have a good hand to play, why go all-in with your cash? We can either fight a bloody war with no guarantee of success, nuke Iran pre-emptively to global outcry and Muslim rage, or talk (with the caveat of a remote risk that Iran will betray us and nuke Israel later). Which one of those is least painful? Yes the situation stinks and everyone wishes that Iran would just be more peaceful and give up their nukes. But a lot of people around the world wish that the US and Israel would do the same, and we refuse almost every time.

French parenting vs. Tiger/helicopter parenting

http://www.kqed.org/a/forum/R201203071000




I know before we discussed the merits and pitfalls of obsessive, micromanaging "Tiger" or "helicopter" parents in the US, but here is the opposite extreme: the "laissez-faire" French method. I have never been a parent, but the French method seems likely to reduce overall family stress with little to no harm to the kid (and in fact may teach beneficial habits like patience, self-control, and self-sufficiency). But in general, the kids are not the center of the family, they are the "supporting cast." The couples' marriage is still the top priority. So the adults may maintain higher satisfaction, and the kids are less likely to become egocentric, spoiled brats. They learn that when they cry or mess up, there aren't frantic, doting parents/grandparents immediately racing to their aid. I guess Americans fear that if they don't come running, their kid will end up scarred for life, or they look like negligent deadbeats? And despite all this attention, the kid will probably resent, rebel, and drift apart later anyway, whereas French kids grow up and happily continue to spend time with their parents. Of course these are all generalizations, and no one knows how much parenting techniques actually affect a child's future.



Of course there is a spectrum of behaviors, but the French model is not about being "perfect parents" to give their "precious darlings" every possible joy and opportunity in life. That's impossible anyway, so why run yourself ragged trying? French parents are not obsessed with consuming "parenting paraphernalia," nutrition, and tutoring, yet French kids end up better educated, more law-abiding, and healthier than Americans on average (and middle-class birth rates are higher in France). Of course French society is a lot more mature and adult-centric than ours, and there are many more social services available to make parenting easier on the French. So for Americans, our gov't provides very little help, and our parents put more pressure on themselves to engage in nonstop parenting, so it's a recipe for disaster. Also, schools in France are for education, not for babysitting and learning bad social habits, like they are here.



Another difference is how self-expression is encouraged/managed. Americans, despite being micromanaging, also tend to go easy on the discipline and limits, for fear of damaging self-esteem, creativity, or something. I guess that's why we always hear at the malls, "Mommy I want, I want, I want!" But what is the value of a creative, confident, expressive kid who expects a level of attention that is probably impossible to sustain when they're older? The French philosophy is that unreasonable desire leads to an unhappy and imbalanced kid, so they need to learn limits or that will hurt their self-esteem, creativity, etc. 2 means to the same end I guess. Boredom is also a tolerated and even encouraged part of childhood. Instead of staring at a screen or having an adult entertain them 24-7, maybe kids should learn to sit quiety and imagine/contemplate the world.



A caller on the program: "American parents think their little darlings are gifts to the world, and expect that the rest of us should adore them too." That's probably some sort of psychosis associated with the parents' own inferiority and vicarious ego issues, as well as our cultural values.



FYI, British parenting resembles the American model more than the French

Michigan GOP changes rules at the last minute to give Romney win over Santorum

Not that I'm a RS supporter, but I will pounce on any opportunity to badmouth Romney.




