I have to admit that I find it odd that this guide to visualization methods has been visualized in a form invented for the chemical elements, rather than in some new form, but it’s still pretty cool. (via)

Bonus visualization: the housing bubble as a roller coaster. (via)

safe investments

Those who have seen Boiler Room, which I just watched last night, can see the irony in this:

But systemic corruption—and that is the right word—has been unveiled at lenders across the board. Two of the most revealing stories on the culture that overtook the lending industry were published early—February 4 and March 28, 2005—by the Los Angeles Times. Reporters Mike Hudson and E. Scott Reckard found court records and former employees who described the boiler-room culture that pervaded Ameriquest—hard-sell, scripted sales pitches, complete with the “art department” in Tampa. Ex-employees confirmed, as did Lisa Taylor, the loan agent quoted at the top of this story, that copies of Boiler Room, the movie about ethically challenged stockbrokers, was indeed passed around as an Ameriquest training tape.

[Ex-employees] described 10- and 12-hour days punctuated by ‘power hours’—nonstop cold-calling sessions to lists of prospects burdened with credit card bills; the goal was to persuade these people to roll their debts into new mortgages on their homes.

Power hours. And if the power-hour culture pervaded the market leaders, what of smaller lenders and mortgage brokers? Here is Glen Pizzolorusso, a young sales manager at WMC Mortgage, an upstate New York brokerage, who earned—get this—$75,000 to $100,000 a month:

What is that movie? Boiler Room? That’s what it’s like. I mean, it’s the [coolest] thing ever. Cubicle, cubicle, cubicle for 150,000 square feet. The ceilings were probably 25 or 30 feet high. The elevator had a big graffiti painting. Big open space. And it was awesome. We lived mortgage. That’s all we did. This deal, that deal. How we gonna get it funded? What’s the problem with this one? That’s all everyone’s talking about . . .

We looked at loans. These people didn’t have a pot to piss in. They can barely make car payments and we’re giving them a 300, 400 thousand dollar house.

To business reporters of a certain age, boiler rooms are associated with the notorious stock swindlers of the late nineties—A. R. Baron, Stratton Oakmont—criminal enterprises all. But all the elements of the bucket shops of the past—the cold calling, the hard sell, the bamboozling of over-their-head civilians, not to mention the outright lying, forgery, and fraud in its purest form—were carried out on a massive scale and as a matter of corporate policy by name-brand lenders: IndyMac, Countrywide, Citi, Ameriquest.


Sort of a combination of works like “The Subprime Primer” and educational films, the Mortgage Crisis Blues are just what you need to help you follow the news.

the beginning of time

Paul Krugman writes:

I wish people wouldn’t say that Fannie and Freddie have been “nationalized.” I mean, it’s basically accurate, but it conveys the wrong impression.

The fact is that Fannie Mae was originally a government agency; it was privatized in 1968, not for any good economic reason, but to move its debt off the federal balance sheet (and Freddie was created 2 years later as a competitor.) Private ownership of Fannie and Freddie never made any real sense, and was always a crisis waiting to happen.

So what we’re really seeing now is deprivatization.

As an economist, Krugman should know that for most non-historians history began sometime in the 1950s and 1960s, depending on what events led to things becoming the way they are now (or just recently were). Therefore, for purposes of discussing Freddie Mac and Fannie Mae, history began in 1968.

“Listen, I–I’m sorry to tell you this, but, uh, you’ve been fired. Management had to replace you with a Mac II and a part-timer with a Masters degree.”

I know there are people – I count myself as one – who are reluctant to watch even medium length videos online, especially if they’re of something that could easily be covered in a transcript. But this is an actual short film with actors and everything, and it’s darkly comedic too: “The Debt.” I saw it on Bravo sometime in the 1990s and I’ve been looking for it online for a few years now, ever since I started paying attention (more or less) to debt in the news. It fits in with the mood of the recession of the late 1980s and early 1990s (the debt counter shows the 1992 interest); aside from the technology the characters use, it doesn’t seem all that out of date.

Note: it’s on youtube in two parts of 5 and 7 minutes (not counting credits it’s just over 10 minutes), but if you play it at the link above you should be taken directly from part 1 to part 2. For more on the film go here and click on “shorts” in the top menu.

indy mac, when are you coming back?

Earlier tonight I caught people on CNN talking about the possibility of a bank run on Monday when IndyMac re-opens after what I guess was already a bank run. (Want to see an old-style bank run? Check out 51:45 on this video.) Apparently it would not be a good idea for people to rush out and try to withdraw their money; the commentators agreed that this needs to be made clear to the public. I suppose political leaders could use their platform to address this, but it hardly seems like the kind of thing a President, for instance, would want to get involved in.

