Month in Review: October, 2012
You thought that was outrageous? Wait ’til you see what we’ve got next!
Each time I think the global banking crisis has produced its worst outrageous bilking of the public, another one surfaces to disgust me all over again, and in October I came across the fraud perpetrated on millions of Spaniards, with the apparent connivance of Spain’s Central Bank, detailed at length in Banker’s breach of trust: Part 1, who was robbed?, Part 2, Who is guilty?, and Banker’s breach of trust: Part 3, Who should pay?
Two days ago, working from a recent Wall Street Journal (October 7, 2012) article, we encountered millions of Spanish depositors defrauded(**) by banks in which they placed their trust; and yesterday we saw that the deceit was structural, running from local branch managers all the way up through the Spanish banking regulators.
You gave us your money, and now we don’t want to give it back
(**) Doubtless those involved will protest that they never sought to defraud anyone, but as oleaginous Spanish Finance Minister Luis de Guindos claimed, “the problem isn’t the product itself. If people understand it, there’s no problem. The problem is that the securities were placed among people that didn’t understand them.” But that’s garbage: depositors don’t go to a bank to buy complex securities, they go to put their money on deposit. To sell them something else without making the substitution abundantly clear is as fraudulent as passing off the wrong drug for the right one with a flippant, “Oh, just take ‘em, they’ll make you feel better.”
Either it’ll cure you or it’ll kill you
However, nearly 90% of those whose money was deceitfully captured still have no redress nor any reason to be confident.
So far, Ms. Pineiro and Mr. Gonzalez´s case hasn’t been taken up.
Up to now, the media have largely downplayed the increasing violence in Greece and Spain, even as unemployment rises dramatically (over 25% in both countries, as far as I can tell), but if the history of economic collapses tells anything, it is that such endings always have a riotous phase.
Austerity protest riots in Madrid, 2012
Tanks rolling through the city is unthinkable … and then one day it just happens: Chile, 1973
In either a burst of inspiration or a flight of fancy, I likened the bankruptcy and dissolution of storied law firm Dewey & LeBeouf to the looming expulsion of Greece from the Euro in Any landing you walk away from: Part 1, Dewey think it’s fair?, and Part 2, where’s LeBeouf?:
As we saw yesterday, using as source material a Wall Street Journal (October 9, 2012) article on an unexpectedly swift recovery from former partners of now-dissolving law firm Dewey & LeBeouf, for those facing trouble any landing is a good one if you can walk away from it, especially if the resolution is swift, final, and better than endless mutual battery.
We’re emotional enough to be violent, and rational enough to know you won’t hit back
Indeed, there is a strong temptation in these situations to inflict pain for its own sake, as a means of making the culpable debtors aware of just how angry the creditors are. But that’s unwise.
5. Those who rode along must release their anger at those who were driving. Settlement – whether in divorce, tort, or warfare – always involves some letting go of anger; eventually the head (one’s own, or the advisor’s) overcomes the wounded enraged heart.
You think I was born yesterday?
In a similar leap-of-ideation, I connected the concept of mobile virtual presence to the potential rearrangement of housing demand in Moving jobs to housing:
Does everybody get this kind of a relocation allowance?
Virtual teams can be much more efficient than place-based ones. At AHI, for example, our business could not operate in its current global form without Skype or its equivalent, because via Skype we stay closely connected to our Associates around the world. Once that personal connection is made, however, it makes little difference whether the person I’m Skyping in five steps away, or five thousand miles.
“Being able to source people from anywhere in the world is a big advantage to companies,” he says. “In most jobs, you don’t actually touch anybody, but it’s useful to be able to see and talk with people informally.” Hassan says a remote worker could stay logged into a Beam system all day, so that anyone can stroll up and start a conversation with them, just as they would in person.
“Let’s get my robot and your robot to meet up for a charging session.”
Likewise, the Beam’s pilot can roll over to a colleague, or attend any formal or informal meeting.
Beam has an eight-hour battery life and weighs approximately 100 pounds (45 kilograms), making it sturdy enough to shove office chairs or a partly closed door out of the way.
Just like the busybody office worker.
Have you been talking behind my back again?
People are the last link in any housing value chain, whether that chain involves production, financing, or operations, and if the last link is erratic or demotivated, the results can be self-defeating, as we saw in The bio-thermostat override, where the Boston Housing Authority, having overseen a multi-million-dollar renovation that added a new sophisticated HVAC system, reversed course after a few sweltering days and Boston Herald articles and allowed residents to install their own units:
That’s probably the right answer, for resident relations; pity it could not have been engineered before the BHA had a public-relations dustup on its hands.
BHA boss Bill McGonigle [Sic: McGonagle – Ed.] changed his stance, Agro added, out of concern over the health of some seniors.
Good optics for sure; good property management, maybe not.
“Somebody loves me!” said a beaming Donald Curtis, when he heard he could get a new AC unit for his apartment.
Fellow tenant Anthony Cartolano, who turns 74 today, was delighted he could unpack his old AC: “God, that’s great news.”
The BHA said they will also purchase “some” portable air conditioning units as soon as possible to help combat the blistering temperatures.
Of course, it would have helped had the BHA thought to engineer in feedback loops for their 301 bio-thermostats before doing the $15,000,000 renovation.
“They were supposed to do the thinking”: Resident in Dallas public housing
Naturally there’s a lesson here: Don’t design systems while ignoring their users, because users can defeat any system, no matter how ‘smart.’