http://www.usnews.com/news/articles/2012/03/01/michigan-state-gop-awards-romney-at-large-delegates

http://firstread.msnbc.msn.com/_news/2012/02/16/10425254-santorum-romney-allies-going-all-in-in-michigan

http://www.npr.org/2012/03/02/147787317/santorum-upset-by-mich-delegate-decision



We all know that it's a major shame if a politician can't even win his or her own state (e.g. Gore in 2000). So despite Romney et al.'s much more formidable and organized campaigning machine outspending Santorum's at least 3-to-1 in his birth state of Michigan, the polls were neck-and-neck, and some even had RS ahead by double-digits a couple weeks ago before he botched the AZ debate. I have little idea how the stupid delegates system in the US works, but apparently the 2 candidates had earned 14/30 MI delegates each, with the party awarding the final 2 at-large delegates. Party rules stipulated that each candidate would get one, since the voting was so close, so MI would be declared a tie. But the MI GOP changed the rules at the last minute to award Romney both. The reasoning for this change is unclear. Santorum's camp is of course crying foul, and he's not the only one. MI's former Atty. General compared this move to a "banana republic". It stinks of corruption, even if it was done honestly and ethically.



Romney also "stole" a perceived Iowa win even though a recount showed RS barely won (or the 2 tied). But the headlines got out that Romney won, so that is the story. Again here, the press says that Romney won MI, so now he gets the momentum and the publicity, while RS looks like a complainer if he doesn't let it go. But despite all of Romney's advantages, the fact that MI was so close should send his campaign and the country a message on his viability as a candidate.



To me, it's just scary that some careless volunteers in Iowa and some un-elected party bosses in Michigan can literally determine who the next presidential challenger will be.

Linsanity

Hahaha! http://sports.yahoo.com/blogs/nba-ball-dont-lie/kobe-bryant-fires-few-hilarious-salvos-jeremy-lin-174131018.html




Reporter: Would you consider guarding [Lin] if he’s having [a good game]?



Kobe: Jesus Christ! Let’s not get ahead of ourselves.
 
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Just to play devil's advocate (did you expect anything less?), when you play the Nets, Wiz, and then have Old Man Fisher guard you - any mediocre player can look like Wilt Freaking Chamberlain. :)




He is pretty fearless, or maybe he's riding high and the logic center of his brain hasn't yet realized, "Hey, I'm in MSG outplaying Kobe!" I didn't think he could step up and hit the clutch shots, but he proved it tonight. Once again, an ex-Warrior shines AFTER he leaves the Bay! The ESPN announcers were saying they should try to get Lin in the rookie-soph All-Star game.



The W's currently have a PG Charles Jenkins, 2nd round pick out of Hofstra, averaging 2-1-1. WTF they kept that dude over Lin? I really don't think Lin is a legit difference maker (there is obviously a reason he was cut by 2 mediocre teams), but heck, keep him on the roster to sell jerseys and tickets at least (especially in the Chinese-heavy Bay Area). Well, we got clowns for mgmt for all the Oakland franchises.



How are you guys doing?
 
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Whats wrong with a religious comment or two? Kobe Bryant talks about


Jesus Christ in his interviews.



From what I've seen, it seems like Lin has a lot of tools to work

with. The scouting report obviously was that he couldnt shoot so the

Lakers gave him more room on jump shots. We'll see how he does when

defenses adjust to slow him down.



Its just interesting to me how scouts and teams can overlook talent

and how players can develop in ways that defy expectations. Rondo was

a #21 pick. Kevin Johnson was stuck behind Mark Price in Cleveland.

The Blazers took Sam Bowie over MJ. But Lin's story is amazing in

that even colleges didn't seriously recruit him.
 
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obe was just giving ups to Jesus, and actually comparing Lin to him - so it was a compliment!




Yeah I think Lin is another example of the "Moneyball" effect. Sports are so irrational - the "talent scouts" have their subjective biased notions of what a top prospect should look like, and if you don't fit the mold, then they pass on you no matter your intangibles or hidden assets. I guess the principle applies to some non-athletic workplaces too. Top hoops players don't look like Lin, and they are more athletic, so why should UNC or Kansas bother to recruit him (not that Lin was at that level at age 18, but just making the argument)?



You need real metrics to gauge talent (sorry I'm starting to sound like Mark Cuban). If you keep picking the same type of guys, you'll never get an advantage cuz the other teams are doing the same. Then you're just hoping for luck, cheating, or "great coaching" to get an edge. Some impact players don't look that great from a stats perspective: Shane Battier, Nnamdi Asumugua (I know I'm spelling that wrong!). But most people just look at scoring and size, so they want Durant types.



