Links 7/22/09

Watergate Hotel attracts no bids BBC

Medieval battle records go online BBC

Radar could save bats from wind turbines Live Science

Leszek Kolakowski Telegraph (hat tip Dave R)

Obama is good for K Street lobbyists The Hill (hat tip DoctoRx). This is funny, if you are into black humor, that is.

Details Emerge of Atrocious CA Budget Deal Daily Kos. More black humor.

Bait and switch: How the “public option” was sold PNHP (hat tip reader lambert strether). Original public option plan: 130 million enrolled. CBO estimate of current plan: 9 million enrolled.

Pubs closing at rate of 52 a week as hard-up drinkers shun their local Times Online

Fed Mortgage Report – What’s Ginnie Mae Up To? Bruce Krasting

BlackRock chief attacks Wall St earnings Financial Times

College sudents banned from credit card applications Xinhua. And we wonder why the Chinese savings rate is higher than ours?

Temasek reveals surprise departure of Goodyear Independent. There must have been a power struggle. Goodyear, a particularly well regarded Australian executive. was considered to be a catch.

And now, the rest of the story: long-term portfolio flows have fallen by more than the trade deficit Brad Setser

Economics is in crisis: it is time for a profound revamp Paul De Grauve, Financial Times

Audit Interview: James L. Bothwell Columbia Journalism Review. On how derivatives regulation was squashed by, among others, the Clinton adminstration. The Clinton administration in fact became quickly very Wall Street friendly as it was clear the Republican were going to win big time in Congress in 1994. Where do you think that strong dollar policy came from?

CIT’s Holdout Problem Steve Lubben, Credit Slips

The real estate roots of the crisis in the US Elena Panaritis. She is guest blogging at Willem Buiter’s blog. This is an interesting argument. I’d be curious to get reader reactions.

Looking for an exit Jim Hamilton. Econbrowser. Today’s must read. I’d feature it in a post, except I have nothing to add. Hamilton warned the Fed at Jackson Hole in August 2007 that the markets would test Fannie and Freddie’s implied full faith and credit guarantee, and no one seemed to listen. His post here leads to an equally serious warning.

Antidote du jour. From reader Steve:

I ‘went bush’ for a while as the Aussies say….had a great encounter, see pics, taken in the mountains of central Thailand near the Myanmar border. Awesome, and nerve wracking!



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31 comments

  1. attempter

    The Panaritis piece is tantalizing, but I felt the same way the first commenter there did: she kept describing the problem abstractly but didn't give examples or prescriptions, so I was left unclear on what she was saying, other than the obvious point that the "efficient market hypothesis" is a fraud because (among other reasons) the information necessary to render it "true" is always dispersed, obfuscated, and destroyed.

    Ironically the second commenter (who said he had read Panaritis' book), in saying the first was off-base in his complaint, gave more concrete information than the post itself did.

    My own critique goes to the fact that land is not a conventional market good since "they're not making it anymore", so it can't possibly be (legitimately) priced and exchanged the way widgets are.

    To treat it that way is bound to lead to market distortions and disasters, in the same way that treating finite, non-replenishable oil as an infinite market good has resulted in absurd price behavior and frivolous use allocations.

    With oil the myth is a thing called Hotelling's Rule, which tried to pretend that the market would rationally take oil's finitude into account in pricing and rationing. Pundits often try to pretend that it has operated this way, but in reality it never did.

    I don't know if there exists a similar myth for land. If I understood Paniritis correctly, she was deploring the absence of any such rational practice, at least regarding the quality if not the quantity of real estate.

    A rational land distribution would acknowledge first the finite quantity of land, and how this must set up a conflict of rights (so-called "property rights") vs. rights (to free movement, to decent food, to a decent job for anyone willing to work the land, which was the classical basis of property in land in the first place, but which has been completely discarded by now).

    Then it would acknowledge the quality of land, namely as productive farmland, as providing environmental services, and as anchoring social stability.

    A true land reform program would focus on this core. This in turn is the necessary basis for all reform.