Those same users are both consumers of local services and payers of local real estate taxes, though those two events are often separated by enough time to cause the users to behave with economic irrationality, as the voters in Saco, Maine have discovered in Mayor, there must be a mistake in my tax bill! Part 1, the revenue side, and Part 2, the expenditure side:
Thirty seconds’ search revealed the capital budget in its full glory:
That’s a lot of paving: and what are these PACTs?
At this point my sympathies swing to Ms. Pelkey, though not for the school budget, but rather for the huge increase in capital spending at a time when the residents are hurting. None of these expenditures was so important they had to be done last year, and now they all rush in at once? his has the whiff of a city council deciding that, if anything is moving forward on the capital front, everything might as well move forward on the capital front.
Sure, have a side of the fingerling potatoes, and another of the broccoli with Hollandaise sauce – no problem!
Everybody else is paying for this, right?
The battle will be opened on the school budget, which has already been declared a battleground:
That post also fetched this comment from an anonymous Saco Resident:
The Saco city council is nothing but a bunch of selfish incompetent crooks, who turn vicious on the very people they were elected to protect. They never read our country’s constitution and taxation without representation is what they’re all about. Our founding fathers fought and died to protect us from these crooks. Richard Michaud: you are a disgrace to America and what it stands for.
Anyone here running for Saco City Council?
The difference between users and bystanders is equally well illustrated when it comes to the development of income-producing property, for the direct users care about the economics and the bystanders often care about the esthetics, a difference of value functions that a clever developer can arbitrage, as shown by Millennium Partners’ interest in preserving the nostalgia of Filene’s Basement as presented in How many square feet in a cornice? Part 1, the right brain, and Part 2, the left brain:
If the fancy purely decorative architecture is the political price of an additional ten stories of residential, that’s a price worth paying regardless of whether you’re thinking as an urbanist (density), a historian (connection to the past), or a developer (higher value and profit).
Almost anything will look nicer than this
On the other hand, if I could have traded the period details for more affordability, that would be better, wouldn’t it?
Well, do we want style or affordability?
In October, I picked up another shard of the cracked windowpane through which we view the Chinese economic conundrum, exploring the possibility that yet another set of Chinese numbers is wrong, in China’s ‘producers’: Part 1, Thank you, I knew I could con you, Part 2, Let’s assume that you are a dishonest man, and Part 3, Have I ever steered you wrong? Always:
– even if there are more than enough ‘secured’ liabilities that claim said assets as collateral. And while the status quo is marching on, the Ponzi is rising, and new liabilities are created, all is well.
In other words, if each new issue of Debt is worth its face amount or more, the fact that it’s a pledge of something else doesn’t matter:
Debt n > … > Debt 2 > Debt 1 > Commodity
However, the second the system experiences a violent deleveraging [Drop in asset values – Ed.] and the liabilities have to be matched to their respective assets as they are unwound [Because holders of paper seek to collect on their collateral – Ed.], all hell breaks loose once the reality sets in that each asset has been diluted exponentially.
That is, if:
Debt n < … < Debt 2 < Debt 1 < Commodity
If the inequalities are reversed, then somewhere in that chain – maybe several places along the chain – some of those pieces of Debt are worth zero.
That’s counterparty risk for you
The financial shakeout continues working market change, much of it back toward equilibrium though inn different forms, as explored in two pieces, first what has been lost in There ain’t no such thing as free checking:
Every banking transaction costs the bank money to process, and ATMs have a capital and maintenance cost, and that money has to come from somewhere:
Dodd-Frank and the CFPB have coincided with a decrease in free checking services, as banks have added new fees to accounts to make up for revenues lost as a result of Dodd-Frank. Those who can’t afford the new fees that the CFPB and Dodd-Frank have caused will find it harder and more expensive to rent a home, deposit their paycheck and purchase food and clothing.
Sooner or later, the fees have to be paid:
The banking industry looks to lose more than $10 billion a year in revenue through federal restrictions on debit cards and overdraft policies, according to bank consultants.
A government can prohibit any particular financial product or service, but it cannot repeal the laws of economics, and if some costs are outlawed, others must be added to take their place.
Grab some dirt first
Then we saw what may be gained, via The meandering evolution of Amazonian bank:
Because they are large institutions whose very existence depends on the perception of stability, we tend to take banks’ existence for granted – yet every bank started somewhere, as something much less evolved, such as an interim lender to a valued supply-chain partner, as revealed in this article from the Wall Street Journal (October 4, 2012):
As it crawled out of the primordial financial ooze
Small Businesses Are Finding An Unlikely Banker: Amazon
Actually, as we’ll see, Amazon is a likely banker, in the very same way Wal-Mart is a likely banker.
Finally, during October I took a long and winding rattle through urban development, arriving in a leisurely fashion at an unexpected destination, in A desire named streetcar: Part 1, the virtue of speed, Part 2, the defect of congestion, and Part 3, the charm of idling:
Boston has the duck boats, which are the ultimate tourist-travel vehicle – amphibious, open-topped, circulatory rather than point-to-point.
Make way for duck boats!
Streetcars worked as urban transport when they were displacing horses.
When cars arrived, the streetcars were displaced as urban transport and fell out of use.
If they are to be brought back, it must be as urban amenity, aimed not at locals but at tourists.
San Francisco streetcar rusting in Missouri
Why, they told me to take a streetcar named Desire and then transfer to one called Cemetery and ride six blocks and get off at Elysian Fields.
– Blanche DuBois, A Streetcar Named Desire