The Bailout and "Econometrics"

Was corresponding again with my friend D and he mentioned the vagaries of econometrics. Which got me thinking.

Who the hell would use a word like "econometric" anyway? How 'bout "measuring the economy"? Or maybe we should all start talking like that:
I had a portion of lasagna today that was gastrometrically unwise. Then I took my pedometer for a nice physiometric jog, before taking a nice, long,
thermometrically-calibrated shower. I'll probably sleep late tomorrow (narcometrically speaking).

In all seriousness, I don't think there is any operative distinction between economics and econometrics. One just has an extra syllable.

Read more of "The Bailout and "Econometrics""

Palin Pygmalion

Fareed Zakaria, that lightweight editor of "News"week, quotes the following Palin verse in its entirety:

That's why I say I, like every American I'm speaking with, were ill about this position that we have been put in where it is the taxpayers looking to bail out. But ultimately, what the bailout does is help those who are concerned about the health-care reform that is needed to help shore up our economy, helping the—it's got to be all about job creation, too, shoring up our economy and putting it back on the right track. So health-care reform and reducing taxes and reining in spending has got to accompany tax reductions and tax relief for Americans. And trade, we've got to see trade as opportunity, not as a competitive, scary thing. But one in five jobs being created in the trade sector today, we've got to look at that as more opportunity. All those things under the umbrella of job creation. This bailout is a part of that.

After which he responds: "This is nonsense—a vapid emptying out of every catchphrase about economics that came into her head."

I'm not so sure. Look closely at it -- the formal strategy of giving one thing, then not one but two, then not two but three ...

I think it's a subtle homage -- to Michael Palin, and (John Cleese):

Read more of "Palin Pygmalion"

And He Shall Take Out the Holy Hand Grenade... (Pelosi Opens Up a Can?)

So the Republicans blame a fiery speech from Pelosi for their failure to vote for the bi-partisan bill. They'd rather risk crashing the economy than suffer their feelings to be so cruelly hurt. Or something like that (***cough:political cover).

But here's the text of the speech. Seems like pretty thin gruel to me (strikes my black heart more along the lines of (gasp) accuracy).

SPEAKER PELOSI: Madam Speaker, when was the last time someone asked you for $700 billion?

It is a number that is staggering, but tells us only the costs of the Bush Administration's failed economic policies-policies built on budgetary recklessness, on an anything goes mentality, with no regulation, no supervision, and no discipline in the system.

Democrats believe in the free market, which can and does create jobs, wealth, and capital, but left to its own devices it has created chaos.

That chaos is the dismal picture painted by Treasury Secretary Paulson and Federal Reserve Chairman Bernanke a week and a half ago in the Capitol. As they pointed out, we confront a crisis of historic magnitude that has the ability to do serious injury not simply to our economy, but to the American people: not just to Wall Street, but to everyday Americans on Main Street.

It is our responsibility today, to help avert that catastrophic outcome.

Let us be clear: This is a crisis caused on Wall Street. But it is a crisis that reaches to Main Street in every city and town of the United States.

It is a crisis that freezes credit, causes families to lose their homes, cripples small businesses, and makes it harder to find jobs.

It is a crisis that never had to happen. It is now the duty of every Member of this body to recognize that the failure to act responsibly, with full protections for the American taxpayer, would compound the damage already done to the financial security of millions of American families.

Over the past several days, we have worked with our Republican colleagues to fashion an alternative to the original plan of the Bush Administration.

I must recognize the outstanding leadership provided by Chairman Barney Frank, whose enormous intellectual and strategic abilities have never before been so urgently needed, or so widely admired.

I also want to recognize Rahm Emanuel, who combined his deep knowledge of financial institutions with his pragmatic policy experience, to resolve key disagreements.

Secretary Paulson deserves credit for working day and night to help reach an agreement and for his flexibility in negotiating changes to his original proposal.

Democrats insisted that legislation responding to this crisis must protect the American people and Main Street from the meltdown on Wall Street.

The American people did not decide to dangerously weaken our regulatory and oversight policies. They did not make unwise and risky financial deals. They did not jeopardize the economic security of the nation. And they must not pay the cost of this emergency recovery and stabilization bill.

So we insisted that this bill contain several key provisions:

This legislation must contain independent and ongoing oversight to ensure that the recovery program is managed with full transparency and strict accountability.

The legislation must do everything possible to allow as many people to stay in their homes rather than face foreclosure.

The corporate CEOs whose companies will benefit from the public's participation in this recovery must not benefit by exorbitant salaries and golden parachute retirement bonuses.