Update: Reading about another Mac and a Mae, their relations with Congress don’t look very healthy (via):

The political battle lines were drawn by 2000, when a senior Clinton administration official called on Congress to take steps that might have diminished the companies’ special status. Treasury Undersecretary Gary Gensler also urged that regulators be given more power to set capital requirements for Fannie Mae and Freddie Mac.

The companies fought back.

“We think that the statements evidence a contempt for the nation’s housing and mortgage markets,” Freddie Mac spokeswoman Sharon J. McHale said at the time.

Even after Freddie Mac was shown to have manipulated earnings, Congress remained deadlocked over legislation to create a stronger regulator. Opposing one such bill in 2004, Sen. Charles E. Schumer (D-N.Y.) argued that a hostile regulator could use the proposed powers to choke the companies.

When a federal regulator accused Fannie Mae of cooking its books to increase bonuses, lawmakers lined up to denounce the regulator. Rep. William L. Clay Jr. (D-Mo.) said a House panel had no business holding a hearing on the matter — “unless this is truly a witch hunt.” Fannie Mae was later found to have overstated profits by $6.3 billion.

Former representative Richard H. Baker (R-La.), who chaired a subcommittee that oversaw the companies, struggled for years to rein them in and tried to show they were being managed for the enrichment of their executives. When Baker obtained data on Fannie Mae pay, a lawyer for the company threatened him with personal liability if he made it public, Baker recounted last week.

Critics of the two firms included former Reagan administration official Peter Wallison, who crusaded against them at the American Enterprise Institute, and a coalition of financial companies whose interests often conflicted with those of Fannie Mae and Freddie Mac. The Bush administration pushed a similar agenda.

“The simple truth is that there is no need for our financial markets to be exposed to this risk,” Emil W. Henry, Jr., an assistant Treasury secretary, said in 2006.

On the other side, a top lobbyist for Freddie Mac held more than 75 fundraisers for members of the House Financial Services Committee in an 18-month period several years ago, raising nearly $3 million, according to records brought to light in a federal investigation. The lobbyist’s fundraising dinners typically featured the committee’s Republican chairman at the time, Michael G. Oxley of Ohio.

Those and other activities led to a record $3.8 million fine against Freddie Mac in 2006 for allegedly[*] violating federal election law.

In an internal memo in 2004, Fannie Mae executive Daniel H. Mudd affirmed what the company’s critics had long contended: In the political arena, “we always won” and “we took no prisoners.”

“We used to, by virtue of our peculiarity, be able to write, or have written, rules that worked for us,” wrote Mudd, now the company’s chief executive.

*This appears to be one of those mysterious usages of “alleged.” Quick searches suggest that this was a settlement in which it was agreed that the allegations will continue to be called allegations.

scene from the mortgage mess

Francis William Edmonds, The Speculator (1852)
(Smithsonian American Art Museum)

policy is the best policy

I said I’d start blogging soon, but soon can mean a lot of things; in this case it meant “within a month.” In any case, I haven’t had time for much blog stuff lately and am behind on all my blog reading. But I wanted to comment on this post, and since it’s so far down the page (down multiple pages, in fact) I figured I’d respond here on this content-starved blog.

Eric writes

Broadly speaking, free trade is a phenomenon of whose long-term benefits I am persuaded, while I am concerned about its short-term downside. These are cautiously held convictions, but I hold them.

I am also persuaded that it sounds arrogant and, well, churlish when proponents of free trade say things like this:

and then he quotes some people wondering whether there is a moral obligation to compensate those who lose their jobs to free trade policies. Not all of them say “no”, but one does outright, and seems offended that one would even ask.

All of this leaves me wondering why the question of free trade gets to be in the “policy question” category in the first place, while the question of compensation – or, to put it more generally, the question of whether to provide some kind of support for the unemployed – is in the “moral question” category. Is there a moral mandate for free trade? Do the voters owe the country free trade policies (which they can give by voting for those who will vote for and implement such policies)? The answers could be yes, but are those questions often asked?

Meanwhile, I am persuaded that though the moral questions are not unimportant, it should be possible to discuss the compensation question as a policy matter, as Eric does towards the end of his post:

Finally, we might consider that historically, globalization (of which free trade is one aspect) has caused all manner of political problems that might, as a practical matter, be avoided with the judicious use of policy. I do not see that calling the un- or under-employed — who are assuredly among the under-insured and the generally poorly treated — “churlish” represents the best policy path to ensure that we all benefit from open markets.