My favorite posts: Part 2, 2006 and 2007
[Continued from yesterday’s Part 1.]
Yesterday’s entry looked at my five favorite posts from 2005:
February, 2005: The four kinds of money
May, 2005: Slums are economically rational
June, 2005: Government is a factory
June, 2005: The Law of the Observant Herd
November, 2005: L’horloge Orange
Today covers 2006 and 2007.
February, 2006: Greenspan’s last testament:
Unlike the typical financial institution, which is as a fish in the sea, each GSE is like a whale in a swimming pool. It’s so big that it soaks up disproportionate space, and any move, any tremor, any twitch, sends shock waves throughout the pool, scattering the fish.
As Fannie and Freddie increase in size relative to the counterparties [The other half of any transaction. — Ed.] for their hedging transactions, their ability to quickly respond to changing market conditions and correct the inevitable misjudgments inherent in their complex hedging strategies becomes more difficult,
“You can’t hedge something this big.”
Whales move more slowly than fish (they have a much slower OODA loop). The GSEs are so big they cannot be financially nimble.
Put an elephant on one end of a seesaw, and then put a hundred small children on the other. If the elephant gets off, the kids go flying.
“Now, Fannie, you’re Congress’s friend, right?”
March, 2006: Zoning oneself blue in the states?
There I was, having an animated breakfast conversation with Harvard’s Ed Glaeser, when the following thought struck me:
Are Democrats zoning themselves to a structural electoral minority?
Knocked me clear off my horse, it did
June, 2006: Public housing: the Ghost of Christmas Yet To Come:
What does the future hold for public housing? Is the future as grim as Dickens’ Ghost of Christmas Yet To Come foretold:
“Before I draw nearer to that stone to which you point,” said Scrooge, “answer me one question. Are these the shadows of the things that Will be, or are they shadows of things that May be, only?”
On the Web site of my for-profit affordable housing consultancy, Recap Advisors, I’ve posted an exploration of this question in Web Update 55: Public housing: the Ghost of Christmas Yet To Come? The Web Update also includes an article of similar title just published in the Journal of Housing and Community Development, bimonthly publication of NAHRO (the National Association of Housing and Redevelopment Officers), which represents America’s roughly 13,000 public housing authorities.
Christmas Yet To Come? For public housing, the present circumstances are grim enough.
September, 2006: ‘Those’ people:
Ever since I started in affordable housing thirty-plus years ago, knowing nothing about it but what I observed and deduced, I’ve been confronted with prejudice against ‘those’ people:
Those people aren’t like us.
Those people are lazy and just don’t want to work.
Those people are just out to beat the system.
Those people have too many children.
Pots for sale, Kibera,
[…]
Very shortly after I started AHI (reasons why Parts 1, 2, and 3), I was in South Africa giving a few talks about how we do it (or don’t) in the USA (and how it works and how it doesn’t) and I realized I need to start with something, so I got up and began, “Affordable housing is where those people live.” I recited all the charges against those people. “And you all know who those people are, don’t you?”
Hesitant chuckles, discreet sidelong glances. Everybody does know who their local ‘those people’ are. Who are the local those people is always unique to each place. It’s not always race, nor even always visible ethnicity. Sometimes it’s tribe, or accent, or dress, or education. But there’s always a group of those people who demonstrate their unfitness by their poverty and their tolerance of deplorable housing conditions, darling, how could anyone live that way?
[…]
People tell me I’m passionate about affordable housing. I hope so, and not just because of its intellectual and other challenges. I cannot pass these school kids, cannot walk a slum, without seeing someone in whose eyes I see myself, someone who I could be but for grace and luck. And at such moments I think that, If we are to do some good in the world and for its housing, we must see that however many bad things and individuals our world contains, it is brimming also full of people, and none of them are those people.
They’re people.
In a bold stroke that caught the financial world by surprise, Fannie Mae today announced that it had canceled its government charter.
“Ever since we reported multi-billion-dollar writedowns,” said CEO Daniel Mudd, “we’ve been under a cloud with Congress. We’ve been on our best behavior, not misbehaving at all, but despite two years of contrition, we still cannot produce an audited financial statement. Allegations of ‘false signatures’ persist, the government is suing our former CEO, he’s suing us for wrongful termination and back pay, and suing our regulator too — and we’re paying his lawyers to do so! — we are suing our former auditors for not having stopped our former CEO from smoothing earnings with financial tricks, and our stock has taken a pounding. Congress has been endlessly debating what to do about us: whether to limit our balance sheet, impose a strong regulator, strengthen OFHEO powers and its funding, or do something else. Others question why we fund subprime lenders instead of competing with them.”
[…]
Asked about Fannie Mae’s move, a Freddie Mac spokesman said, “We are absolutely not a duopoly. We’re canceling our charter too.”
Upon hearing the news, President Bush exclaimed, “Dang! And after leaving them vacant throughout my Presidency, I was just getting ready to select the Presidential nominees for Fannie Mae’s board.”
The charter cancellation is effective on this first day of the second quarter of 2007
April, 2007: Securitization: the Adventure of the Top-sliced Lender:
Upon my arrival in the paneled Gentlemen’s Lounge, I asked Mycroft what moved him to invite me.
Mycroft Holmes surrounded himself with the most comfortable of masculine surroundings
[…]
“Sir, you have the instincts of an investment banker. Yet in creating this security, we are still at risk for the balance:”
[…]
“That is a principle of securitization; each time the banker slices offer a lower tranche — as a concession to the Bourse, we have adopted their term — the remaining junior security is on the one hand higher yield, and on the other, a distilled or more concentrated residue of risk.”
“Even so, it is a significant capital sum to have invested in one’s own securities.”
“Too significant by far,” rumbled Mycroft.
Watson knew that he would need another day to bone up on securitization
October, 2007: Cryptobiotica:
No, cryptobiotica is not the newest
Viva cryptobiotica!
It’s a curious form of desert life that has a direct analog in housing and urban development, something very much on my mind since my recent trip to
Nancy and I first encountered cryptobiotica a dozen years ago when we were touring
Don’t bust the crust!
Cities and slums are economic ecosystems, and just as a biological ecosystem has its biota, so to do all the active entities – that is, the companies, professionals, and individuals who operate within the ecosystem – comprise its ecota [my ungainly term].
From a distance, cryptobiotica looks like nothing much.
See anything alive in this picture?
That speckled mass, which gives the soil a held or dried-mud appearance, is a complex form of life. As described on the Web site of Capitol Reef National Park:
Cryptobiotic soil is found throughout the world. In arid regions, these living soil crusts are dominated by cyanobacteria, and also include soil lichens, mosses, green algae, microfungi and bacteria.
In other words, what appears from our vast height to be simply dried mud is actually a complex interdependent community of organisms that have eked an existence out of an inhospitable and apparently empty environment.
Sort of like the people who live in slums:
Really, my favorite blog post is always the next one coming up from the keyboard.
What are your favorites? Write a comment below!
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