Archive for July 2011

Ah Well. Never Bet Against Applebee’s Salad Bars

July 9, 2011

I should know better.  Yesterday I made the obvious error of suggesting that maybe, just maybe, David Brooks iz lerning.

To be fair, I hedged a bit — but still, I suggested that we had at least the weekend before the essential BoBo-ness of the man reasserted itself.

Wrong.  As commenter MattH pointed out, it was mere hours before the facile, flaccid stylings of the David Brooks we know and love reasserted themselves.

In Friday’s regular roundtable of horrors on NPR’s ATC, Brooks managed to produce a truly vintage performance, starting with this:

Mr. BROOKS: Well, the first thing that could be said is they’ve gotten it wrong and a lot of people have gotten it wrong. They didn’t expect this. Remember when the stimulus passed, they thought unemployment rate would be down around 7, when it’s up at 9.2 now. Then we have the summer of recovery, so we clearly don’t understand the way the economy’s going.

FSM help us all when Brooks gets to talking econ.  People do understand a great deal about the way the economy is going.  Brooks works with one of them, who happens to be a Nobel laureate.  Just today he published data sourced from the Congressional Budget Office that describes what the stimulus did, and why it now has so little impact on employment.

This isn’t rocket science.  This is common knowledge, and it takes trivial effort to discover such numbers.  Brooks doesn’t make that effort, because he understands economics in precisely the same way he was able to interpret the semiotics of nonexistent salad bars at Applebees.

It gets worse:

Now, part of the problem is not their fault. When you have a financial crisis, you have a long, long, slow, very frustrating recovery. And we’re sort of in the middle of a normal financial crisis recovery which is very slow and miserable. But the thing that can be done is, I think, over decades we’ve added weight after weight to the economy and made it less flexible, a little more rigid, made it hard for people to hire and fire with various regulations and taxes and things like that. And it’s time for a generation-long effort to really reduce that stuff.

This is pure Brooks.  Say that out loud.  It doesn’t sound overtly stupid. There are sentences and punctuation and things that sound like words organized into claims of meaning.

But now read it again.  Ignore the assumption not in evidence — the claim that a priori financial crises resolve themselves slowly and painfully as a “normal” — i.e. natural; i.e. not subject to policy choices — quality.  Pay no attention the simply false claim that this is a “normal financial crisis” at all.  What happened during the Bush II presidency was not simply a recurrence of prior follies. It was the specific and predicted consequence of a whole series of decisions about the way to regulate (or not) a banking system.  But don’t mind that either.

Instead, look again at these sentences:

But the thing that can be done is, I think, over decades we’ve added weight after weight to the economy and made it less flexible, a little more rigid, made it hard for people to hire and fire with various regulations and taxes and things like that. And it’s time for a generation-long effort to really reduce that stuff.

Huh.  I mean, truly, WTF?

The problem with the economy today is that regulation makes it hard to fire people?  Does DAvid Brooks not notice 9.2% unemployment?

Somebody had to fire folks to get to that number. Or the 16.3% U6 measure that includes those temporarily discouraged from seeking work?

Take a good look at this.  Enjoy it.  It’s a type specimen of punditry by word salad.

There’s no connection with reality — for one, Brooks would have to explain why more restrictive employment regimes and stronger labor movements, like those of Germany, don’t seem to be replicating our experience.  But never mind.  By this “analysis” (sic), our only hope is to suck it up through my retirement and my kid’s passage into mature adulthood just to get things right.  On David Brooks say-so.  On his deep understanding of the economy.

Mr. BROOKS: If there’s one thing we should learn from this – the government is really bad at short-term economic manipulation. It can lay the foundation for long-term growth, but manipulating jobs and the economy quarter by quarter, it’s just beyond its power.

Sez who? David Freaking Brooks — and no one who actually knows anything.

In reality:  governments are capable of driving short term effects; and lousy at long term directing of the economy, though Brooks is surely right if what he is trying to suggest that it makes sense to invest in infrastructure and knowledge over time.

But such investments can generate precisely the kind of short term economic effect Brooks says lies beyond the capacity of mortal minds to master.  That is:  if Brooks were to consult an actual policy-knowledgable economist for example, he would discover just how many jobs each billion bucks of infrastructure investment (not tax cuts, notoriously inefficient as economic stimulus) would produce.