    As for the rotten, perverse "market", it has proven its abject failure, and I don't think the anodyne reforms Panaritis implies would be sufficient.

  2. Diego

    Yves,

    Elena Paranitis doesn't give a good explanation on what she is exactly proposing to reform.

    I think her proposal is creating a Registry of Property as it does exist in most European countries, e.g. France or Spain.

    In the US, you can sell your home to a buyer who can't possibly know you have 3 different mortgages on that home. Of course, that's punishable; but this adds a layer of mistrust, legal procedures and general "toxicity" which has much contributed to the US real-estate crisis.

    In Spain and other countries, if you take a mortgage, it must appear in the Registry of Property; this way, it is information, not trust, which lies at the core of every transaction. If bets go wrong, you know you won't have 3 different banks trying to foreclose the home you bought from a criminal.

    Of course, this additional layer of bureaucracy has its costs. But you just have to compare the real-state markets and banks in France and Spain vs. the US and the UK to see the advantages.

  3. MarcoPolo

    Reader Steve, nice pics. I envy you. I spent some time with those hill tribes a few years ago and would go back in a heartbeat. Would advise others to avoid Burma though. My Thai friends told me that every thing had been quiet, but 24 hrs. after I left the place blew up.

  4. Anonymous

    Chip Goodyear: well regarded American executive who stepped up to CEO role of BHP Billiton (from CFO- after departure of South African predecessor Brian Gilbert)

    Charles

  5. John Galt

    On the Watergate story, PB Capital is Deutsche Postbank's CRE lending arm and lends outside Germany in areas like London and across the US.

  6. Uncle Billy v. Mont Pelerin

    Sir – In regards to the FT article:

    "macroeconomists can calculate the motions of a lonely rational agent but not the madness of the crowds"

    But what if they *have* been able to calculate the madness of crowds for quite a while? Interesting implications, no?

  7. fresno dan

    "Looking for an exit"
    Interesting. Long story short, no matter how many feigns, manipulations, contrivances one can think up, at some point, income, expenditures, and value must be in a sustainable balance. At some point, people will realize that "dollars" are a piece of paper, and "treasuries" will be paid back with pieces of paper that may be worth a lot less than the lender presumed.

  8. Dan Duncan

    So Attempter, when you write:

    "A rational land distribution would acknowledge first the finite quantity of land, and how this must set up a conflict of rights (so-called "property rights") vs. rights (to free movement, to decent food, to a decent job for anyone willing to work the land, which was the classical basis of property in land in the first place, but which has been completely discarded by now)."

    That's quite a quantum leap you got going there. BAM! And "a rational land distribution" is established. Believe it or not, the operational word in your new land paradigm is the article "a".

    As a result of your "a", it's not rational land distribution as a description….Rather, it's "A rational land distribution"…and it becomes a thing…it's as if the phrase becomes one big noun.

    So who shall establish this thing…this Rational Land Distribution? Who establishes this entity that will decree the obvious: Land is finite!

    And what exactly do you mean about the "willingness to work the land is the classic basis of property in land"? Kinda of like serfdom, right?

    The Panaritis article was abysmal. Nothing offered. Just vague feel good phrases about "upstream frameworks". A complete waste of time.

    Sure, it'd be nice to eliminate a lot of the transactional BS in real estate. Title insurance and deed records could use an overhaul.

    But to suggest that we're here because of the deed record keeping is absurd.

    And to Diego who writes: "In the US, you can sell your home to a buyer who can't possibly know you have 3 different mortgages on that home. Of course, that's punishable; but this adds a layer of mistrust, legal procedures and general "toxicity" which has much contributed to the US real-estate crisis."

    What is that? Are you saying that people are buying houses blind with no title searches…or that title searches don't reveal the existence of 3 mortgages. That's way off. Sure there are examples of mistakes in the title exams…but those are the exception.

