Bloody Brilliant

Aussie or Kiwi - this magician has a simply marvelous card trick (after a quick warm up, that is)

Dear Potential MBS Investor...

On behalf of Goldman Sachs, we would like to inform you that a recent study of their mortgage backed securities showed that over 1 in 10 of the home mortgages they contain did not meet current underwriting standards. This ratio has been increasing each year for the past few years - and we wanted you to be aware of this trend before you made any further investments.

We have contacted the originators of these loans and impressed upon them that while we reserve the right to include them in our securities, we will not pay full price for them. The price savings on securities containing these loans will be passed along to you if you decide to invest in ---

Okay, sorry. I just can't continue writing that without bursting into hysterical laughter.

By now, the news is out that while investment banks knew full well that their MBS pools had loans that didn't pass underwriting - and that the percentage of those loans was increasing.

Thanks to Gretchen Morgenson over at the NYT, we now know that the firm who studied these loans tried to provide the information to the ratings agencies - who weren't interested.

So the banks who paid for the study learned that their MBS pools were getting uglier.

What did they do? They leaned on their loan suppliers to get a discount on ugly loans - continued to charge full fare to their investors - and kept the data to themselves.

Nice.

Felix seems to think prosecutions are nigh. Let's hope so.

If you see the world in terms of Left & Right...

...you really aren’t seeing the world at all.

So sayeth The Big Picture's Barry Ritholtz

Here's a sampling:

For those of you who are stuck in the old Left/Right debate, you are missing the bigger picture. Consider this about the Bailouts: It was a right-winger who bailed out all of the big banks, Fannie Mae, and AIG in the first place; then his left winger successor continued to pour more money into the fire pit.

What difference did the Left/Right dynamic make? Almost none whatsoever.

War Memorial

A propo of nothing-

So, I'm on a tour bus in Bergen and our guide is prattling on about this or that. She has a peculiar way of saying OnTheLeftHandSide or OnTheRightHandSide all run together with perfect clarity - right before dropping her voice so she becomes unintelligible.

Then she'll surge back into my audible range with a painfully earnest IsItOkay? punctuated with a smile you can hear. We'd all given up on listening for detail - so a busload of tourists would nod in unison.

At some point her singsong voice skips out the words war and Germany - and there is mention of a building that is OnTheLeftHandSide. As her perspective shifts from her left to our left - I haven't the foggiest idea which direction I'm supposed to look.

Not that I know what she's even talking about.

I've been snapping pictures at random - so has Mom - and I figure we may have a picture that will make it make sense. She mentioned naval and symbol which ties with the fact that Bergen is a huge port. In any event, whatever it was is long behind us by the time we start to compare notes.

-------
One thing that struck me about Norway - at least in contrast to the UK or the US - there are no war memorials. Which of course is an exaggeration. Yes; surely there are some - somewhere. But wherever they are, they are certainly not front and center. All the statues you see are of musicians, poets, leaders of the fishing guild (seriously). No soliders, no plugged up cannons - not even a plaque. Compare this with a recent side jaunt we took into a town here in the US. A WWII tank displayed on the main road, a WWI cannon in the town square, and civil war monuments graven into the side of their courthouse. This was in a town of barely 10,000.

Bergen has over a quarter of a million people.

Admittedly, Norway was out of the fight pretty early in WWII. There are some truly amazing stories of the resistance - and the odd espionage adventure - but Norway has no Omaha beach. I read somewhere that after the war, the Norwegians located the German cruiser they sunk (the Blücher). They then salvaged the oil from its fuel tanks and cut up the ship for scrap - and sold it. Eminently practical these Norwegians - in contrast with how Americans reverentially allow the USS Arizona to leak oil into Pearl Harbor to this very day.
-------

In any event - up until that muted mention by our guide - there had been no signs of the war. And I was curious what she had meant.

When we stopped for some other photo op (digital cameras have turned tourists into snap happy maniacs - but the truth is volume pays off) I cornered the guide and asked about what she was trying to point out.

I showed her my photographic guess: a grey, ugly building with odd stone sculptures under each window that vaguely resembled eagles. "Is this what you meant?"

