Category: journalism

the loquacity crisis

There’s a pattern to much of the reporting on the financial crisis and the bailout. See if you can identify it.

From “Banking Regulator Played Advocate Over Enforcer” the Washington Post‘s report on the Office of Thrift Supervision:

1.

In 2004, the year that risky loans called option adjustable-rate mortgages took off, then-OTS director James Gilleran lauded the banks for their role in providing home loans.

…

Gilleran did not respond to multiple requests to be interviewed for this article.

2.

John Reich, who has been OTS director since 2005, and Polakoff, his deputy, were well positioned to have learned the lesson. At the time of Superior’s difficulties, Reich was one of the leaders of the Federal Deposit Insurance Corp. and Polakoff ran FDIC’s Chicago office. Indeed, Polakoff’s office recognized Superior’s problems before OTS and pushed for increased scrutiny of Superior’s bookkeeping.

In testimony before Congress in the fall of 2001, Reich listed what he considered the lessons of Superior’s failure. Among them, he said, “we must see to it that institutions engaging in risky lending . . . hold sufficient capital to protect against sudden insolvency.”

But instead of increasing oversight, OTS shrank dramatically over the next four years.

[To be fair, Polakoff must have agreed to be interviewed: he is quoted in the article.]

Concerns about the product were first raised in late 2005 by another federal regulator, the Office of the Comptroller of the Currency. The agency pushed other regulators to issue a joint proposal that lenders should make sure borrowers could afford their full monthly payments. “Too many consumers have been attracted to products by the seductive prospect of low minimum payments that delay the day of reckoning,” Comptroller of the Currency John C. Dugan said in a speech advocating the proposal.

OTS was hesitant to sign on, though it eventually did. Reich, the new director of OTS, warned against excessive intervention. He cautioned that the government should not interfere with lending by thrifts “who have demonstrated that they have the know-how to manage these products through all kinds of economic cycles.” Reich, through a spokesman, declined to be interviewed for this article.

3.

Countrywide Financial’s decision to reconstitute itself as a thrift and come under the OTS umbrella was a victory for Darryl W. Dochow, the OTS official in charge of new charters in the Western region, home to Washington Mutual, IndyMac and other large thrifts.

In the late 1980s, Dochow had been the chief career supervisor of the savings-and-loan industry, and federal investigators later concluded he played a key role in the collapse of Charles Keating’s Lincoln Savings and Loan by delaying and impeding proper oversight of that thrift’s operations.

Dochow was shunted aside in the aftermath and sent to the agency’s Seattle office. Several of his former colleagues and superiors say he eventually reestablished himself as a credible regulator and again rose in the organization. Dochow did not return a phone call requesting an interview, and OTS said he declined to give one.

4.

As early as 2005, Angelo R. Mozilo, then the chief executive of Countrywide, approached OTS about moving out from under the supervision of the Office of the Comptroller of the Currency, which regulates national commercial banks.

…

Mozilo declined to be interviewed for this article.

And from the New York Times report on Citigroup’s troubles:

1.

In September 2007, with Wall Street confronting a crisis caused by too many souring mortgages, Citigroup executives gathered in a wood-paneled library to assess their own well-being.

There, Citigroup’s chief executive, Charles O. Prince III, learned for the first time that the bank owned about $43 billion in mortgage-related assets. He asked Thomas G. Maheras, who oversaw trading at the bank, whether everything was O.K.

…

The bank’s downfall was years in the making and involved many in its hierarchy, particularly Mr. Prince and Robert E. Rubin, an influential director and senior adviser.

…

Mr. Prince and Mr. Rubin both declined to comment for this article.

2.

David C. Bushnell was the senior risk officer who, with help from his staff, was supposed to keep an eye on the bank’s bond trading business and its multibillion-dollar portfolio of mortgage-backed securities. Those activities were part of what the bank called its fixed-income business, which Mr. Maheras supervised.

One of Mr. Maheras’s trusted deputies, Randolph H. Barker, helped oversee the huge build-up in mortgage-related securities at Citigroup. But Mr. Bushnell, Mr. Maheras and Mr. Barker were all old friends, having climbed the bank’s corporate ladder together.

…

Mr. Bushnell and Mr. Barker did not return repeated phone calls seeking comment. Mr. Maheras declined to comment.