  9. Diego

    Dan Duncan,

    some excerpts from Paranitis' blog:

    "Doing a review of the property market behavior throughout recent history, I have observed that the US has a rather weak institutional infrastructure when it comes to securing the tradability risk of real estate. Property rights in the US are not always as solid as many of us think they are, which distorts incentives and relative prices. There can always be considerable risk regarding boundaries, usage, eminent domain etc. Not all information is registered in the county registries, and so one has to do a long search and also purchase title insurance to accompany the final transaction. The end result is that some of the characteristics of real estate assets allow speculative bubbles."

    "It’s no accident that other countries, even those that trade mortgages as financial instruments (such as Australia and Canada) have avoided the levels of off-the-cuff valuation of property we’ve seen in the United States. The reason is that other countries have standardized the information needed to determine the genuine value of real estate and hence mortgage valuation.

    This information – actual boundaries, property transfers, claims, liens, and so on – is made available to everyone. The system is sound and transparent. And where do they keep this information? In national property registries, which maintain all the data, in a standardized format, that buyers and sellers need to undertake transactions related to real property.

    The United States has a broken registry system, and instead of ever fixing it allowed a title insurance industry to arise as a substitute. Title insurance is non-transparent and (at best) inconsistently regulated, yet it is the main system through which information about property valuation flows. Plus, you have to pay for the information. This leads to all sorts of problems, and fuels speculation."

    http://www.prosperityunbound.com/blog/

  10. Charles

    Yves, I left a comment on the FT's blog. Yet, as you expressed interest in reader's reaction, here is my post :

    There are indeed markets that are very transparent and with low transaction costs, and that still exhibit wide swings (including an overhang of negative equity mortgages on the down legs). Check for instance the Singapore real estate market.

    To paraphrase the author, she didn't touch the roots of the crisis either, because the real root of the crisis is faulty Asset Liabilities Management : lenders and borrower should endeavor to match durations and,not only that : for long durations, index the notional of liabilities with the type of asset they finance. Such matching increases the resiliency of the economy and diminishes the risk of massive deflationary defaults.
    For instance, homeowners (in the US) should borrow with a mortgage whose notional is linked to the Case-Shiller index of their region. Power Plants Projects should borrow against monetary flows linked to the value of future electricity outputs, etc…

    There would be appetite for such index linked asset : household that don't qualify yet for a mortgage would invest in the MBS that could be made from indexed mortgage and be reassured that they do not have the risk of being "priced out" of a rising market. Conversely, household that were "forced" to buy a house to live in would not suffer unduly from a falling market if they were holding an indexed mortgage.

    A liquid interest rate curve on the Case Shiller index on a large span of maturities would be an extremely useful tool for the Central Bank to get fine information on inflation expectation. It would also solve the vexing issue of inserting real estate prices in the CPI : if mortgages become linked to the Case-Shiller, it is completely legitimate to replace the owner's-equivalent-rent by the change of the real estate price index on YoY basis. With such a CPI, the Fed would have put the monetary breaks much sooner in the early noughties. Last, but not least, mortgages become counter cyclical, rising real estate doesn't generate excessive wealth effect, and falling real estate provides mortgage repayment relief.

    The first obstacle to such common sense solution is, as the author noticed, opaque price signals. To get proper indices, one needs proper raw data. It is difficult for real estate, but I believe it can be solved in a satisfactory way (perfection is neither needed or possible). I think Case-Shiller is good enough.

    The second obstacle is much more daunting : it is the greed of economic agents that want to become rich the easy way with their balance sheet rather than the hard way with their cash flows.

    This is true both from the borrowers and the lenders. It will require therefore lots of financial education for households and their financial advisers to bring them back to their senses after the current folly.
    As for the lenders, don't count on the usual suspects (think "Giant Squid"…) to introduce such stabilizing financial innovation : it cuts too much into their monetizing franchise. However, it would make sense for chastened GSE to lead the way on this. Indexation would indeed be an elegant route to the mortgage modification that are needed to get the US/UK economies back on their feet.