I guess most hoopsters under 21 have at least a couple deficiencies in their games. I am sure NBA teams were concerned with Rondo's size and shooting. But they don't take the next step and look at the kid's potential, or how they can adjust the team's system to minimize the player's weaknesses and enhance his strengths. Look how Denver and Florida's systems made Tebow more successful. It's easy to just look at individual stats or physical features, but these are complex team sports. You have to measure the player's overall contribution to making the team win (like Billy Beane did). And if Lin or Rondo's ratings are higher than say hyped prospects like Wall or Walker, then you pick Lin first. It may not work out every time, but with enough tries you will win in the long term.
 
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So are we saying that the whole scouting profession needs to be re-evaluated because Jeremy Lin has had five good games, one of which included 8-24 shooting? Moneyball was based on using certain statistics to build a team on a limited budget. If the A's had more financial resources, there's no way they would pick the same players. It's easy to sit here and talk about the successful guys that don't "fit the mold", but if you were building a team I'm pretty sure you'd take your chances with five John Walls instead of five Jeremy Lins. John Wall is going to work out more often. Unless you're claiming that you would pick Jeremy Lin with the first pick in the draft. College football fans do the same thing. They have a couple of scrappy, low-rated players that play well, and then they say they need to build their team with those guys. Then they'll turn around and complain about the low star ratings of their recruiting class or the overall lack of talent on the team.




By the way Lin was cut by the Warriors to free up money to get DeAndre Jordan, and they actually tried to get him back.
 
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To be totally honest, I don't really like watching Lin play and I wouldn't want him if I was a GM. I am rooting for him and I like his story of course. I just used Lin as an example to show that deviating from the status quo can be beneficial at times. If the objective data say that Wall is better than Lin in terms of bang for buck, then I go with Wall. I'm just saying that conventional scouting can miss some of the intangibles, or favor some less relevant metrics over more important ones.




Look at the Yankees, BoSox, or Real Madrid soccer - money definitely helps get a decent number of wins, but you usually can't buy a championship. You have to innovate or perish. The rich teams can get away with "stupid" scouting because talent/production is generally correlated with salary, and they can absorb some bad contracts. But the cool thing about taking a chance on a dark horse is it's not that costly. If the Lin experiment doesn't work out, no biggie. But he has upside. Going all-in on a Greg Oden or Eddy Curry is a bigger sacrifice if you're wrong, and could set you back for years. UNLV hoops and Miami football rose to prominence because they took a chance and started recruiting urban kids who were overlooked by the big programs. Unless you're rolling in cash, you have to look for hidden talent and untapped supply. The greenest pastures are already crowded.



As you said, it's easy to Monday evening quarterback this type of stuff. All the signs pointed to Sam Bowie having a great career and Kurt Warner never amounting to anything. They're outliers. In general, making the "safe pick" works out. But the competition in pro sports is getting so tight and unforgiving, that any sort of edge that your rivals aren't exploiting is probably worth looking into.
 
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Obviously every team has to individually evaluate each player. Outside of team-specific systems or preferences, most teams converge on a similar hierarchy of player ratings. Even if a team really likes Jeremy Lin, it makes no sense to draft him high because you can just get him later. You don't choose Jeremy Lin over John Wall, because John Wall's ceiling is much higher. You just pick up Jeremy Lin late in the draft or as an undrafted free agent, which has basically no downside. Then you get both. You don't attempt to fund your whole retirement with money market funds or bonds. If you pick the player that everyone think is a can't miss prospect, and he doesn't pan out, they will say you were unlucky. If you pick the guy nobody else likes, the supposed diamond in the rough, then they will say you were dumb. Using guys who struggled with injuries as examples is not really fair, as no one has a crystal ball to foresee that. Very rarely do teams win championships with rosters full of average or above average players. The 2004 Pistons come to mind, but that was aided by the dysfunction of the Lakers. When you have the opportunity to try to get superstar players you have to take it, especially in the NBA draft, where the rookie salaries are predetermined and not exorbitant. Miami had basically no football history prior to 1980. Sure they took chances on some local talent that they may have overlooked before, but they weren't rejecting highly decorated recruits in order to do it. They didn't really have much of a choice.