These are the most recent examples I’ve seen; I’m sure there are more out there.

activism and web 0.2

It seems that Obama has been reading Lincoln; this is encouraging. Some of Obama’s reading about Lincoln may be less encouraging. I am not getting ready to lead a nation or form a cabinet; I have been reading Wendell Phillips. Phillips, you may recall, is the only non-politician profiled in Hofstadter’s American Political Tradition: his type is the “agitator” (something Obama once was, not so incidentally).

I’m reading Phillips mostly because I’ve meant to do so ever since I was a TA in a course on the nineteenth century U.S. whose instructor confessed admiration for him, and I saw a reference to Phillips in something else I read just recently. Many of his speeches are now online, but unfortunately not in easily copy-and-pastable form. I’ve only read a few so far, but I can already say that Phillips is worth a look for anyone interested not just in his history, but in political and social movements and agitation in general.

Here’s Phillips in “Public Opinion” (1851) on the theory of change:

We are apt to feel ourselves overshadowed in the presence of colossal institutions. We are apt, in coming up to a meeting of this kind, to ask what a few hundred or a few thousand persons can do against the weight of government, the mountainous odds of majorities, the influence of the press, the power of the pulpit, the organization of parties, the omnipotence of wealth. At times, to carry a favorite purpose, leading statesmen have endeavored to cajole the people into the idea that this age was like the past, and that a “rub-a-dub agitation,” as ours is contemptuously styled, was only to be despised.

The time has been when, as our friend observed, from the steps of the Revere House — yes, and from the depots of New York railroads — Mr. Webster has described this Antislavery Movement as a succession of lectures in school houses, — the mere efforts of a few hundred men and women to talk together, excite each other, arouse the public, and its only result a little noise. He knew better. He knew better the times in which he lived. No matter where you meet a dozen earnest men pledged to a new idea — wherever you have met them, you have met the beginning of a Revolution.

Revolutions are not made: they come. A revolution is as natural a growth as an oak. It comes out of the past. Its foundations are laid far back. The child feels; he grows into a man, and thinks; another, perhaps, speaks, and the world acts out the thought. And this is the history of modern society. Men undervalue the Antislavery Movement, because they imagine you can always put your finger on some illustrious moment in history, and say, here commenced the great change which has come over the nation. Not so. The beginning of great changes is like the rise of the Mississippi. A child must stoop and gather away the pebbles to find it. But soon it swells broader and broader, bears on its ample bosom the navies of a mighty republic, fills the Gulf, and divides a Continent.

“Rub-a-dub agitation” might be sort of a mid-nineteenth century version of “bloggers in their pajamas.” Later in that same speech Phillips takes up the subject of technology and organization:

In working these great changes, in such an age as ours, the so-called statesman has far less influence than the many little men who, at various points, are silently maturing a regeneration of public opinion. This is a reading and thinking age, and great interests at stake quicken the general intellect. Stagnant times have been when a great mind, anchored in error, might snag the slow-moving current of society. Such is not our era. Nothing but Freedom, Justice and Truth is of any permanent advantage to the mass of mankind. To these society, left to itself, is always tending.

In our day, great questions about them have called forth all the energies of the common mind. Error suffers sad treatment in the shock of eager intellects. “Everybody,” said Talleyrand, “is cleverer than anybody”; and any name, however illustrious, which links itself to abuses, is sure to be overwhelmed by the impetuous current of that society which, (thanks to the press and a reading public) is potent, always, to clear its own channel. Thanks to the Printing–Press, the people now do their own thinking, and statesmen, as they are styled — men in office, — have ceased to be either the leaders or the clogs of society.

_____

Note: I have broken up the speech text into more readable paragraph lengths. The hyperlinks, of course, are in the original – that’s just how far ahead of his times Phillips was.

daguerro-who?

At first I was going to say that the Life magazine photo archive Google is hosting seems a bit confused about chronology:

life-google-archive1

But it turns out you can search for the French and Indian War and get results.

the limits of détente

I get the impression that Marshall McLuhan was not impressed with the first Ford-Carter debate (in Philadelphia) (via):

The rebellion of the medium against the message he refers to was the breakdown of the audio part of the broadcast near the end of the debate. When the candidates learned that they could not be heard on tv, they apparently just stood there and waited for the problem to be fixed. For 27 minutes.

Years later, Carter and Ford talked about the experience for a PBS documentary (video here, starting at 3:52):

JIM LEHRER: Everyone in America who was watching, you know, was very – couldn’t figure out – this was unreal. What was it like standing there?

PRESIDENT CARTER: I watched that tape afterwards and it was embarrassing to me that both President Ford and I stood there almost like robots. We didn’t move around, we didn’t walk over and shake hands with each other. We just stood there.