  11. carol765

    Re: Willem Buiter's guest blogger posting:

    ¨We need a standardized repository of information about the asset of property, so that no one has to search multiple places to make sure a title is good and that there are no outstanding liens dating back decades.¨

    However, that would NOT have prevented the housing bubble. Many countries, the world over, including those with a standardized repository of information re real estate, have had a housing bubble.

    ¨Where is Geithner´s explanation of what is being done to address the bad rules and regulations governing how property rights in real estate are established in the United States, which is the primary reason that all the systemic problems could bring us down the path to negative-equity mortgage loans?¨

    bad rules re property rights in real estate the primary reason for negative-equity mortgage loans?? Does she realy believe that?!
    If so, she has been to/read about Spain, Ireland, the Netherlands, and many other EU countries. EU countries have a real estate info system, which is nice, but alas, does not provide a "genuine value of real estate" (as she apparently posted on her blog, thanks Diego).

    Obviously, the primary reason for negative-equity mortgage loans are the financial innovations no-money-down, option-ARM and neg-ARM. Before these financial innovations, someone wanting to buy a house had to pay 20% up-front, and each year pay the interest plus a part of the outstanding mortgage. If society does it this way, one starts with 20% (positive) equity, and after 20 – 30 years the house is mortgage free, and one has finally become a true home-owner (instead of a debt-owner). Please realize that even in the US today some 30% of the houses are mortgage free, and those owners have 100% equity.

    ¨….. until it puts in place a system that homogenizes and standardizes the underlying securitized assets of real estate and housing …¨

    Securitization of mortgages is just another financial innovation that has caused more problems than it solved. In the ´banking is boring´ days, if you wanted to buy a house, you approached 3 local banks and asked for a mortgage proposal. Those banks knew the area of the property, could judge the stability of your income, could estimate developments on the local real estate market, could estimate the likelihood of tax changes, impacting the debt servicing capabilities (e.g. a decrease in tax deductions of mortgage interest paid). And the banks kept these loans on the books. No securitizations of mortgages at all. A healthy housing market does not need securitization!

  12. Diego

    carol765,

    you are right securitization and easy credit were instrumental to the housing bubble in the US. However, some specific aspects of the US property framework contributed to the financial collapse the housing bubble triggered.

    I'll name two: 1) not having a Government guarantee on property titles, since the US has no property registry; and 2) in many states, negative mortgages can be canceled out by "jingle bells" or handling the mortgaged home back.

    You may have read that Spain and others had a big housing bubble, despite them having full-recourse mortgages and national property registries; what you will never read is that those bubbles triggered a major financial collapse, as it has in the US, where the banking system became insolvent.

  13. Eric

    California has much higher taxes than Colorado – I don't know why Daily KOS thinks that higher taxes are the answer. The problem is that California spending has far outstripped inflation over the last couple decades – the answer for that is to cut spending. 9.3% is one of the highest state tax rates in the nation – and since that is deductable off their federal taxes, it means that the California government is basically stealing money from the rest of the country with their high taxes.

  14. Anonymous Jones

    Eric — Try to use actual facts in your argument. State income taxes are deductible from federal taxes, but the deduction is often heavily circumscribed by the AMT; so your 'stealing money' is not only factually suspect but ludicrous in light of the federal government (rather than California) enacting the rules that allow such a deduction. Also, state income taxes are but one of many state taxes. They are higher in California because state property taxes are kept so low by prop 13. California's total tax burden is high, but it is not completely out of line with other high income states such as New York. I'm not saying that higher taxes are the answer, but it's difficult to believe that they are not at least part of the solution, unless you want to turn California into a high crime cesspool with an obscene wealth gap a la those wonderful cities like Mexico
    City or Jo'burg.

  15. Scot

    Securitization, ARMs, and too many risky loans all play a part in the banking system becoming insolvent. Lack of a national registry and/or title company regulation? Not so much.

    I like the idea of a index linked interest rate, although an extended stabilized period would result in interest rates (and monthly payments) steadily going up over time. A buyer would ultimately pay more interest (as a percentage of the total value of the loan) over time. Intriguing neverthe less.