The question is not whether you should ever take a chance on an "off the radar" guy but whether, when all players are available, you're going to choose the "off the radar" guy over the "can't miss" guy. You're a Raiders fan. How do you feel about the drafting of Mike Mitchell in the first round (about 3 rounds earlier than his projection) versus the drafting of Mike Huff in the first round? They've both been unspectacular, but one pick looks way worse than the other.
 
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I never said that you should draft longshots over safer bets. But at least look at the longshots when appropriate - and not every team does. Lin may be a relative "steal" at his $300K one-year contract or whatnot (esp. if NY is paying luxury tax, but I'm not sure their situation), but probably most teams would prefer to save up and pay a superstar like Durant $16M/year. You can only have 5 guys on the floor at a time, and 12 total, so of course you want to pack in as many stars as you can afford, instead of 12 under-rated value players. But for MIA that spent a lot for 3 stars and 2 more veterans, they could really benefit from penny pinching at the back end to find enough value to get them to the promised land. Of course you have to pay the right stars the right amount of money. The NBA probably overpays for size, and the NFL sometime overpays for speed and QBs. Bottom line, get the most bang for your buck - wins, jersey sales, TV contracts, whatever you measure success by. Don't just pick a player because he looks good or fits some arbitrary profile.




With the Yankees' financial advantages, I actually consider them bigger losers than the Rockies, who at half the payroll give it a good playoff run each year. Of course they have a weaker division and all that, but you get my point. The Yankees are supposed to win each year, so if they don't, they have fewer excuses than the A's. The equation is different if you are the deep pocket Goliath, or the reigning champ. But 90% of the teams in the league are not in that situation. That's why they have to be different to get an edge. If a poor team does exactly what a rich team does, they will lose 99% of the time, and at best they will achieve parity (with amazing luck). "Fight fair but avoid a fair fight." Don't play on Goliath's terms. Most franchises have more in common with U-of-Miami than the Yankees. I guess the draft helps weaker teams get a fighting chance next season, but clearly it's not a guarantee. So that puts even more pressure on struggling teams to get drafts and trades right.



The Raiders are kind of a bizarre example because their recent drafting history has been so atrocious. For the prospects that Davis "over-paid" for (i.e. drafted too highly) like Huff and Bey, there was an equal number of "sure thing" college stars who underperformed (Russell, Gallery, and probably McFadden too considering his health). So no formula is 100% safe. Maybe Seabass and Lechler were their best picks, but we'd probably need a more sophisticated analysis to measure their incremental benefits to the team vs. alternatives.
 
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Well I guess I'm not sure what we're arguing about then. It could be argued that three teams have looked at Jeremy Lin "when appropriate", because three teams have had him in on their rosters. All of them got him without having to draft him instead of another player, and they are paying him about as little as he can be paid. That seems like bang for your buck. And again, it's not like no one has given him a chance. He's been on three teams and up until 10 days ago hadn't played well enough to warrant being given more playing time. Obviously teams want to get superstars. No team goes into free agency with "under the radar" guys as its first choice, unless that's all they can afford. As for using arbitrary profiles, I think if you look through the entire draft you will see people of all shapes, sizes, and skill sets. I'd say the one thing that is common is that they usually have one standout, or at least above average trait. They are either big, strong, quick, long, great ballhandlers, great shooters or something. Jeremy Lin doesn't have any of those traits and generally played against a low level of competition. He's arguably average at best in all those areas, so it's hard to justify picking him any earlier than late in the draft or as a free agent. I would be curious to know what qualities you would look at in a guy who is doesn't have good athleticism, is not a good shooter, and plays against weak competition that would make you comfortable in projecting them to be successful in the NBA. Come to think of it, I think both your teams (Kings and Warriors) have drafted players high in the draft (Stephen Curry and Jimmer Fredette) that were both pretty highly rated prospects despite not having prototypical traits. So in that regard I would say the scouting is not as rigid as you make it out to be.