The guide shook her head. NoNoNo. The yellow building. It was built by the Germans... I hop through a few of my surrounding snaps - no yellow building.

German, AND yellow. Well, sorry I missed that.

Lots to see and do, that was the last I thought of it. Then after we get back, mom and I exchange pictures and I see this:

A yellow building in Bergen - was it the German one? Pastel yellow buildings in Bergen are like Starbucks in the US. Unless there's some plaque I can see in the picture...

I zoom in with photoshop. Nothing visible by the door - but with this resolution, it's not like I could read it.

I need a sign.

Then I zoom on the window balcony:

And there it is. German Naval Headquarters in Bergen, circa WWII.

The Norwegians will hoist a sunken battlecruiser off the bottom of their fjord for salvage - but the swastika-laced ironwork of their conquerors is preserved for all to see.

Lest anyone forget.

A very different kind of war memorial - and the only one I saw in Norway.

Florida, BofA: "We Don't Know What the F%#* We're Doing"

I gotta read Barry more often.

Here's a gem from his WTF file:

"When Jason Grodensky bought his modest Fort Lauderdale home last December, he paid cash. But seven months later, he was surprised to learn that Bank of America had foreclosed on the house, even though Grodensky did not have a mortgage.

Grodensky knew nothing about the foreclosure until July, when he learned that the title to his home had been transferred to a government-backed lender. “I feel like I’m hanging in the wind and I’m scared to death,” said Grodensky. “How did some attorney put through a foreclosure illegally?”

Bank of America has acknowledged the error and will correct it at its own expense, said spokeswoman Jumana Bauwens."

Barry has a few suggestions - the best of which is his number 3:

3. Freeze the Florida foreclosure mills. IF A COURT CAN FORECLOSE ON A HOUSE WITHOUT A MORTGAGE, THERE IS SOMETHING TERRIBLY FATALLY WRONG WITH THAT COURT SYSTEM. They are administratively incompetent, and until they demonstrate they are not renegade organized criminals (i.e., have some basic competency), they must freeze what they are doing.

I Will Never Complain About My Commute Again

Do this on full screen.

As Barry says, this is "The sickest thing you will watch this weekend":

DADT in Brief

(H/T Will Wheaton)

Stewart vs. O'Reilly: Don't Call it a Battle of Wits

Jon Stewart goes on O'Reilly and just plays straight man to O'Reilly's firehose of stupid.

Part I:


Part II:


It's sad to watch O'Reilly stick to his worn-out playbook as if there is something for him to win.

Bill? Stewart isn't playing - he's just smarter and funnier than you are.

(H/t TPM)

Obama's Kryptonite

This was just too perfect:

Jack Shafer: My Hero

How does a journalist count to three? One, Two, Trend!

Poynter profiles Slate's Jack Shafer - a man who specializes in letting the air out of bogus "Check out this new Trend!" stories. (like "Toothing" or drunkorexics)

Money quote:

"I think we write trend stories because we think they're news," Shafer said in a phone interview. "We write bogus trend stories because we're wrong, we're lazy, and we're mentally tardy."

(Via Felix Salmon)

The Best Way to Take Out a Unicorn

Thanks to The Oatmeal, for teaching grammar with possibly the most attention getting examples.

(Shout out to my man, MTB)

Bucket of Cold Water

(Via CJR)

Bloomberg's Jonathan Weil tells it like it is

Here’s the kind of thing that passes for free enterprise now. Last month a fellow named Michael Carpenter, who is the chief executive officer of Ally Financial, got on a conference call with securities analysts and gushed with delight about the $3.5 billion price that General Motors had just agreed to pay for the subprime auto lender AmeriCredit. Based on that transaction, he proclaimed, Ally might be worth $30 billion.

GM, which owns a 6.7 percent stake in Ally, is Ally’s former parent.

“I love the AmeriCredit deal,” said Carpenter, whom some might remember from his days as the head of the securities firm Kidder Peabody. “I don’t have any doubt about our ability to repay the U.S. Treasury. So I think it’s great.”