  16. Steve Koch

    Yves:

    Elena Panaritis has interesting ideas (some good) but her writing is so poor that I found it painful to read her post. You provide a splendid service when you go to the trouble of paraphrasing this kind of material.

    The idea of retaining the original info about individual loans that are bundled into a security is great. A non market based approach to valuation seems wrong. It is straight forward for an experienced real estate person (who has local knowledge) to estimate the value of a home based on recent comparable values and the condition of the home.

    Diego:
    There is no connection between government guarantees on property titles and the US housing bubble or subsequent financial bust. What % of the foreclosed homes were foreclosed because there was not a clear title? Nearly 0%, right?

    My experience is that surveys are quite worthwhile. IIRC, I have bought 8 properties. Most of the time the fence turned out to not be on the property line. It turns out that some people are dishonest enough to move the property markers. No matter how good the national registry, you still have to verify the info in the field. This is especially true on a foreclosed home because the disgruntled foreclosed owners frequently strip and/or vandalize the foreclosed home before they depart. You also have to gauge what is happening with the local neighborhood,

    Carol:
    Securitization of mortgages is not intrinsically bad. It does seem that turning subprime mortgages into AAA securities is an inherently bad idea.

  17. Diego

    Steve Koch,

    we agree securitization, ARMs, easy credit, etc. were responsible for most of the housing bubble. That's the financial part of the story, which has been exhaustively analyzed.

    But the market regulation part of the story has been out of the analysis. Lack of national property titles caused arguably only 1% of the problem, but what matters is the compound effect of different aspects in this defective market regulation, not just that 1%.

    Take non-recourse mortgages. In a full-recourse environment, you have negative net home values but you still hold your home; the alternative is losing everything (every asset, cars, etc.) PLUS part of your future income until you pay every dollar back. The consequence is people hold their homes, there are less foreclosures, homeprices stabilize early and the financial system resists. Of course, that also means people are more prudent when taking mortgages.

    I'd say non-recourse mortgages are a huge, silenced part of the story, accounting maybe for 25% of the problem.

    Now let's look at tax deductions on mortgage interest. Why has nobody question them? Every bubbly real-estate market (US, UK, Spain, etc.) had tax deductions on mortgages, while every not-so-bubbly (France) or depressed (Germany) real-estate market had no deductions. Why is nobody raising this issue?

    I did the math for Spain and tax deductions accounted for 10% of homeprices' rise in the last decade. I'd say the figure is far higher in the US, since the mortgage-to-GDP ratio is far higher there.

    So add it all up, and market regulation may have caused 40% of the problem, while getting how much attention? Nearly 0%, right?

  18. Mammon

    Seems this pathetic moron never encountered the term "rent", which is omnipresent in the writings of the precursors of political economy (Ricardo, Marx, Schumpeter, inter alia)

  19. Jeff65

    Diego said:

    "Of course, that also means people are more prudent when taking mortgages."

    I'm not so sure about that. Mortgages are full-recourse here in Australia, yet housing affordability is among the worst in the entire world. A price of 8x annual income is considered normal. Hardly prudent. If the housing bubble bursts here it will be ugly.

  20. carol

    Steve Koch,
    "Securitization of mortgages is not intrinsically bad."

    But what was wrong with the 'old fashioned' way: you qualify for a mortgage from a local bank, and that bank keeps the loan, until you've paid it down?
    Recent history has proven that banks, expecting to sell that mortgage (sliced and diced and unrecognizable bundled with many others) to an anonymous investor, perform less due diligence. This is bad for the debt-owner (erroneously called home-owner): foreclosure-stress, bad for the investor, and now even bad for the society at large.

    " It does seem that turning subprime mortgages into AAA securities is an inherently bad idea."

    Only a bad idea? Let's agree it is fraud! Were are the legal actions?