As for your paragraph about baseball, that's consistent with what I said. The teams that are penny pinching are doing it because they have to. They don't have a choice. The teams that have more resources aren't penny pinching because they don't have to. It seemed like you were saying before that teams should be targeting "under the radar" guys over highly rated guys even when they have the opportunity and means to get either one. I thought this because the frequent examples of John Wall and other NBA draft choices. But you're saying that you didn't mean that. So, just like in your example of the University of Miami football program, the choice of under the radar guys is made out of necessity. The only reason I brought up the Raiders (Huff and Mike Mitchell) was to make a point about drafting under the radar guys high versus picking guys where they are projected to go. Mike Huff may not have turned out to be great, but he was a consensus first round pick and someone would have picked him in the next handful of picks. I don't think anyone faulted the Raiders for picking him at the time. At most they could have traded down a few picks and gotten him, but they couldn't have waited another round to get him. Mike Mitchell was projected in the 3rd or 4th round, and they took him in the first round. That means they could have waited and gotten him for much less money. This was meant as an example of why it would be acceptable to pick John Wall first overall and dumb to pick Jeremy Lin overall, even if you like him a lot. But you said that you didn't mean that, so it doesn't really matter anyway.
 
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Scouting is not as rigid as a 2x4, but it could be more open-minded and data-driven, that's all. I wouldn't say that players like Jimmer and Curry don't have prototypical traits. They were dead-eye shooters who could also drive, and had some success in clutch situations leading their teams against bigger programs in the NCAA tourney. They aren't physical, but not every scorer has to be (Reggie, Mullin). They were also "high character" guys and likely fan favorites. I am not sure if those traits are worth drafting high for vs. pure athleticism, but they have them at least. I also think that the NBA draft is the lowest-risk draft compared to MLB and NFL (I think the data bear that out too). NBA rookies can contribute immediately, top picks are less likely to bust, and they have relatively fewer problems adapting to the pros. HS players are more risky of course.




Your comment about the level of competition a prospect faced is a good one. That's probably why many soccer players on the US national team don't get recruited by the top Euro clubs, either justified or not (they don't care if Donovan scored 3 goals vs. Honduras). OTOH, Duke players who come from an elite system and face top competition each season usually aren't top NBA prospects, probably due to lack of great physical skills and superstar potential.



I didn't know anything about Lin's history and looked on Wiki. He led his previously unknown HS team to a CA Div II title against a top Catholic school hoops powerhouse, and won a lot of individual honors. Stf and UCLA now "regret" not offering him a scholarship. Lin basically broke all the Ivy League hoops records, but I guess that isn't saying much. He did perform well in non-conf. games and put up 27 and 30 vs. BC and UConn. Not sure how critical those games were, and probably Lin's lack of hype and scouting made it easier for him to surprise big programs. Despite not facing much competition, some ESPN guy put him on a short list with Hayward, Vasquez, Singler, and Turner. BTW - he only got a 3.1 GPA at Harvard... pfffff.



http://en.wikipedia.org/wiki/Jeremy_Lin



I previously said I wouldn't consider Lin if I was an NBA GM. But now I'm tempted, not because of the typical assets, but somehow he has that intangible factor that allows him to defy his critics and surprise people. It may be just a face he puts on, but the kid acts fearless and like he belongs, despite our conventional wisdom thinking WTF is he doing being a starting PG? I can't believe how well he is handling himself. Confidence without attitude is an important trait for a star, and I think some highly touted draft picks lack it (Kwame and Darko come to mind). But we'll see how he responds when he hits the rookie wall or a prolonged slump. He thinks team first, but of course his decision making and passing need improvement. That may come with experience. Defensively he could be a liability, but D'Antoni's system doesn't really depend on that, and NY has Chandler and Amare to try to erase mistakes. Lin's game is also disruptive, which is useful. For some reason, other teams don't look comfortable when he is on the floor and hitting shots.