And what makes this all yet more echt-Brooks is that he didn’t even have to trouble himself to read anything.  He could, you know, just listen to his long-suffering foil on his NPR gig, E. J Dionne:

Mr. DIONNE: And just one thing on that, though. You know, David Leonhardt, a great blogger, economics writer at The Times, made the point that we’ve lost a half a million jobs in state and local government over the last two years and we’re – if we added them at the same pace we were, we would’ve added a half a million jobs. That’s a million jobs lost. Government can clearly affect government employment and the withdrawal of the stimulus from state local governments has been caused…

But never fear.  Our man David sees the debate over whether to shoot all the hostages or merely some of them in Washington as a signal to rejoice:

I think what’s happening in Washington is kind of great. You’ve got Republicans and Democrats, serious negotiators doing serious things. Liberals on the left, on the extreme left and extreme right are very unhappy. But this is the first time in years we’ve begun to see real talking on big stuff. I think it’s kind of great.

Except, of course, this “real talking on big stuff” is a fantasy.  A fiction.  Not happening (as I just noticed ABL has flagged too) — because the Republican representatives amongst these putative “serious negotiators” are running like the curs they are, tails between their legs, unable to sustain the pressure of reality in the major leagues.

And who is the guy in particular racing from the scene of his inadequacy?  Exactly the man Brooks singles out for praise:

I think he’s been masterful for a year. And I think he’s exceeded expectations on all fronts. He’s doing a very delicate dance where he’s being open to a lot of stuff, a lot of revenues, a lot of changes that Republicans don’t like.

Well, just to reiterate the link. No.  John Boehner is not and has not been a masterful leader of the House.  And right now, he’s punting.  He’s folded.  He’s surrendering to the real powers within his party, those whom Brooks himself knows are incapable of managing a rowboat, much less governing a country.

So: to all who’ve read so far, my deepest apologies.  BoBo is unchanged, a hack’s hack, a waste of oxygen and carbon.  I should always remember this corollary to DeLong’s law:

1.  Remember that David Brooks is always wrong.

2.  If your analysis leads you to conclude David Brooks might be right, refer to rule 1.

Images:  Jan Steen, Rhetoricians at a Window, 1662-1666.

Hokusai Katsushika, Temma Bridge, Osaka,  between 1827 and 1830.

Pigs Fly; Satan Cuts Ribbon on Hell’s Newest Ski Lift…

July 8, 2011

…and Bobo makes sense.

…in the middle of this golden age of behavioral research, there is a bill working through Congress that would eliminate the National Science Foundation’s Directorate for Social, Behavioral and Economic Sciences. This is exactly how budgets should not be balanced — by cutting cheap things that produce enormous future benefits

….

People are complicated. We each have multiple selves, which emerge or don’t depending on context. If we’re going to address problems, we need to understand the contexts and how these tendencies emerge or don’t emerge. We need to design policies around that knowledge. Cutting off financing for this sort of research now is like cutting off navigation financing just as Christopher Columbus hit the shoreline of the New World.

Maybe this is just a case of a blind pig finding its once-a-year acorn…

__

…or perhaps (we live in hope) David Brooks has finally noticed that the party he’s been touting for years is on a catastrophic mission to destroy America, a quest that depends, in part, on ensuring we never, ever put ourselves in the way of learning inconvenient truths about the world.

I do hope it is the latter.  These are parlous times, and I’ll welcome even the latest of late-comers to the fray.  If I were a betting man, though, I’d guess we’ll see a reversion to the BoBo mean by early next week — but even so, we have a few days to bask at the glow of David Brooks saying something useful.

Image:  Gustave Courbet, Peasants from Flagey Returning from market, 1850

Social Security: Undead

July 8, 2011

Per John and ABL yesterday, this:

Rep. Barney Frank says Minority Leader Pelosi reassured House Democrats that the COLA change (which amounts to escalating cuts to Social Security over time) floated in the press will not happen.

Democrats are far from perfect, still waaay to naive about GOPer feral behavior, and all that, but they aren’t bone stupid — certainly not of the balanced budget amendment/weeks-wages-in-wine-swilling variety.  They know (from recent, bitter experience — remember that 1/2 trillion buck Medicare “cut” that was actually simply an end to the transfer payments to private insurers) that there is a reason entitlement support, and especially Social Security, is called the “third rail” of politics.  One that the Republicans seem determined to lick.

I’m coming to something of an eleven dimensional chess explanation for Obama’s current behavior — which is to me very scary, because even if you win the game, when you play with clout-foreheaded louts, the inevitable smashing of the board is a real loss.  And maybe I’m wrong, and this isn’t clever strategy at all, and Obama really is trying to solve a problem I don’t think is the one we actually face in his global attempt to reframe the US budget.  But I’m with ABL and John:  there’s enough to be angry about in the world before blowing skull shrapnel all over the ceiling about some disaster that hasn’t happened yet.