    Diego:
    “you are right securitization and easy credit were instrumental to the housing bubble in the US. However, some specific aspects of the US property framework contributed to the financial collapse the housing bubble triggered.”

    Sure, but I disagree with Elena Panaritis, who calls those aspect the primary reason for underwater mortgages.

  21. Steve Koch

    Carol:

    You make a great point that a lender is probably less diligent if they
    plan on selling that loan asap. In the future, the idea is to
    standardize and make more rigorous the process of qualifying borrowers
    (eg: don't throw away the specifics of each loan). Maybe the people
    that are bundling mortgages into securities could only include
    mortgages that have been processed via the approved (TBD) process
    (kind of like ISO 9000). Securitization of loans has great potential
    but we now need to improve the process of qualifying and bundling
    loans into securities.

    I'm not sure that bundling subprime loans into AAA securities was
    fraud. Only the rating agency can say that the security is AAA,
    right? The company that bundles the subprime mortgages into
    securities cannot rate its own securities. Do you want to prosecute
    the rating agencies for fraud?

    A lot of problems with the process have been exposed, we now need to
    improve the process.

    Diego:
    My point to you was that, contrary to what you stated, title problems
    had little or nothing to do with the housing/financial crisis. I made
    no argument with you regarding market regulation in general.

  22. Anonymous

    Maybe you should invite Inhacio Lula da Silva to be your next President, complete with his team of economic advisers and central bankers. He's obviously done a much better job than any of the previous billionaires. Perhaps that's because his education didn't go beyond primary school and metalworker apprenticeship. And don't worry about corruption, lobbying, maneuvering congressmen and putting bankers in jail, he's got a lot of first hand experience.

    Brazilian democracy works much better than the US "democracy", because instead of special interests buying candidates, there it's the voters who sell their votes to the candidates. Better a bribe in the hand than a politician's promise.

  23. skippy

    Sorry all for the colloquialism, but you don't buy a pig in a poke, right?

    Layer upon layer of complexity with regards to fact finding: Price, History, Trend does not make good investing for the common person and those with the knowledge, clutch it to their bosoms with utterances of meee preciousss. If this is the road to better days, I'm cutting a new trail.

    Skippy…ala Sgt. Hulka off the back of the truck (in the Movie "Stripes")

  24. Dan Duncan

    Diego, if those quotes come directly from Panartis' blog, then you really are wasting your time in reading it.

    Take the following: "Title insurance…is the main system through which information about property valuation flows. Plus, you have to pay for the information. This leads to all sorts of problems, and fuels speculation."

    This is flat out wrong. In fact, it's a stupefyingly ignorant statement by Panaritis.

    First off, the closest you'll get to valuing property from the county records is the tax assessors office. This information is notoriously inaccurate for current valuations. Nobody who is active (and competent) in real estate relies on the tax assessor's office (or any other municipal authority) to get information about property valuations.

    The main system through which (residential) real estate valuations flow is through realtor multiple listing services.

  25. Independent Accountant

    Dan Duncan:
    I read Panaratis post. For my money, she said nothing worth reading.

  26. Independent Accountant

    YS:
    I lived in Los Angeles, 1985-2006. I escaped. I wish California the best of luck. Disagreeing with the Daily Kos, the tax paying public is following Lenin's dictum, it is "voting with its feet". Soon California will consist of some wealthy people west of the 405 in Los Angeles, a few more in North San Diego County, San Francisco and the Silicon Valley and millions of illegal aliens and their offspring. As the ethnic composition of California more closely appriximates Mexico, why wouldn't living standards follow? I suspect California's "Gini Coefficient" has fallen significantly since 1985 and continues to fall. In the limit it will reach Mexico's.
    Good luck Arnie.
    The Daily Kos did not refer to the recent California referendum. I wonder why?
    Hahahahahaha, would the Mogambo Guru say.

  27. skippy

    @Independent Accountant,

    Your saying that there is a California, East of the 405[?], I couldn't see it.

