I'll Take the Plain Bag Thanks

Great article on The Daily Beast regarding peoples giving up the signature shopping bags at high end stores in exchange for white plain bags. This is from the article:

At Hermès and a handful of other exclusive retailers, “secret shopping” has becoming the winter season’s newest trend. Anyone who can still afford, say, the three cashmere throws at $2,225 each that Mrs. Fuld bought when she stopped by the store that day isn’t likely to advertise it. Instead, the city’s most extravagant shoppers are ferrying their purchases home in unmarked bags; delegating delivery to assistants; or manipulating credit card bills to disguise their spending from outsiders—and their spouses.

The article is fascinating to me because among the wealthiest of people there is a guilt or fear of their own extravagance. The disconnect is that the feeling of displaying the frivolous items of luxury in the midst of peoples financial suffering and difficulties is tacky, rather than unjust. Manners would dictate that you get a plain bag coming out of the Hermes store, but decency would probably require you to give up shopping there all together.

Planet Money

NPR's Planet Money podcast is an absolute must add to your iPod or Zune (chuckle). Do yourself a favor and go and listen to the podcast so you can learn why Credit Default Swaps, 40 to 1 leveraging, and the TED Spread are factors in a changing America.

Seriously these are very entertaining and infomative 20 minute podcasts. You owe it yourself to check them out and you will be smarter at the end of the week than you are today on Monday.

Economics and Astrology

NY-Times: Reading the Recession For Signs of the Future

The precipice is getting crowded as the financial crisis drags on, leaving even the optimistically inclined with no silver lining to cling to. At a gathering last month at the Federal Reserve Bank of New York, economic analysts tested several projections on computer models of the regional economy [New York State]. The models spat back estimates of job losses in the metropolitan area during this recession that ranged from about 325,000 to nearly one million. (The latter result would be far worse than in any other recession in the last 30 years.)

With such a wide spread of possible outcomes, it is no wonder that John Kenneth Galbraith, the famed economist, once said that “the only function of economic forecasting is to make astrology look respectable.”

I thought that last quote was really funny. Anything to help from crying right?

Blasphemy

HOLD YOUR TOUNGE! Right now a Venti Vanilla, No-Foam, Latte is what gets me through the day! Sometimes if I have to choose between ordering lunch and getting my Starbucks...well lets just say it's a really, really tough call sometimes.

I have cheaper alternatives to Starbucks for a VL. Dunkin Donuts, but I just don't do it (yet). Will I give McDonalds a chance? It might be hard there isn't a McDonalds on my commute as opposed to the three or four Starbucks that are on my way to work. If I try a Micky D's latte I will let you know how it goes.

Transportation 2.0

Thomas Friedman today in the NY-Times:

If you have an idea in Detroit or Tennessee, promise me that you’ll pursue it, because someone in Denmark or Tel Aviv will do so a second later.

I don’t know if this alternative to gasoline-powered cars will work, but I do know that it can be done — and Detroit isn’t doing it. And therefore it will be done, and eventually, I bet, it will be done profitably.

And when it is, our bailout of Detroit will be remembered as the equivalent of pouring billions of dollars of taxpayer money into the mail-order-catalogue business on the eve of the birth of eBay. It will be remembered as pouring billions of dollars into the CD music business on the eve of the birth of the iPod and iTunes. It will be remembered as pouring billions of dollars into a book-store chain on the eve of the birth of Amazon.com and the Kindle. It will be remembered as pouring billions of dollars into improving typewriters on the eve of the birth of the PC and the Internet.

What business model am I talking about? It is Shai Agassi’s electric car network company, called Better Place.

I read about Agassi's Better Place Company in my WIRED magazine in August. It's a great article and shows what is really possible when people who are rooted in the 21st century become empowered to redefine how we see things like transportation.

401-Keg

My brother sent this to me via email:

If you had purchased $1,000 of AIG stock one year ago, you would have $42 left.

$1,000 worth Lehman stock, would be worth $6.60 to you today.

With Fannie or Freddie, you would have less than $5 left.

But if you had purchased $1,000 worth of beer one year ago, drank all of the beer, then turned in the cans for the aluminum recycling REFUND, you would have had $214.

Based on the above, the best current investment advice is to drink heavily and recycle.