And then of course there is his story and cult fan following. Tonight in TOR, the fans were cheering for him as he hit the GW shot. I know it's TOR, but still. A team is still a business, so the buzz he generates is valuable. Plus other teams may be resenting Linsanity and are gunning to shut him down, so he could be a useful decoy to allow other Knicks to excel. My conspiracy theory is that Stern wants to create the NBA Tebow story, so he is throwing the games to allow Lin to succeed. The kid isn't even getting hard fouls, which is definitely what I would do to cool him off. All of this is very bizarre. NY won't make a deep playoff run even with Melo and Amare, but the Lin story should at least get scouts, GMs, and analysts to reconsider their assumptions. Coaches seem to be lumping real praise on Lin.



To be honest, I had no idea that Oakland even drafted a Mike Mitchell guy. :) I guess that shows how much the franchise wants to bury its mistake, or how much of a fan I am. Sorry that my previous emails let you to believe I held different opinions than I actually do. I have to work on my communication clarity.
 
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Just to clarify, of course in hindsight it's easy to say that teams should have shown more interest in Lin now that he has had some sustained high performance. But I think based on his college record and his bio, it shouldn't have been a mystery that Lin would have had some pro potential - at the minimum from the "first Asian American in the NBA" angle. But from his workouts (in one case he showed up Wall, right?) and interviews and such, a smart coach/GM could have seen Lin's disruption/intangibles potential. I just don't think they took the time, or maybe they let their biases get the better of them, or maybe they had justifiably more important personnel issues to worry about.




As you said though, it's too bad that Lin left the Warriors over money issues for a transaction that never even happened. But maybe this was the best thing for him and the league, because Lin would have never had the chance to shine on GS as he is doing with NY. The path to fame is rarely straight and predictable. Notice how I didn't say "path to greatness" though, which I doubt will apply to this guy - but you never know.
 
Sorry a slight correction, Lin isn't the first Asian-American in the NBA, not by a long shot. A Japanese-American played for NY as well... in 1947 (same year Jackie R joined the Dodgers)! That is a great show of post-war reconciliation (not that the guy did anything bad to the US during WWII, but you know how the prevailing racism was at the time). He was even shorter than me!




http://www.npr.org/blogs/thetwo-way/2012/02/15/146888834/pro-basketballs-first-asian-american-player-looks-at-lin-and-applauds

More on Freddie Mac

More on the Freddie Mac saga: http://www.npr.org/2012/02/09/146585726/potential-conflicts-at-freddie-mac-draw-scrutiny




NPR really isn't letting this go, and I guess they are not aware of, or refusing to acknowledge, challenges to their "betting against homeowners" accusation along the lines of the naked capitalism piece. Recently they interviewed the FHFA head DeMarco over this, and from what I could tell, the questioning was somewhat biased by NPR standards, and DeMarco's answers seemed to get cut off more often than usual (you could hear his words getting cut off fairly noticeably). When asked why Freddie invested in inverse floaters, DeMarco explained that he was trying to avoid losses to taxpayers. But he never even touched on hedging risk and portfolio diversification. I know some listeners may find that stuff boring, but NPR has tackled CDS's and other complex financial stories before. So either DeMarco totally whiffed on PR, or NPR suppressed his full explanation. A former Freddie risk management exec was interviewed in the NPR series as well, and he expressed shock and disapproval of Freddie's actions. But his job was risk mgmt! Couldn't he explain the situation, or was he worried to swim against the populist tide and be labeled a Freddie apologist crony?



