So as is obvious...

...this blog is on an indefinite hiatus since I'm now blogging regularly for work. But feel free to stay in touch by other means,.

A New Idea: Journalistic Leverage

Another day, another disaster.

Today the New York Times, quixotic but perhaps misinformed, attempts to make like the government and hold someone accountable for the disaster brewing at Freddie.

For sure, whoever vetted the Times’ spreadsheets did a great job. Numbers abound! But it seems as if their sources, much like a hot football player on senior prom night, have been trying to exploit the Times’ naivete.

There are a few doozies in this story. First off, all those unnamed sources?

Financial mavens chide banks for excessive leverage, so let’s practice a little position trimming of our own, here. There should be some sort of margin requirement for ratio of unnamed to named sources. Maybe there is. This story definitely doesn’t meet it. I counted. There are four named sources, not counting publicly released statements by the Fed and a few press relations peons who probably haven’t slept since last quarter.

There’s one mysterious screaming Democrat, hordes of attacking shareholders (attacking with what? Pens? Swords? Plowshares?) and 5 sources who said thanks but no thanks.

Not to mention the two dozen “officials” who, fearing reprisal (or, perhaps, are still piqued that they lost to CEO Syron in last month’s Irish Golf Classic) get top billing but not by name.

So that puts the ratio of anonymous to “mous” sources at: 17:4, not counting the spokesmen, the abstentions and the horde (because how does one count a horde?)

In other words, this entire story is massively leveraged, exposing the Times to a perhaps unprecedented but entirely predictable loss…of credibility.

Ignoring whether Syron’s ex-mistresses, former schoolmates and general haters-on have been using the Times as a convenient mouthpiece, there’s the fact that some of these quotes appear to have fallen upon the ears of babes.

One unknown but high-ranking Freddie Mac official tells the Times “It basically worked exactly as everyone expected — when things got bad, the government came to the rescue. But we didn’t expect it would come at the cost of a new regulator who now has the power to burrow into our business forever.”

They didn’t expect that?? Even though historically bailouts come at the cost of a regulator?

At the end, Syron adds with Napoleonic charm that his main concern is for #1: He wants to “save [his] reputation.” All right then. I shudder to think what his priorities were before this last-ditch, stop-gap, into-the-breach, insert-awful-metaphor-here moment, the type that really separates the boys from the traders.

Reading this story is like playing “Where’s Waldo” only instead of Waldo, we’re searching for the idiot. Was it the official? The writer? Syron? At the end of it all, I’m just not sure.

And also, to be blunt, this whole mess could have been avoided. If banks hadn’t been lulled by easy money and higher collateral value, but instead sat out the subprime siren song, or at least hedged a bit better against losses in home value. If a few people back in 2004 had read a few memos. But honestly. Whoever reads memos?

(Also: I’m not the only one who thought this story smelled off. Arrow over to Calculated Risk, where blogger Tanta politely refers to the article as a “Hit Job.”)

The Genie in the Bond Market

Economists and insurers like mathematical models. Nothing gets their glee going like predictability. People, on the other hand, are to math what ice dancing is to show ponies. (Don't look for a relationship, because there isn't one.)

In college, I - along with other aspiring financiers, arbitrageurs and general good for nothings - learned about moral hazard. To wit: the idea that a person who has bought insurance will behave more riskily than he otherwise would because he has insurance. It's a common problem in insurance circles.

Oddly enough, it's also a common problem in life. Once you buy into the system and stand to make a profit if you cheat the system, why not cheat? (Maybe you have ethical qualms about cheating. That's why you don't work in finance.)

Back in the late 1990s, a group of itinerant Harvard professors and a few Nobel laureates came up with the "Efficient Market Hypothesis." EMH was just about the worst thing to come out of Chicago since the winter weather report. The economists could hardly have been more excited than if they'd gotten elephants to tap dance, which in fact might have been less risky than what they proceeded to do. Several prominent economists left academia (and there's a reason that UChicago squirrels these folks away far, far from the real world) and started managing billions and billions of dollars using EMH.

The greatest drawback to EMH was that it was didn't work in the real world. The economists found this out to their chagrin when they started a hedge fund, made spectacular returns, leveraged themselves into the year 2050, and lost their shirts (as well as the shirts of everyone else involved.)

At the time, the Fed organized a bailout worth about $3 billion, which while staggering doesn't even approximate the current U.S. debt. But this was during the Clinton adminstration, salad years for the national account. The only real problem was the risk of moral hazard. After all, if the Fed started bailing out hedge funds, where would the trail end? And what, oh what, about moral hazard, the tragic effluvium of human nature injected into this otherwise perfect soup?

Why does this matter now that Long Term Capital Management (the failed hedge fund) has come and gone? Here's a fun fact. After engaging in some of the riskiest behavior in the (admittedly short!) memory of modern finance, one would expect the partners from LTCM to go into quiet retirement, perhaps give up a golf membership or two to show solidarity with the people they let down.