Our message to Wall Street is this: the party is over. The era of golden parachutes for high-flying Wall Street operators is over. No longer will the U.S. taxpayer bailout the recklessness of Wall Street.

The taxpayers who bear the risk in this recovery must share in the upside as the economy recovers.

And should this program not pay for itself, the financial institutions that benefited, not the taxpayers, must bear responsibility for making up the difference.

These were the Democratic demands to safeguard the American taxpayer, to help the economy recover, and to impose tough accountability as a central component of this recovery effort.

This legislation is not the end of congressional activity on this crisis. Over the course of the next few weeks, we will continue to hold investigative and oversight hearings to find out how the crisis developed, where mistakes were made, and how the recovery must be managed to protect the middle class and the American taxpayer.

With passage of this legislation today, we can begin the difficult job of turning our economy around, of helping those who depend on a growing economy and stable financial institutions for a secure retirement, for the education of their children, for jobs and small business credit.

Today we must act for those Americans, for Main Street, and we must act now, with the bipartisan spirit of cooperation which allowed us to fashion this legislation.

This not enough. We are also working to restore our nation's economic strength by passing a new economic recovery stimulus package- a robust, job creating bill-that will help Americans struggling with high prices, get our economy back on track, and renew the American Dream.

Today, we will act to avert this crisis, but informed by our experience of the past eight years with the failed economic leadership that has left us left capable of meeting the challenges of the future.

We choose a different path. In the new year, with a new Congress and a new president, we will break free with a failed past and take America in a New Direction to a better future.

Read more of "And He Shall Take Out the Holy Hand Grenade... (Pelosi Opens Up a Can?)"

Here beggineth the lesson: why Fanny and Freddie didn't do it Part 2

A very good friend of mine in the legal profession emailed me recently with a ten year-old article he'd been forwarded that ostensibly helped lay blame for the current mess at Clinton's feet. (A note: he's got solid blue bona fides -- he's just too scrupulous to dismiss it out of hand. Admirable after the floor fight today, but I digress.)

It's an argument that's being made a lot recently, whether directed and Fannie and Freddie, or ACORN, or the CRA. I've provided my lengthy and increasingly bombastic response. Let's just say that research comes in handy for a chest-thumping, anti-Grinch smackdown.

Dear D,

It's not a bad article, but there are two key problems with the Rightward argument that Fannie and Freddie/Acorn/the CRA are responsible for the mortgage crisis. The first, and most obvious (to me) problem is that it confirms what we can call basic class-based stereotypes that just happen to break down along white/minority lines. Note that while the article you sent me talks about the growth in the rate of home ownership of whites versus minorities, it says nothing about overall rates or total numbers. I think it's still fair to assume that whites received a plurality of these loans, if not a majority, in the 90s, due to the fact that they outnumber minorities (by definition) and traditionally were more likely to receive loans in general (see above regarding prejudice). The CRA was designed to attack precisely that problem -- it was a law that insisted banks had to give loans to the populations that they served (you couldn't have branches in black and white communities, but give loans almost exclusively to the white community).

So much for my first quibble -- but one that doesn't matter much. My biggest problem with this line of argument is the timing. The extremely high-risk mortgages, particularly the explosion in Adjustable Rate Mortgages, came well after Clinton's term in office. The CRA was a piece of legislation that Carter enacted. But, as this article makes clear, the expansion under Clinton was not into ARMs, and certainly was not into deposit-less mortgages.

M's mom is a mortgage broker -- unfortunately at WaMu -- and as she points out, the banks that were subject to CRA or Fannie and Freddie have been in better shape as a whole during this crisis, because the standards which these regulations created were higher. For one, if it was a government backed loan, you still had to *prove* your income, because the paperwork went back to Fannie and Freddie for review. Below is an article from The American Prospect that debunks the conservative argument in respect to the CRA.

The other problem is that the government programs were more careful than the private ones. Note that the article you sent me isn't about subprime loans at all -- which typically are prime +3 or 4, not +1. Even more damning to the right-wing argument is that subprime loans were originally defined as those that don't fit Fannie and Freddie guidelines -- the ones Fannie and Freddie wouldn't take because they were too risky.

