Friday, May 27, 2005

Our local NPR station did a talk show the other day about the possibility of a real estate bubble -- which, of course, had a pro-bubble "expert" and a no-bubble "expert", for balance. One point that was raised repeatedly was that banks, in writing mortgages, are making judgments about the long-term ability of home buyers to pay, and that they wouldn't endanger their own solvency by writing risky or bad loans. Which might be a comforting point, if it wasn't just wrong.

The problem with this argument is that it assumes that the bank will itself be stuck, long-term, with the mortgage. And that's not necessarily so. What instead happens often is that the bank (or mortgage broker) will sell the mortgage. So, the issuing lender really only has to believe that the mortgage will last long enough to flip, and will look good enough to find a buyer. So, it's not the fiscal acumen of the lenders we have to trust, to keep people from getting in over their heads; it's the fiscal acumen of the buyers. Who are they?

The usual buyer of first resort is either Fannie Mae or Freddie Mac. These are large quasi-non-governmental organizations which were established to create a secondary mortgage market, and their own fiscal rectitude is already somewhat in doubt. But, in a sense, it doesn't matter, since the whole purpose of these companies, as Freddie helpfully explains, is to package up collections of individual home mortgages as mortgaged-backed securities. And so the buck gets passed further. To whom? And what can we say about them?

Well, one of the most active players in the current secondary mortgage market is the Bank of China -- their central bank. And why are they buying American securities? They're buying in order to ship the dollars we pay for their imports back out of the country, lest a glut of dollars there reduce the value of the dollar in yuan. Everyone knows that that will happen eventually -- at which point, the value of these dollar-denominated Chinese "investments" is certain to drop as well. It's certainly no secret from the Chinese themselves, and they seem not to care, so long as the yuan stays "pegged" to the dollar over the short term.

In short, these mortgages can only get written if they look good to a player that seems to show no interest in the long-term value of its dollar-denominated investments. This is not such a comfort.

The point almost wouldn't be worth mentioning, except that both NPR "experts" didn't seem to get it -- for most of the hour, they were happily talking as if the bank that wrote a mortgage was stuck with it until it was fully paid off. One of them is a professor at the Wharton Business School; the other is described as the director of the Milsteain Center for Real Estate at Columbia.

Thursday, May 26, 2005

Tom Friedman is puzzled:

America faces a huge set of challenges if it is going to retain its competitive edge. As a nation, we have a mounting education deficit, energy deficit, budget deficit, health care deficit and ambition deficit. The administration is in denial on this, and Congress is off on Mars. And yet, when I look around for the group that has both the power and interest in seeing America remain globally focused and competitive - America's business leaders - they seem to be missing in action.

Perhaps he should listen more to his own pro-globalization rhetoric. America's business leaders have. Take Boeing, for example. Their 2002 annual report says right up front that "We are transforming -- from a company that knows how to market in countries around the world to one that is a 'citizen' of those countries." And erstwhile CEO Phil Condit said in 1997 that he wanted folks outside America to stop thinking of Boeing as an American company. So this is Boeing's response to the decline in America's prestige and influence: stop being American. And oh, by the way, hire overseas. (Some might think this is not an ideal attitude for a company that gets something like 57% of its revenue from... ahem... "the defense and space sectors." But Congress doesn't object, so who are we to complain?)

At least Boeing hasn't gone as far as Cisco, the networking giant. Speaking in Shanghai not too long ago, their CEO, John Chambers, proclaimed "an entire strategy of becoming a Chinese company"...

Wednesday, May 25, 2005

Scenes from a World's Fair:

The New York World's Fair of 1964 was colossal. Acres of pavilions. Treasures from all over. The Queens Art Museum -- the former New York City pavilion from that Fair and the 1939 Fair before it -- has a plaster cast of Michelangelo's Pietà, as a kind of reminder that Fair director Robert Moses somehow got the Vatican to loan the real thing. There isn't much left.