Ha! Promptly on the heels of liquidating one near national disaster, the partners at Long Term went onto to start another hedge fund, identical to the first. All the same people signed up as partners, they even kept their fancy Greenwich offices. Now, JWM Partners manages nearly $3 billion in assets, roughly the amount of the bailout less than a decade ago. Sure, somewhere, someone went crying into a world of pain. But it certainly wasn't the traders at Long Term, even though their failure was (odd as this may sound) their own fault.

But why pick at these bones? I say this on the eve of another momentous bailout, the Treasury bailout of Fannie and Freddie, those twins of leveraged tragedy. The fears are the same: letting Fannie and Freddie bite the dust will send the entire housing sector and indeed the entire American economy and then the world economy and then the known universe into a blazing nova.

Pardon. But. Remember how, at the bottom of it all, these things are always someone's fault? And the heads at Fan and Fred will go blue in the face talking about how they they didn't take on unnecessary risk, and how it wasn't their fault that short-term money failed, and that they had no one to unload their long securitions upon. They might even tell you that they weren't trading subprime securities, and maybe they weren't.

But somebody was. Where is that somebody now? Greenwich? New York? Where will that somebody be in ten years, when the US capital account has gone the way of a deflated Whoopie cushion?

Moral hazard, indeed.

Pounds of Flesh

Paul Krugman, over at conscience of a liberal, drew attention to this very funny airport sign the other day.

Airports are, of course, the last bastion of spontaneous humor – perhaps because there’s something so hideous about squeezing into a cramped metal compartment with your fellow man, cheek by jowl, noses inhaling the same recycled air for several hours while you contemplate how a terrorist win could hardly be more awful than the indignity of removing first your hat, then your shoes, then your pants in airport security until you wondered if you’d walked unwitting into an audition for a Vegas show. Nor for that matter could it be so much more terrible than the temperature of the plane itself, which has all the tropical warmth of winter in the Kremlin, which exacerbates the growling in your stomach as you behold the usurious prices the blonde, be-hatted, matching airline attendants demand for peanuts, water, and even trips to the toilet.

Yes, a flight resembles nothing so much as a prison where you’re not even granted the solace of a phone call. Which is why the suggestion at the Princeton airport is either genius marketing or the slow fade of our last vestiges of national self-respect, depending on how you look at it.

Imagine, if you will, that airlines did charge by the pound. Not 20 cents, not at these gas prices – let’s say $1.75. After all, a pound is a pound in the impersonal eyes of thrust and lift. In this world of peak load pricing, Eva Longoria would pay a mere $157.50 to jet across country. On the other hand, her hulking husband would pay the prince’s ransom of $437.50. Between them, the Longoria-Parkers would net an airline $297.50 a piece. Not bad.

In this new world, people who like to fill up, work out or even wear extensive fleece will have to pony up. And if they think to complain at the unfairness of it all, the wise man’s response would be “is this economy fair? Is joblessness fair? Is terrorism fair?”

And if anyone fears climbing aboard that communal scale, perhaps even dreads facing the number they would be forced, by law, to confront – remember this much: sans keys, sans belt, sans shoes, clothes and basic dignity – well, you’ll have very little left to lose. Your weight might even reflect that.

More Gripes About Other People's Writing

As everyone knows, I had a problem with “Eat, Pray, Love.” I tell people I didn’t like Gilbert’s voice, but what really goaded me was her premise. To wit: that somehow, travel can be extrapolated into memoir.

The best bit of travel writing I ever read was this, culled off a B-grade MySpace page one depressing evening: “No matter how far we travel, we stay in the same place, unless we are willing to change.”

There is a part of me that refuses to accept that people who explore the world are doing anything other than exploring the far reaches of themselves. And perhaps travel is an impetus to change, but it’s probably even more the other way around. Feel free to take a walk on the wild side of your personality, but why should that be the wild side of the world? And then, what sublime foolishness to think that somehow, the little corner of your brain you’ve carved out and mapped is the world!

But most of all, it’s the well-wishers who peeve me. The “you must do x before you die”-ers, the Bucket List-ers, you know the type I mean. The ones who wear you down with the insidious suggestion that if you’ve never stood before the bleached face of the Taj Mahal in the waning light of the moon you’ve never known love or beauty, the ones who assume that if you’ve never rafted the roaring Mekong you’ve never known breathlessness or adventure.

Maybe I’m bitter, and a little jealous. The truth is that I started traveling to escape the world I knew, which I later realized was myself, which I later realized would never happen.

Here’s another excellent bit of advice I once got about travel, from my seventh grade English teacher: “you don’t have to leave your home to do it.” I believe this. For that assignment I read “Pilgrim at Tinker Creek,” which may be one of the best adventure novels of all time.