It's called the 401-Keg.....

Blaming the Poor for Ruining the Market III

I will continue to vehemently attack the idea that minorities and the poor are responsible for getting loans they could not afford through CRA's and subsequently caused entire US and global economy to fail. It's not that it just offends me, it's that it is completely false.

Please, if you still believe that CRA's and the poor are responsible for this mess, you must listen to "Another Frightening Show About the Economy" from the This American Life podcast. If you listen to that you will see first, just how bad and scary things are financially and second, how the poor have almost nothing to do with it. Do yourself a favor and listen to the podcast and you will start to understand why we are in this mess.

Here are some quotes from various sources who all refute the idea that the poor via CRA's caused the financial crisis:

"CRA only governs a certain class of federally insured banks. Problem is, half of the subprime loans came from mortgage companies with no CRA involvement at all. Another 25%-30% came from companies with very little CRA exposure. For those who left their abacus at home, that's 80% of the loans which were fully or largely outside CRA jurisdiction. More than that, the non-CRA mortgage firms made subprime loans at twice the rate of CRA-covered firms." - Ezra Klein, via Mark Thoma blog Dept. Economics University of Oregon

"Finally, keep in mind that the Bush administration has been weakening CRA enforcement and the law’s reach since the day it took office. The CRA was at its strongest in the 1990s, under the Clinton administration, a period when subprime loans performed quite well. It was only after the Bush administration cut back on CRA enforcement that problems arose, a timing issue which should stop those blaming the law dead in their tracks." - Aaron Pressman, Business Week 9/29

"Second, CRA does not either encourage or condone bad lending. Bank regulators were decrying bad subprime lending before the turn of the millennium (see Interagency Guidance on Subprime Lending), and warning the CRA-covered institutions we regulated that badly underwritten subprime products that ignored consumer protections were not acceptable. Lenders not subject to CRA did not receive similar warnings.And we also explained to those we regulated how to serve lower income communities and borrowers in a manner that was good for the borrower, good for the bank, and earned CRA credit." - Ellen Seidman, New America Foundation

"The banker I asked summed things up this way, "As far as CRA requirements and the current crisis in the financial markets, anyone who claims that our problems are the result of the CRA rules just doesn't understand the crisis or the way those requirements are worked out in a community. Further, these rules have been around for decades (enacted in 1977) and they just aren't the problem." - Larry James, ED of Central Dallas Ministries

" Furthermore, companies not covered by CRA made subprime loans at more than twice the rate of lenders that were, according to Janet Yellin, president of the San Francisco Federal Reserve Bank. The idea that CRA brought the banks down is "just ridiculous," Mr. Thoma said.

The ugly truth is this: The redlining that led to the passage of CRA has been replaced by reverse-redlining. Lenders didn't have to be dragged into low-income neighborhoods. They rushed in. It was there that they could push their complicated mortgages onto the elderly, blacks and Hispanics, and then sell the loans to somebody else. At least 40 percent of the holders of subprime mortgages could have qualified for cheaper prime mortgages, according to one study. " - Froma Harrop, Dallas Morning News

"There was a culture of stupid, reckless lending, of which Fannie Mae and Freddie Mac and the subprime lenders were an integral part. But the dumb lending virus originated in Greenwich, Ct., midtown Manhattan, and Southern California, not Eastchester, Brownsville, and Washington. Investment banks created a demand for subprime loans because they saw it as a new asset class that they could dominate.

At Monday's hearing, Republican Rep. John Mica of Florida gamely tried to pin Lehman's demise on Fannie and Freddie. After comparing Lehman's small political contributions to Fannie and Freddie's much larger ones, Mica asked Fuld what role Fannie and Freddie's failure played in Lehman's demise. Fuld's response: "de minimis."

Lending money to poor people doesn't make you poor. Lending money poorly to rich people does." - Daniel Gross, Newsweek

This American Life

Several months ago This American Life did an episode on the sub-prime mortgage crisis called, The Giant Pool of Money. It was far and away the best 55 minute explanation on how mortgages got turned into securities and then sold on up the financial food chain. Which subsequently set the scene for the crisis we (meaning the world) finds ourselves in right now. It remains one of TAL most popular episodes ever because of the clear narrative they used to explain complicated financial instruments. It's worth the $.99 to purchase the episode.