So now there is sufficient buzz and anger over this that Congress is holding hearings. As you would expect, lawmakers from both sides are quite upset. But from all the hours of testimony, you would think someone would bring up the risk issue. Congress and the public are rightfully still unconvinced that the rule-making and investment arms of Freddie are sufficiently segregated, so why can't the Freddie execs explain their internal workings and safeguards to protect against COI (if they exist)? It's tough because the tighter refi and restructuring rules were rolled out before Freddie invested more heavily in inverse floaters. So one could argue that the investment side took notice of the tighter refi rules, and then made sound bets accordingly. That is technically legal and may not even be unethical. But if the investment guys were pressuring the rules guys a priori to make refi rules tougher, in anticipation of taking these inverse floater positions, then that's much worse.



I guess conservatives have ostensibly been against GSE's since even before the housing crisis (they never complained when the GSE's were making investors a ton of cash though), saying that gov't participation in markets usually ends up bad. And the progressives are outwardly hostile to anything that remotely resembles a bank, even if it is a GSE under the stewardship of a Democratic administration. So no one is on Freddie's side now, whether fully justified or not. I'm wondering if Fannie has also made investments of the same nature. Fannie is basically a twin entity, but we haven't heard anything from their end.



Interestingly, Freddie got in similar hot water in 1997 when it was discovered that they invested $340M in Phillip Morris corporate bonds just as the investigations against Big Tobacco's misdeeds were building up. When the story broke, they quickly dumped that position. Maybe this suggests that GSE's, or any gov't entity in general, shouldn't bet on the private sector. Like Solyndra and insider trading by Congress, there's just too much chance for COI, or the suspicion of COI, which these days is almost as bad. Freddie is so big, and with so much influence, that it could affect its own investments and the market as a whole if it wanted. Yes it's great when our gov't can make some capital gains to counter all the billions we lose from interest payments on our debt. But with so much COI risk, maybe the gov't should limit itself to investments only in Treasuries (basically internal lending) or CDs. Yes their return will be lower, but the chance for impropriety will be greatly reduced too. I know this is probably impractical, but I'm just saying.

Deal between states and banks on mortgages

So far, [mortgage relief] hasn't worked on a grand scale. As one person said to me, this is a slap on the wrist of the banks. It's not a fix for the housing problem. -NPR

http://www.nytimes.com/2012/02/09/business/states-negotiate-25-billion-deal-for-homeowners.html?_r=2
http://www.npr.org/2012/01/23/145535135/foreclosure-robo-signing-deal-worries-n-y-official?ps=rs

So I guess the states' AG's are closing in on an agreement on the big settlement with the banks over robo-signing and other improper foreclosure procedures. Considering current economic and budgetary conditions, the banks seemed to be playing the states against each other in order to get a sweeter deal. Some of the states hardest hit by foreclosures (CA, FL, NY, MA, DE) initially refused to endorse the deal because they thought the banks were getting too much immunity without sufficient investigation, and it would prevent them from launching future civil lawsuits as more evidence emerged. But critics within those states, as well as the other states already endorsing the settlement, were pressuring the holdouts to get on board. They justified the compromise by saying, "It's not a perfect deal and we're not getting everything we want, but homeowners are suffering every minute we delay and we need relief now."

States are hurting financially and are willing to drop the investigations for some chump change (the current deal sends $2.7B directly to states). At least NY and CA pushed at the eleventh hour to retain the rights to seek future damages regarding improperly formed MBS's and some criminal wrongdoing. But even if the states build strong cases on those charges, the track record suggests that banks will continue to stall, appeal, or pressure states into hasty settlements.

Despite the billions earmarked in the accord, the aid will help a relatively small portion of the millions of borrowers who are delinquent and facing foreclosure...

Another 750,000 people who lost their homes to foreclosure from September 2008 to the end of 2011 will receive checks for about $2,000. The aid is to be distributed over three years...