    By the way how many hours does it take to travel from Manhattan Bch to ward's the Rocky's before you leave urban sprawl. Last time I drove to Boulder, Co. it took maybe 5 hours (felt like I was in a cartoon with recycled/looped back ground).

    skippy…an't progress grand.

  28. Dave Raithel

    I read the read the Panaritis article this morning and went to work with the same perplexity expressed by others above. I work at a small vineyard – an abandoned one that is being "re-built", if such things are built to begin with. By coincidence, this happened: My boss pointed out that the adjacent property owner had placed two markers on a plot of ground, that we'd been mowing the last three years, to indicate where the adjacent owner thought the property line is. (Our regularly maintaining HIS property would be relevant, oh, in a generation or so.) My boss then observed that by his viewing of the plat lines, another neighbor's fence line ran 30 feet into the place we work – pulling off a piece of ground about 30' by 200'. He had suggested to the investor of the vineyard years ago that a survey be done – to which the investor countered: The worst thing one can do to rural neighbors is do a survey ….

    I can't make this stuff up. I don't have the imagination. And what I describe may be irrelevant to the issue perplexing me. But after reading the article the other day about BANKS walking away from foreclosures (such that those "foreclosed" upon discover months later that they still "own" the property"), I'd have to say that something isn't sufficiently bureaucratic about something as important to most people as real property …

  29. tanqtonic

    @YS:

    problem is that the CA govt has engorged itself and never learned to push itself away from the public trough.

    During the "uptimes", the monies coming into the state coffers swelled with capital gains monies; the state quickly allocated those monies to projects that were recurring in nature.

    They funded recurring costs with non-recurring inflows — smart.

    When you factor in population growth and and inflation, had CA maintained its spending levels from 2002, today it would have a 12-15 billion dollar surplus.

    I am disgusted by the DailyKos' representation of this as the fault of the public and the Republicans. As I see it, the 1/3 Republican caucus are the *only* bulwark from making my incredibly high CA taxation rate (among the two or three highest in the nation)even higher. As far as I can see, compared to the state I moved from, I am confronted with system tha tsomehow I pay a huge percentage *more* for the *prize* of living in CA, yet the services that I get in return are far less. Somehow the leaders of this great (*cough*) state paradoxically charge me about 20% more to live here (on a tax ratio basis), and somehow manage to utterly fail to even approach the services of where I moved from.

    This government has to learn that the public is not an "all you can eat buffet".

    To parrot an earlier poster, my goal is to get the company I am at to IPO, then move the hell out of this godforsaken palce.

  30. Anonymous

    Steve said:
    ¨I'm not sure that bundling subprime loans into AAA securities was
    fraud. Only the rating agency can say that the security is AAA,
    right? The company that bundles the subprime mortgages into
    securities cannot rate its own securities.¨

    Hm, they cannot officially rate their own securities. But if they bundle subprime, jumbo, alt-A together, and without blinking an eye, accept the AAA-stamp-of-approval, they know (please remember: these are the self-acclaimed best and brightest) that something is wrong.

    It is even worse: giving securities to the rating agencies, and agreeing to a pay structure, which pays more fees, the higher the rating received, is sollicitation for fraud.
    Please note that this business model will *not* change under proposed legislation sent to congress this week (July 21th)!

    ¨ Do you want to prosecute
    the rating agencies for fraud?

    If I were a financially independent attorney general: YES, I would have pressed for charges, and would have had wall street inundated with search warrents (remember Elliot Spitzer: even before the news was out, some of his wall street enemies already had claimed victory: they knew that the FBI was hitting him. How?… Of course, the ´case´ against Spitzer was dismissed, but the signal to others was loud and clear: do not try to fight against Wall Street).

    ¨A lot of problems with the process have been exposed, we now need to
    improve the process.¨

    I believe there are so many fundamental problems, that merely improving the process will not be enough. We need fundamental changes, but with lobbyists all over WashDC, Wall Street the biggest donor to both parties, the oligarchs too powerfull, I am becoming doubtfull….
    ´The audacity of hope´ could very well end up in the futility of hope.

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