PRESIDENT FORD: I suspect both of us would have liked to sit down and relax while the technicians were fixing the system, but I think both of us were hesitant to make any gesture that might look like we weren’t physically or mentally able to handle a problem like this.

JIM LEHRER: The delay continued for 27 minutes before the technicians were able to trace the problem to a blown transformer and replace it.

PRESIDENT CARTER: So I don’t know who was more ill at ease, me or President Ford.

JIM LEHRER: It looked like a tie to me.

PRESIDENT CARTER: It was a tie. Neither one of us was at ease, there’s no doubt about that. Those events, I think, to some degree let the American public size up the candidates, and I don’t think either one of us made any points on that deal.

If they could not have stood up to the audio, could they have stood up to the Soviets?

stop the presses

Unless someone objects, I’m going to stop doing Tribune Thursday for a while.

safe investments

Those who have seen Boiler Room, which I just watched last night, can see the irony in this:

But systemic corruption—and that is the right word—has been unveiled at lenders across the board. Two of the most revealing stories on the culture that overtook the lending industry were published early—February 4 and March 28, 2005—by the Los Angeles Times. Reporters Mike Hudson and E. Scott Reckard found court records and former employees who described the boiler-room culture that pervaded Ameriquest—hard-sell, scripted sales pitches, complete with the “art department” in Tampa. Ex-employees confirmed, as did Lisa Taylor, the loan agent quoted at the top of this story, that copies of Boiler Room, the movie about ethically challenged stockbrokers, was indeed passed around as an Ameriquest training tape.

[Ex-employees] described 10- and 12-hour days punctuated by ‘power hours’—nonstop cold-calling sessions to lists of prospects burdened with credit card bills; the goal was to persuade these people to roll their debts into new mortgages on their homes.

Power hours. And if the power-hour culture pervaded the market leaders, what of smaller lenders and mortgage brokers? Here is Glen Pizzolorusso, a young sales manager at WMC Mortgage, an upstate New York brokerage, who earned—get this—$75,000 to $100,000 a month:

What is that movie? Boiler Room? That’s what it’s like. I mean, it’s the [coolest] thing ever. Cubicle, cubicle, cubicle for 150,000 square feet. The ceilings were probably 25 or 30 feet high. The elevator had a big graffiti painting. Big open space. And it was awesome. We lived mortgage. That’s all we did. This deal, that deal. How we gonna get it funded? What’s the problem with this one? That’s all everyone’s talking about . . .

We looked at loans. These people didn’t have a pot to piss in. They can barely make car payments and we’re giving them a 300, 400 thousand dollar house.

To business reporters of a certain age, boiler rooms are associated with the notorious stock swindlers of the late nineties—A. R. Baron, Stratton Oakmont—criminal enterprises all. But all the elements of the bucket shops of the past—the cold calling, the hard sell, the bamboozling of over-their-head civilians, not to mention the outright lying, forgery, and fraud in its purest form—were carried out on a massive scale and as a matter of corporate policy by name-brand lenders: IndyMac, Countrywide, Citi, Ameriquest.

Tribune Friday (in 1908: Saturday)

  1. In Fort Meyer, Virginia, in front of a crowd of spectators, Orville Wright set a new record for the longest flight “for a heavier-than-air machine”: 1 hour, 10 minutes, 26 seconds.

    2.  

  2. One person was killed in an explosion in a dye shop in Syracuse.

    3.  

  3. A serious accident in the “24-Hour Auto Contest” apparently still ongoing in Brighton Beach sent two men to the hospital and led to the withdrawal of two cars from the race. Of the eleven cars to start the contest, only seven remain. Interesting detail: President Roosevelt gave the “starting signal…over the telephone from Oyster Bay.”

    4.  

  4. A hurricane has devastated the Turk’s Islands. The extent of the devastation is still not entirely clear, but a number of people have lost their lives.

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  5. Louis Lippman, “alias Metzler” was arrested in Buffalo for embezzling $300,000 from a New York banking house.

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  6. There is yet more discussion of the maneuvering taking place over the Republican state ticket in New York. The convention will begin in Saratoga in a few days and it seems clear that Hughes will win renomination.

small town (numerical) values

It’s really sort of remarkable, the lengths some people will go to in order to hide the metropolitan reality of this country. And that’s assuming that Wasilla and all other similarly-sized cities are small towns that are not, as surely some of them are, actually suburbs just on the edge of urbanized areas.