The federal government so far has spent $17.2 billion to bail out Ally, the lender formerly known as GMAC Inc. Taxpayers hold a 56.3 percent stake in the company, which says it may hold an initial public offering next year if it can’t find a buyer.

What a spectacle. Here you had the CEO of a thrice-bailed- out zombie bank, drooling over how much a government-owned carmaker was going to pay for a publicly traded subprime lender, and using this price as a yardstick for his own bank’s paper worth. In a sane world, Ally would have been liquidated already. Any capital it’s able to raise is money that otherwise might go to more deserving enterprises.

Bizarro world laid bare.

My Kind of Place

This is a cafe I could seriously get into.

How Old is Your Gas Pipeline?

Why do I ask? Oh, I don't know...

San Bruno, CA: 4 dead and counting

But here's another question - when was the last time your gas lines were evaluated by professionals?

Which is not to say this sort of thing should be on homeowners. It shouldn't. Unseen batallions of quiet professionals should be keeping this off your worry radar by making sure everything is maintained properly.

But here's something to jolt you out of that safe mental picture:

the Pipeline and Hazardous Materials Safety Administration, the federal agency that regulates 2.3 million miles of oil and natural gas pipelines, largely relies on standards written by the oil and gas industry. It has about 100 inspectors, leaving industry a great deal of latitude with inspections. (Even after the blast, state utility regulators ordered PG&E to inspect its own network of gas pipelines.)

And according to The Washington Independent, federal regulators are required to inspect only about 7 percent of the country’s natural gas pipelines. That percentage is based on how populated the surrounding area is, and not the actual conditions of the pipelines.

Regulating agency dependent on industry expertise? Check. Regulator's resources laughably inadequate to the task it is given? Check.

Now where have I seen that pattern before?

Zero Tolerance

Let's do a little role play, shall we?

Imagine you are the principal of a middle school.

A 13 year old boy is brought into your office. He was overheard talking about firearms, then threatened another student and himself.

A search of the boy and his locker have produced no weapons or contraband. The boy admits to talking about target shooting - and mouthing off to another student who overheard the discussion.

His version - the exchange went like this:

Q:What would you do with a gun if you had one?

A:Well, I'd shoot you and then myself.

"You see," says the kid - "I was making a joke."

There were no injuries and no altercation between the kids involved. This kid has no priors, lives with both parents, and seems embarrassed by the whole thing.

What do you do?

Talking to the kids parents is a given, as is telling the kid that this kind of "joke" is not funny at all - nor something that is taken lightly in the post-Columbine world.

But what else?

Do you suspend the kid?
Call the police and have them investigate?
Schedule a meeting with the school counselor to figure out if this kid is dangerous or merely foolish?

Take a few seconds and think what you should do - as the responsible administrator of a public school.

Then relax - because apparently (at least in southern Illinois) you don't get to decide. School policy suspends the boy immediately and refers him to juve mental health. They take him and hold him for five days of observation, where he will be evaluated for possible treatment. If his parents object to his being treated - mental health officials can overrule them and treat him anyway.

Both of the kid's parents are deaf - so communication between the school, the mental health facility lags far behind the events on the ground.

[By now, you will have guessed - this is not a hypothetical. This is what is currently happening to the family of one of my colleagues]

The boy speaks to his hearing relatives by phone, who relay messages to his parents. He has not showered since his arrival at juve mental health - as group showers are a new and frightening thing for him.

No word on weather treatment will be administered - I would hope the probability would be low - but there's the open question of how five days of incarceration will alter the trajectory of this boy's life. How will he view himself ?- and how will he be labeled by his peers?

Think of all the stupid things you ever said in your adolescence - would you have ever believed that one of them could land you in a juve mental ward?

Messed up.

Which is worse: HAMP or Wells Fargo?

(Via Felix Salmon)

As if further proof was needed - when banks and governments jointly declare their eagerness to "help homeowners" - that's the time to put them under the frigging microscope until they scream for mercy:

[David Lazarus] is telling the story of Mike and Ellen Kahara, who signed up for a HAMP mortgage-modification program through their lender, Wells Fargo. They made all their HAMP payments in full for the three-month trial period, and then continued to make payments as Wells dawdled over whether or not to make the loan-mod permanent.