On average, these homeowners are underwater by $50,000 each... A recent estimate from the settlement negotiations put the average aid for homeowners at $20,000. -NYT

So the bank seizes your home illegally and you get $2K over 3 years (with discounting more like $1.93K in value)? Do they get to live in their homes again? And distressed homeowners who on average owe $50K more than their homes are currently worth are only getting $20K in assistance on average, so how much help is that really? I guess we should be grateful for any charity that the mighty banks see fit to bestow upon us, but the refi-restructuring aspect of this settlement will only help less than 15% of underwater borrowers. It clearly is not big enough to "fix" the housing market, and is just serving to help the banks sweep their past misdeeds under the rug.

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It's a pretty big bank bailout. Note how effective the Obama administration has gotten at concealing these. Orwell would be proud: a bailout of the banks presented as a victory for the homeowner. A couple little comments.






- Only about $5B of the touted $25B comes from the banks. The rest of it is coming from you and me. $3B is for refinances, which reduces the amount paid to the investor who owns the security. $17B is actually credits for principal modifications. Banks either get 1:1 credit for mods to bank-owned mortgages, or 0.5:1 mods for investor-owned mortgages. That is, instead of taking the $17B hit on their own balance sheet, they can choose to put a $34B hit to the investors they sold the mortgages off to. I wonder which one they'll choose. Since the investor is pensions, 401k's, and the taxpayer (via Fannie and Freddie), that's us paying $20B of this settlement.





- One thing we've heard a lot about is how the market for mortgage-backed securities has been very shallow since the crash. This is the usual argument for why Fannie/Freddie have to step up their purchases of mortgages, because no one else is buying them. The banks have argued that it's skittishness, or that investors don't have money, or whatever, but a big piece of it is that investors are rightfully wary of putting money into a market that they know is deeply opaque and full of chicanery. This was the big argument in favor of stock market regulation in the past, that if you have a strong SEC making the stock market transparent and legal, investors will flood into that market. The banks have done the opposite to the mortgage-backed securities market, and it should be no surprise that investors are wary. Now that investors see that $20B of settlement fees are going to get pushed down their throats, do we imagine anyone is going to be willing to buy mortgages? Expect Fannie and Freddie, and through them the taxpayer, to continue to be on the hook for this because no one wants to participate in a market that is so clearly rigged.
 
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Thx. I really appreciate your insights on these topics. As you said, it should tell us something when only the politicians with skin in the game are celebrating this settlement, and the homeowners and advocacy groups are mostly silent or upset. I didn't know about those accounting schemes to shift the costs to investors (us) - are any media outlets getting the word out? Then that begs the question: is it cost-effective to siphon money from taxpayers and investment funds in order to give marginal relief to a small subset of distressed borrowers, with no guarantee that the aid is sufficient to keep them in their homes? If at proper scale and price tag, I think mortgage relief is an important social priority now, and if that means investors needing to write down some of their returns, then that should be nothing new considering what we've gone through since 2008. But I'm just not sure that this is the right plan for that objective.




I totally agree - without confidence in a market (especially ones dealing in virtual capital), who the hell would want to invest? That's why savers in banana republics (and some G20 nations) prefer to keep their cash under their mattresses. Effective regulation can be GOOD for business as you intimated. It's not as bad these days, but investors have been so risk averse during this downturn that the yield on some short term Treasuries was actually negative (i.e. they would rather burn some of their money in return for safety, rather than trust the stock market or secretive banks). And as you said, now gov't & taxpayers have to hold their nose and chug more toxic assets. It's amazing that after 3+ years, we still can't effectively value these vehicles, and some banks still haven't come clean on their balance sheets (and their stock prices continue to get punished for it).



"They'll see, real estate is going to make a comeback!" - Dick Fuld (Lehman's last CEO, a week before his firm folded in 2008) in the film "Too Big to Fail"

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?