One such relic is the Unisphere -- the skeleton of a colossal, stainless steel globe, with topographic maps of the continents bolted on, dedicated to "Man's Achievements on a Shrinking Globe in an Expanding Universe." Around it, suspended by wires, are three hoops, one showing the orbit of the first communications satellite. Those were big news, back then. It's still quite intact, though it looks like it hasn't been cleaned in a while. Walking around it, you get a gut feel for some geographic facts that I haven't gotten much any other way. Like the sheer size of the Pacific Ocean -- nearly a hemisphere of water and not much else. If you look at the Unisphere from that side under slate-grey skies, the thing looks disturbingly hollow.

Nearby, crumbling like the feet of Shelley's Ozymandias, is the wreck of the New York State pavilion. This was once a fanciful structure, with a cheery "tent of tomorrow" in bright advanced plastics covering a map of New York State, and platforms suspended on concrete pillars bearing cafés and an observation deck. It's all fenced off now. The roof of the tent is gone, leaving only the supporting wires; the exhibit space within is bare dirt. There were once two glass elevators traveling up and down the pillars. One can still be seen, suspended in midair between the ground and the now-bare platforms, with nowhere left to go.

One last relic of the '64 Fair is inside the Queens Art Museum itself -- the hangar-sized panorama of the City of New York. Sometimes it is updated, sometimes it isn't. The World Trade Center towers can still be seen. Upstairs, until June 5th, is an exhibit documenting Muslims who have vanished from sight, snapped up in various ways by U.S. authorities. Maher Arar, extraodinarily rendered to torture in Syria. Gerald David, deported to Pakistan on a secret flight out of the country. Michele Swensen, detained on charges of nebulous connections to al-Qaeda which were three times dismissed by American judges -- while his American-born kids vanished into foster care. It's worth seeing, perhaps as a reminder of another kind of faded glory.

Tuesday, May 24, 2005

Quotes for our time:

The integrity of future Supreme Courts has been protected from the undue influences of a vocal, radical faction of the right that is completely out of step with mainstream America. That was the intent of the Republican "nuclear option" from the beginning. Tonight, the Senate has worked its will on behalf of reason, responsibility and the greater good. ...

I do not support several of the judges that have been agreed to because their views and records display judicial activism that jeopardize individual rights and freedoms. But other troublesome nominees have been turned down. And, most importantly, the U.S. Senate retains the checks and balances to ensure all voices are heard in our democracy.

I am grateful to my colleagues who worked so hard to achieve this agreement. I am hopeful that we can quickly turn to work on the people's business.

--- Harry Reid, defending his agreement to allow likely party-line votes on three of Dubya's most extreme nominees.

Before I come to describe the Agreement which was signed at Munich in the small hours of Friday morning last, I would like to remind the House of two things which I think it very essential not to forget when those terms are being considered. The first is this: We did not go there to decide whether the predominantly German areas in the Sudetenland should be passed over to the German Reich. That had been decided already. Czechoslovakia had accepted the Anglo-French proposals. What we had to consider was the method, the conditions and the time of the transfer of the territory.

The second point to remember is that time was one of the essential factors. All the elements were present on the spot for the outbreak of a conflict which might have precipitated the catastrophe. We had populations inflamed to a high degree; we had extremists on both sides ready to work up and provoke incidents; we had considerable quantities of arms which were by no means confined to regularly organised forces. Therefore, it was essential that we should quickly reach a conclusion, so that this painful and difficult operation of transfer might be carried out at the earliest possible moment and concluded as soon as was consistent, with orderly procedure, in order that we might avoid the possibility of something that might have rendered all our attempts at peaceful solution useless. ...

... To those who dislike an ultimatum, but who were anxious for a reasonable and orderly procedure, every one of [the] modifications [of the Godesberg Memorandum by the Munich Agreement] is a step in the right direction. It is no longer an ultimatum, but is a method which is carried out largely under the supervision of an international body. ...