Eventually, on August 11, Wells Fargo sent the Kaharas a letter saying that the bank had rejected their application for a permanent loan modification. That’s bad enough — but the bank made matters infinitely worse by then turning around and selling the Kaharas’ house, in a foreclosure sale, just five days later, on August 16.

And yes - it gets worse from there.

Wall and Peace

Just flipped through a copy of Wall and Peace by the guerrilla artist extraordinaire, Banksy.

Just a rollicking good time.

His art and clandestine art installations are brilliant, of course - but he intersperses it with copy that is as delightfully venomous as the rest of his work.

I especially like his observation that giving respect to the property rights of public advertisements is like "asking for permission to keep a rock that someone's just thrown at your head."

My Big Fat Greek Bankruptcy

(Via Felix Salmon)

Michael Lewis scrapes off Greece's financial scab and reveals the horrors underneath.

The [Greek] national railroad has annual revenues of 100 million euros [yet pays its workers] 400 million, plus 300 million euros in other expenses. The average state railroad employee earns 65,000 euros a year. Twenty years ago a successful businessman turned minister of finance named Stefanos Manos pointed out that it would be cheaper to put all Greece’s rail passengers into taxicabs: it’s still true. “We have a railroad company which is bankrupt beyond comprehension,” Manos put it to me. “And yet there isn’t a single private company in Greece with that kind of average pay.”

And that's just the beginning.

a law on the books [makes] it a jailable offense to cheat the [Greek] government out of more than 150,000 euros [in taxes]—but its enforcement. “If the law was enforced,” the tax collector said, “every doctor in Greece would be in jail.” I laughed, and he gave me a stare. “I am completely serious.” One reason no one is ever prosecuted—apart from the fact that prosecution would seem arbitrary, as everyone is doing it—is that the Greek courts take up to 15 years to resolve tax cases.

Perhaps the most entertainingly horrific thing you will read this month.

Your Best Friend is Suing You For 600 Million Dollars

It's no secret that I'm a Facebook holdout.

I view Facebook as more of a disease than a pastime - a tool that entices people to give up their personal data in exchange for its aggregated entertainment and networking tools.

So it's no small surprise that I feel like watching a movie about the creation of Facebook.

All of this you could put down to the fact that we have gotten very, very good at making movie trailers - but I like to think it's because I really liked Radiohead.



Slick.

13 Out of 1,000

Caught this off CJR

You remember back when we had that flash crash on the stock market? The market lost a staggering number of points, then got them back just as fast.

The WSJ reports that the SEC is looking into quote stuffing as a potential factor in that mess. Quote stuffing is flooding the market with orders that are visible enough to influence other trades - but are canceled before they are completed.

Head-faking the market, in other words. But how bad could these signals be?

According to the WSJ - which uses the NASDAQ trading volume of Feb 18, 2010 as an example.

There were offers to buy or sell 89.704 billion shares on NASDAQ that day.

These offers resulted in 1.247 billion shares being traded.

That's a completion rate of  1.3%

Chittum says "Dang" - I'd use something a bit stronger.

Sure, offers to buy and sell will outstrip what can actually change hands - but 98.7% of all offers on the NASDAQ don't happen?

Really?

I'd love to see that metric plotted over a the life of the NASDAQ.

Taxes for Thee, but not for Me

(Via CJR Yves Smith, and Loren Steffy)

Because this just rocked:

Dear IRS: Please note that beginning this year, I am no longer earning an income. From now on, I am compensated through what I like to call column interest. It isn't pay. It's a capital gain that I receive in exchange for providing about 2,000 words a week to this newspaper. Please lower my tax rate accordingly.

Hey, you can't blame me for trying. After all, a similar strategy has worked for years for money managers at hedge funds and private equity firms. In fact, now that Congress is threatening to close that loophole, the private equity world has erupted with an anguished wail. Such is the reaction when the privileged few are asked to pay their fair share.