The takeaway for me is that you *could* argue that Carter and Clinton had some effect, in that they encouraged some of the first experimentation with these new mortgage vehicles. But all of their programs were vastly more conservative than the bizarre shit that banks like WaMu (who largely operated outside of the CRA and Fannie/Freddie) were doing. My sense is that what happened was the "liberal" mortgage programs showed that minority default rates were lower than people expected, and hence good business. So some entrepeneurs decided to get ahead of the curve with some radically more risky vehicles -- which Greenspan decided to support and explicitly refused to look at regulating. The private sector cowboys rode the bubble, and then Fannie and Freddie got involved under the Bush Administration because they were agressively deregulating them and the CRA, and F&F were losing market share (remember--they were private entities with a bottom line). The upshot is that, as far as I can tell, the policies which Democratic administrations enacted were actually pretty solid because they were careful. But when the Bush administration embraced much higher-risk lending combined with shredding oversight, a solid policy spun out of control.

At the end of the day, you're right, no one will ever be able to say with full certainty what the cause is. But it's no surprise that the bash CRA/Fannie Freddie club are people who hate entitlements, affirmative action, etc., etc. They forget how many bad credit/poor whites were out there receiving these loans, too. I haven't been able to find any national statistics. But the Furman center in NY does an annual review of the NYC housing market that has some fascinating findings. It shows that the total percentage of loans that were subprime, after holding at 3% in the 90's, skyrockets after 2001 to over 20% in 2005-6. I don't see how you can pin that on anyone but Bush and his Fed+Treasury. Further, the study shows that black subprime lending was a much higher total percentage of subprime loans in 2005 -- around 44% versus 16% to whites of all subprime home purchase loans. But let's dig deeper -- it's important to remember that a quarter of N.Y is black, and less than half white. To get close to a national statistic (demo 76% white vs. 12% black), if these rates hold, you do simple math, (.16*.76/.44 vs. .44*.12/.25). That works out to 24% of subprime mortgages nationally going to whites, versus 21% going to blacks. If you figured hispanics the same way, given that their rate in NYC fell between whites and blacks, I think you'd see a similar figure. Which is to say that white people contribute as much to this mess as any individual minority.

Which I guess goes to say, that the next time someone sends you a ten-year-old article as evidence that their Limbaugh talking points are true, (and especially if they are fellow members of the legal profession) please tell them for me, "Your shit is weak. Go do some actual research." I mean, what are interns for?

Damn, that felt good. Please feel free to forward this -- and I hope you don't mind if I post it.

-devo

P.S.> Republican word on why they didn't back the bailout: Nancy Pelosi hurt my feelings. Wow.

Read more of "Here beggineth the lesson: why Fanny and Freddie didn't do it Part 2"

Debate

Well, one of the problems with cooking burgers for people during the debate is that you're cooking burgers for people during the debate. So I only saw about a quarter (I'm going to watch the whole thing tonight.) But I will say that Obama seemed to be doing exactly what he needed to: proving he was calm, intelligent, and reassuring as a leader. And McCain sounded nervous to me -- there was all of this tension in his voice. I thought he was sweating. Obama doesn't need to win anything -- if he shows he'd be a cool head in tight situations, and people come to feel comfortable with him, it's over. And McCain stop Obama from sounding intelligent or staying cool. Put a fork in the straight talk express.

Read more of "Debate"

Debate watching

I'm having some friends over to watch the debate tonight with beer and burgers (and gasp, we're not all rooting for the same team). But tonight also marks the anniversary of the 19th Amendment, which gave women the right to vote. It's a striking anniversary for this debate. Of course, the 19th Amendment came at the heels of the 18th, prohibition. As boywonder notes, in some ways, prohibition wasn't such a bad thing:

Read more of "Debate watching"

Tech news

So I spent last night pulling apart my laptop to replace the cooling paste that's between the heatsink and the CPU. It's been overheating lately, and I had a feeling it had something to do with when I swapped out the old 1.6 GHz cpu for a newer, 2 GHz chip a year ago (ran 70-92C hot but much faster!). (Don't try this at home -- completely disassembling a laptop is not for the faint of heart. But with a 4 year old laptop that you still love, it's worth it.)

It took me a couple of hours and had me up till 2 -- but this time I read up on how to clean the cpu and the heatsink properly (go go google search). And now the CPU is running rock solid at 43 degrees C running flat-out on a cpu test. It went through the night like that. I feel like my baby just brought home straight A's.

On an alternate note, iTunes 8 is pretty but the video craps out in WinXP. I've tried a lot of troubleshooting (can't even reinstall the old 7.4 version). Maybe they're trying to drive me over to Mac... On the plus side, the Genius function is fun so far, though combined with 1-click my checkbook might take a big hit. The funny thing about Apple stuff -- if a competitor program like win media player pulled this crap it'd be in the trash. But it's love, you know? I guess I'm not *really* a PC.

Read more of "Tech news"

McCain calls "game on"

Well there's no deal in Washington tonight, but I guess the car passed. "Time in!"

Read more of "McCain calls "game on""