Oh — and it looks like one of the most cynical and disastrous politicians of my lifetime is finally waking up and smelling the coffee.  Too late, I fear.

Image:  J. M. W. Turner, Rain, Steam and Speed-The Great Western Railway, 1844

Even When They’re Right, They’re Wrong.

July 8, 2011

So, the banks, some of them, finally figure out that (some) loan modification is better than the alternative:

Two of the nation’s biggest lenders, JPMorgan Chase and Bank of America, are quietly modifying loans for tens of thousands of borrowers who have not asked for help but whom the banks deem to be at special risk.

Rula Giosmas is one of the beneficiaries. Last year she received a letter from Chase saying it was cutting in half the amount she owed on her condominium.

Banks are proactively overhauling loans for borrowers like Ms. Giosmas who have so-called pay option adjustable rate mortgages, which were popular in the wild late stages of the housing boom but which banks now view as potentially troublesome.

Before Chase shaved $150,000 off her mortgage, Ms. Giosmas owed much more on her place than it was worth. It was a fate she shared with a quarter of all homeowners with mortgages across the nation. Being underwater, as it is called, can prevent these owners from moving and taking new jobs, and places the households at greater risk of foreclosure.

All well and good.  Option ARM’s, the particular class of loans the banks are now modifying, allowed  borrowers to pay no principal, and only part of the interest each month — with whatever interest they chose not to cover ending up as additional loan balance encumbering whatever poor structure to which it is attached.

Those are clearly financial anti-personnel devices,* and it’s probably not a bad idea to try and defuse some of them before they blow. Or at least that’s the reasoning reported:

Bank of America and Chase inherited [interesting choice of word, there, don’t you think? — ed.] their portfolios of option ARMs when they bought troubled lenders during the housing crash.

Chase, which declined to comment on its program, got $50 billion in option ARM loans when it bought Washington Mutual in 2008. The lender, which said last fall that it had dealt with 22,000 option ARM loans with an unpaid principal balance of $8 billion, still has $33 billion of them in its portfolio.

Bank of America acquired a portfolio of 550,000 option ARMs from its purchase of Countrywide Financial in 2008. The lender said more than 200,000 had been converted to more stable mortgages.

Dan B. Frahm, a spokesman for Bank of America, said it was using every technique short of principal reduction to remake its loans, including waiving prepayment penalties, refinancing, lowering the interest rate, postponing some of the balance and extending the term.

“By proactively contacting pay option ARM customers and discussing other products with better options for long-term, affordable payments, we hope to prevent customers from reaching a point where they struggle to make their payments,” Mr. Frahm said.

But the infuriating thing about this story is, of course, that the banks have chosen to help out loans (and people) not yet in deep trouble, but are witholding such aid from those who need it most:

The concern the banks are showing for those who might get in trouble contrasts sharply with their efforts toward those already foreclosed. Bank of America and Chase were penalized last month by regulators for doing a poor job modifying mortgages in default.

Adam J. Levitin, a Georgetown University law professor, said these little-publicized programs were more evidence that the banks were behaving in contradictory and often maddening ways.

“Loan modifications that should be happening aren’t, while loan modifications that shouldn’t be happening are,” he said. “Homeowners of any sort, whether current or in default, would rightly be confused and angry by this.”

So, while I’m glad that something is finally being done to modify loans made through one of the worst ideas in the history of finance, this story actually highlights the much larger failure to deal with the financial and social catastrophe of the broader failure of the home mortgage market. The foreclosure mess is a disaster because it simultaneously has generated a feedback loop of decline in many housing markets and it breaks communities.  Nothing good happens in a neighborhood where too many houses are unoccupied.

DFH’s (Atrios/Duncan Black comes most prominently to mind, but there are plenty of others) have been pointing this out for years now.  And at last, even The New York Times seems to be noticing, even as it documents what may be the first crack in the bankers’ resistance to grappling with their losses.

Welcome to the party, I guess — and, so as not to seem ungracious, let me not say “what took you so long,” to plead instead for much more attention on “the loan modifications that should be happening” to come.

*PS: no doubt, someone, somewhere (Brooks? Will?) must soon instruct us that these clever little monetary claymores were somehow the love-children of FDR, LBJ, Malcolm X, the Big Dog, and Howard Dean.  But, in fact, this is your invisible (and never-to-be-regulated) hand in action.

Image: Jan van Goyen, Peasant Huts With A Sweep Well, 1633