This, the inward travel, is both difficult to know and probably impossible to master. I know I’m not far along that path. I also know that I could never teach or preach the way to the trailhead to anyone else. And perhaps it’s true that other authors – the infamous and insufferable Elizabeth Gilbert, for one – acknowledge that they don’t know the whole truth either. But doesn’t the very act of writing a book suggest you should be listened to, that you feel you hold some perspective other people don’t? (For that matter, doesn’t a blog? Yes, ok, you may have me there…)

The point is, in adapting the world for our own enlightenment, don’t we leach it of its complexity? Isn’t that process abrasive and wrong? The great yogis of Hindu tradition achieved enlightenment without moving. They sat in the snowmelt, or under spindly trees, or in the middle of a cattle fair – wherever, really – and in the moment between closing and opening their eyes their brains managed to span the cosmos.

That would make for one hell of a travel memoir. The rest of us, I think, should stick to plain old travel writing.

First Generation Blues

I have a problem with people who write about India. I realized it today while reading AA Gill’s “A Short Walk in the Hindu Crush” which is perhaps the best travel essay I’ve ever read about India, and a great travel essay to begin with.

I have a problem perhaps because I feel as if India sleeps in my bones, a latent tiger, or at least a chemical reaction I can neither predict nor control. It irks me because all my life people here have said to me “You’re Indian” and what do they know about that? “Foreign-ness” is a mantle that doesn’t sit easy on anyone, and when I meet other first generation children I’m drawn to them for this reason. Whether they’re from Cuba or China or Guatemala, it doesn’t matter. We have that same energy, that same sense of waste-not inherited from parents who had nothing to waste. We’ve been called something, whatever it is, but not American. We’ve been called it for so long that we’ve begun to believe it’s true. The most interesting thing I realized while in India was that I was, in fact, American.

And to some people this will seem naïve, but my question is, how can you sit around a table with friends you’ve known for years, and listen to them talk about the post-9/11 world and the general justifiability of racial profiling, and not feel like the Other? How can you ignore the elephant in the room, the elephant in the form of you? How can everyone else ignore it, is the question. And then, they write about India as if they know what it means.

Well, I have news for you Tigger, you can’t have it both ways.

Obama Earns A Living, Too

Ryan Lizza has a long article about Barack Obama in The New Yorker. You can read the full 15 pages if you like, but his opening interview with longtime Illinois Alderman Toni Preckwinkle seems to be the scoop. Preckwinkle, who’s known Obama for years, seems shocked by the guy’s meteoric political rise, and she goes so far as to suggest Obama has lost his personal integrity.

I know. Some friend.

But Lizza’s article exposes a fundamental Orwellianism that we need to get straight. Despite the fact that he is running for President, there still seem to be people out there who are shocked – shocked! – that Obama behaves like a politician.

People, the man is a politician. As a very wise columnist once wrote, “they’re not like the rest of us.”

Of course, Obama is not entirely clean himself. (And no, I’m not referring to that misfit moment in his autobiography when he admitted he’d done cocaine.) If anyone is responsible for this “Obama is not a politician” belief, it’s Obama himself. In that galvanizing speech, the one that launched the Obama cult of personality, he said, “If there's a child on the south side of Chicago who can't read, that matters to me, even if it's not my child. If there's a senior citizen somewhere who can't pay for their prescription and having to choose between medicine and the rent, that makes my life poorer, even if it's not my grandparent. If there's an Arab-American family being rounded up without benefit of an attorney or due process, that threatens my civil liberties. It is that fundamental belief -- it is that fundamental belief -- I am my brother's keeper, I am my sisters' keeper -- that makes this country work.”

It’s still one of the greatest speeches in modern history. It ranks up there with MLK’s “I Have A Dream,” and the similarities are not to be discounted.

Why is it so heartbreaking to accept that those words came out of the mouth of a politician? The difference between Obama and every other politician we have isn’t that Obama claims to be a different breed (normally, they all do) but that many of us believed him (normally, we never do).

But maybe that exposes a deeper cultural insecurity, a “Politician-Human” complex along the lines of the “Virgin-Whore” complex that stymied feminism. The Politician-Human complex might have evolved when we trusted the promises of politicians only to be painfully misled.

But it runs deeper than that. It hearkens back to the Founding Fathers. Nothing put George Washington’s wig in a knot like politicians, whom he described in his famous farewell letter as “cunning, ambitious, and unprincipled men…enabled to subvert the power of the people and to usurp for themselves the reins of government.”

Which is a shame, since Washington, in addition to being our first President, was also our first politician.

Merriam-Webster defines a politician as: “a person experienced in the art or science of government; especially: one actively engaged in conducting the business of a government.”

Meanwhile, the most popular definition on Urban Dictionary has a different take: “A person who practices politics. "Politics" is derived from the words "poly" meaning "many", and "tics" meaning "blood-sucking parasites."” Incidentally, this is also the politest definition on the page.

Our nation’s bizarre love-hate relationship with its elected polity is more than I can unpack in a blog post, even one as irresponsibly long as this one. Suffice it to say that being a politician has, over the course of history, taken on many associated meanings, whether justified or not. We consider politicians selfish and utilitarian, or dishonest and insensitive. We consider “politician” to be a mindset, a personality and a social class.

But at the end of the day, it’s also a job. Obama’s job.