Today the two producers who made that first show, Alex Blumberg and NPR's Adam Davidson, have done another one called: Another Frightening Show About the Economy which is a pretty ominous title if you ask me.

The link above will take you to the TAL iTunes page where you can download the episode for FREE until Sunday 10/12. I have not had a chance to listen to the program yet, but if it's half as good as the "The Global Pool of Money" then it is a must hear for anyone who finds this whole financial mess confusing (which is pretty much all of us). I'll post my thoughts once I finish listening to it.

Christian Chronicle....Fair and Balanced.

It is safe to say that the church I grew up in is pretty conservative. Ok, it's very conservative, but before you think this is a post slamming my Christian heritage I will tell you that it is not. I would actually like to give a shout out to The Christian Chronicle, which accurately bills itself as an "International newspaper for members of Churches of Christ."

The lead story for this months paper is "Presidential Race Engages Students" written by Bobby Ross Jr. I was curious how this Presidential race would be characterized by the Chronicle whose audience is a pretty religiously and politically conservative one. I found the article to be refreshingly fair and open to both McCain and Obama supporters. It dealt fairly and graciously with the reasons why both candidates found strong support among young people in the Churches of Christ and that those reasons come from sincere Christian beliefs.

This was an encouraging article for me because it gave a lot of credence to the fact that a person could have Christian values and principles that lead them to vote for a Democrat just as as those values lead a person to vote for a Republican. Critics might say that this reality has existed for a long time and the Chronicle, and by extension other members of the Churches of Christ, are late to that realization. This might be true, but I still think the thawing of the view that if you are believer and pro-life you must vote a certain way or you are not a true Christian is a really good development for people of faith on both sides of the aisle. This kind of fair and gracious reporting in such a heated political time should be applauded and encouraged.

Lehman Brothers Vs. Africa

Lehman Brothers total compensation expenditures for 2007:
$9,500,000,000 - equal to $332,470 per person employed by Lehman (23,000+ employees).

Total Aid to Africa in 2007 from USAID:
$5,200,000,000 - equal to $5.20 per person (992 million people)

Blaming Regulation for the Mess...wrong!

Just another example of how difficult it is for irresponsible free market ideologues to give up the fight:


Market to Market: Why Dave Ramsey is Wrong.

Blaming the Poor for Ruining the Market II

Follow-up:

Ronald D. Utt, Ph.D. from The Heritage Foundation wrote an article in June of 2005 called: Time to Reform Fannie Mae and Freddie Mac.

"Despite its claims to the contrary, Fannie Mae's basic operating procedures do not target any particular type of buyer/borrower....Nine percent of the conventional conforming loans made by the private mortgage market were to first-time minority homebuyers. By contrast, only 4.7 percent of Fannie Mae loans and 3.5 percent of Freddie Mac loans over the same period were to first-time minority homebuyers."

Blaming the Poor for Ruining the Market

Ladies and gentleman do not be fooled. Poor people are not to blame for this financial crisis. Over the coming days you are going to hear free market ideologues try to pin this whole mess on the Community Reinvestment Act or CRA's. CRA's are a financial instrument pushed onto banks by the government to get low-income families the necessary loans to buy homes. These were "sub-prime" borrowers. Some will point to these CRA's, or "loans to irresponsible, poor, inner-city people" as the genesis of this financial crisis. DO NOT BELIEVE IT.

A study done by Traiger and Hinckley regarding the CRA’s found that these banks were less likely to make bad loans than banks not using CRA's. The summary conclusion of that study was as follows:

CRA Banks were substantially less likely than other lenders to make the kinds of risky home purchase loans that helped fuel the foreclosure crisis. Specifically:

1. CRA Banks were significantly less likely than other lenders to make high cost loans.
2. The average APR on high cost loans originated by CRA Banks was appreciably lower than the average APR on high cost loans originated by other lenders.
3. CRA Banks were more than twice as likely as other lenders to retain originated loans in their portfolio.
4. Foreclosure rates were lower in MSA's with greater concentration of bank branches.