Ever since I assumed my present office my main purpose has been to work for the pacification of Europe, for the removal of those suspicions and those animosities which have so long poisoned the air. The path which leads to appeasement is long and bristles with obstacles. The question of Czechoslovakia is the latest and perhaps the most dangerous. Now that we have got past it, I feel that it may be possible to make further progress along the road to sanity.

--- Neville Chamberlain, defending his agreement at Munich.

And no, I'm not comparing the theocons to the Nazis here. I'm comparing Harry Reid to Neville Chamberlain. Each of them manged, in his own way I'm sure, to convince himself that an opponent's brute exercise of power was somehow mitigated by minor concessions over matters of form.

(And yes, the freepers are outraged. Should I be pleased? It's their job to be outraged. It's their place in the movement.)

What cripples the Democrats politically, more than anything else, is the widespread perception that they care about nothing other than clinging to the tattered remnants of their own fading power. They complain that it's unfair to expect them to offer up a program when they lack the power to enact it. Gosh, that sure stopped Newt Gingrich.

This deal just tatters those remnants some more -- preserving the filibuster, as I've noted already, as a kind of theoretical option, which they get to keep as long as the Republicans can't convince their own caucus, on a party-line vote, that the Democrats' use of it is somehow extraordinary. Merely to be seen putting up an actual fight would be worth more than that.

Senator Feingold gets it. Pity the leadership doesn't...

More: A lot of liberal bloggers are taking comfort in James Dobson's fulminations against the deal. "Justice Clarence Thomas, Justice Antonin Scalia, and Chief Justice William Rehnquist would never have served on the U. S. Supreme Court if this agreement had been in place during their confirmations." -- never mind that all of them were in fact confirmed under the long-standing rules which would have permitted filibusters. Well, Dobson objects to the deal because Dobson objects to anything the Democrats do, whether he has a reason to or not. As with the Freepers, that's just his job...

Monday, May 23, 2005

And now, scenes from the classless society. We give you... the airport.

Dealing with airports has gotten a little more obnoxious for all of us, what with new security measures, which (whatever their effectiveness) are designed to let us all know someone cares... well, at least enough to make us take off our shoes. So, we're all in it together.

Well, some are in it more than others. Friends of bigshots at American Airlines, for instance:

Among those who benefit from the generous travel arrangements are AMR's outside directors, their spouses and dependent children. According to its proxy filing, AMR provides travel to directors and their families and pays the taxes that the perks generate. The company accounts for these perks at cost. Last year, these costs were over a quarter-million dollars. In the last five years, the costs totaled $1.4 billion.

Chump change, of course, for a big airline, but worrisome enough to one unidentified shareholder at the AMR meeting who wondered aloud about excessive directors' travel. One director received more than $61,000 under this perk. That would cover 145 round trips between New York and Tokyo as well as taxes paid at a 40 percent rate...

This at a time when the airline has been reducing salaries and benefits for actual employees. Then again, the airlines don't necessarily offer these folks their most elite perks -- those offered to invitation-only, "super-elite" frequent flyer clubs:

On United and on other airlines, members of the secretive, invitation-only clubs are met at the airport by employees and whisked past the check-in line. They wait for their flights in unmarked V.I.P. lounges and are offered liberal upgrades and personalized attention by airline employees. And at a time when airlines are obsessed with improving their on-time records, it is not uncommon for a plane to be held for a super-elite member who is stuck in traffic.

''Super-elites are the Skull and Bones of the sky,'' said the frequent-flier expert Joel Widzer, referring to the blue-blood secret society at Yale. ''Don't bother asking how to join. If you qualify, they'll let you know.

And why might the airlines offer such perks? Well, they have to compete with the ultimate perk, available to those who can afford charters: bypassing all that "security" nonsense completely. Surely, the terrorists wouldn't be uncouth enough to try to hijack a plane with important people on it?

That last article is a little old... the "no security" threshold has been raised a bit.