Or listen to Larry James, Executive Director of Central Dallas Ministries who has on the ground experience with CRA's:

"Most small banks make donations to organizations like CDM. Larger banks find ways to do community development deals with stronger, larger community organizations and even cities like Dallas. There is no quick and easy loan process, no system flush with money flowing toward the "irresponsible poor." The poor never see such funds directly and getting funds for projects is difficult, guarded and complete with all sorts of accountability. In Dallas the large CRA projects (if you want to call any of them "large") have been positive for the city, especially in underdeveloped communities.

There is more than enough blame to go around in this financial crisis. From the Financial Services Modernization Act which brought down the firewall between commercial banks and investment banks (supported by Republicans, Democrats, and Bill Clinton), to investment managers that bet the farm on securities that went bust (Lehman was leveraged $30 to $1)!

It's clear the markets need to be bailed out in a responsible manner. And a proper review of what got us in this mess needs to be undertaken. But do not even entertain the idea for one second that the Governments "over eagerness to help the poor" is what sunk the ship. Nothing could be further from the truth.

Zeke LOST the car debate.

What a week around the Isbell house. Wow, don't know really where to start. Ahhh yes I do. Congrats Zeke on turning six months old on Sunday the 27th. You're mom and I are so proud of how much you have grown and you really are the sweetest little boy. We love you so much and feel beyond blessed that you are part of our family. These six months have seen you start to eat food, sit up, pull-up, and grab everything in reach. Great work son! How about these next six months we work on crawling, walking, and sleeping. Let's start with the sleeping.
For those interested here is Levi at six months.
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Along with Zeke's half birthday comes the realization that LOST is back!! I can remember kvetching after that fateful final five minutes of last years season finale that we wouldn't get any more LOST episodes until my unborn son was six months old! The time has come. If you are a LOST fan permit me to direct you to the best LOST follow-up blog on the web, The Root. Get the DVR ready!!
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We sold our car! For the first time since we moved here in 1999 we don't own a vehicle and it feels great (at-least right now anyway). I sold it on Craigs List in literally an hour and a half. I listed the car for $800 which I didn't think I could get because of all the body damage on the car (two weeks ago someone ran into the fender and bent it in...didn't leave a note). But as soon as the ad posted my cell phone just started blowing up. I got thirty calls from very desperate people with cash ready to take the car without even driving it (shady right!). I was getting so many calls that I had to take the ad down after an hour. At 7:30 pm last night we sold our car to a very nice couple for $1,400 cash!!! That's right I got almost twice what I asked for it and it was done in just under four hours. This is how my friend Byron must feel, because deals like this happen to him all the time.
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Have a great weekend and GO OBAMA!!
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Wow punctuation does matter right (title)!

Work

I love my job and where I work. But hate doing reimbursements.

The Cost of War

*links fixed*

Here are the dimensions of a dollar bill. It's about 6 inches long, and 2½ inches wide, and as thick as a regular piece of paper.

This is what a stack of dollar bills totalling $360,000 looks like (which would get you this apartment on the UWS of Manhattan). If you made a single stack, it would be 120 feet high.

You should see how big the stack of money is for the cost of the wars in Iraq and Afghanistan as of July 21, 2006. It's incredible.

Last night Allison and I resisted the pull to watch the mindless Oprah Oscar Special and instead watched the hour long report "Bob Woodruff: To Iraq and Back." We watched with tears in our eyes the stories of people who have paid a price for this war that illustrative graphics about money could never convey. If you have a few minutes watch this video segment of the report.

$100 Guilt Free

This post poses the exact opposite question that you will find on this blog about money. I am curious what is easy for you to spend money on. I am not talking about what is easy for you to waste money on, I am talking about the thing you actually enjoy spending money on.

Let's say you take $100 out of your own budget to spend it on something. Where can you go spend that money and after it's gone feel like it was totally worth it? No buyers remorse just pure satisfaction.

For me it has to be going out to eat. Both Allison and I enjoy a good restaurant and have never regretted spending money on a nice meal with good friends. We don't get to do it as often as we would like, but just the other night we went to a delicious French place with our friends down in the village, and it was fantastic.

The meal was close to $100 for us and a big reason it was guilt free was because the money was in the recreation envelope just sitting there waiting for us to use it. I am telling you the envelope system rocks!