Favorite Holiday Names

December 18, 2009

Back when I was attending office holiday parties, I wasn’t above grabbing the name tags intended for spouses and have a little fun. I generally stuck with one or two, but over time I developed a list of other names that never got used. I figured I’d share the list in the hopes that it brightens your day. If you’ve got any additional ideas, I’d love to hear them. Enjoy.

  1. Marion Bright
  2. Hal Lelujah
  3. Byrum Babumbum
  4. Dick T. Halls
  5. Noel Bjorn Iztheking
  6. Chet Snuts
  7. Harold Angels
  8. Gloria S. Ongofold
  9. Miss L. Toe
  10. L. B. Homeforchristmas
  11. Will T. Omen
  12. Al Iscalm
  13. Al Isbright
  14. Cy Lentnight

Mortgage Mess

December 16, 2009

Sadly, the mortgage mess is going to be with us for a long time.  The big thing that I think is likely to prevent a resolution any time soon is complicated, but worth thinking about.  It’s really much more complicated than I depict here, too, but for simplicity I’ve stripped it down to one issue and the essentials at that.

As you think about why more mortgages aren’t being renegotiated so that foreclosures can be avoided, consider this:

The holder of the first mortgage is quite often different from the holder of the second mortgage or HELOC.  If both mortgages were written at the same time, the chances are that the first was sold off and likely securitized, while the second was either held by the lender or sold in a separate securitization.  That second lien loan is, in many cases, worthless because of declines in market values of homes beyond the point where the homeowner has any equity (as discussed in this WSJ article).

For example, if the home was worth $250,000 and the owner got an 90% first mortgage and a 10% second at the outset ($225k and $25k, respectively), but that home is now worth only $190k (a drop of 24%–not unheard of these days to be sure), the second lien holder is S.O.L.

The reason that this is important and the reason that the crisis is going to be around for a long time is that those separate holders of the mortgages have different motivations and different exposures to be managed.  If the holder of the second lien is the originating bank and that bank acts as the servicer for both loans, there is a potential incentive for that servicer to not renegotiate the first mortgage to avoid having to realize the worthlessness of the second.  Setting aside the fact that the servicer can potentially make more money keeping a struggling homeowner barely alive than they can with a fully renegotiated loan, the holder of the second lien has no incentive to realize the true value of its position, so they don’t.

The government is pressing lenders to restructure mortgages to avoid foreclosures–but those are first liens that they’re thinking about.  If the first mortgage is restructured to the point that principal is forgiven and the balance reduced, the servicer/second lienholder must recognize that its loan is wiped out and write it down to zero if it’s still unsecuritized.  (If the second is securitized, the situation is potentially much more complicated.)  It’s not at all clear that this process of clearing bank balance sheets of “toxic waste” has occurred, despite the massive losses recognized during 2008.

To say nothing of the commercial real estate exposures that are lingering in a semi-dead state to be dealt with at some point in the future, hopefully after banks can earn enough money to replace the capital they’re about to deplete with big CRE write-downs.

More to come on this topic.


Thoughts on Freezing My Arse

December 11, 2009

Another Day in Paradise

Old Thinking:  I prefer cold weather to abjectly hot weather because if it’s cold, you can always put more clothes on, but when it’s really hot, even taking off every stitch of clothing you have on won’t cool you down.

New Thinking:  How could I have been so friggin’ stupid to think that?

It’s the time of the year when even life-long Chicagoans ask themselves “Why do I live here?”  It is a question of particular curiosity for me, because I don’t have a job and could look for a new one anywhere in the world—even God forbid, someplace warm.

The Great Book of Parenting will note that I continue to look for work in this beautiful for 9 months out of the year (ok, maybe 6 months out of the year—check that, 4 non-consecutive months out of the year) place only so my children stay with their friends.  I told my 16-yr old that a few months back when she was complaining about the weather,  “Hey Caroline, I don’t have to look for a job here.  We can live anywhere!  Think of the possibilities!  I just thought you wanted to stay here and go to school with your friends.”  She has not complained about the weather since.

The winter thinking is so perverse that you curse the clear days and think, “If we just had some cloud cover…”

We’ve lived in Chicago for almost 20 years now.  The closest I ever came to leaving was one April day in 1997 when there was a freak (!) three-inch slush fall and I had to walk the half-mile home without any overshoes.  Tromping through the muck, slipping every third step I muttered first, then shouted once I realized that I’d ruined my shoes “Why do I live here?”  The next day a headhunter called me about a job in North Carolina (state motto:  Spit Cup Optional).  I took the call and very nearly took the job.  It wasn’t the weather there that kept me from doing it. It was because two of the people I met there couldn’t remember either their young children’s ages or what grades they were in.  Seriously.

It occurred to me this morning that the conditions here today are so severe that they meet even John Yoo’s definition of torture—“an activity that could lead to organ failure, impairment of bodily function or even death.”  Perhaps Amnesty International can get the UN Human Rights Commission to take action to outlaw The Alberta Clipper.  Tomorrow’s Chicago Tribune headline:  “Dick Cheney Endorses Subzero Temps”.  Maybe this is the reason they want to move the Gitmo prisoners to western Illinois—we’ve exposed them to the brutal sun and humidity of Cuba, now it’s time for a little Arctic blast. Tell us what we want to hear or else we’ll take your coat away from you.

But if I didn’t live here, what would there be to complain about? Humidity?  Mudslides and forest fires?  The federal government’s failure to protect my beachfront home from hurricanes or its attempt to “steal” beachfront property from me by creating a buffer to protect my property from erosion and hurricanes? The fact that sand gets all over the carpeting? Skin cancer and the lack of adequate dermatology coverage in the Health Care Reform bill?

As I look out my window, for about the last 15 minutes there has been a constant flow of Canada Geese flying overhead in their characteristic V formations, headed south to crap on golf courses there.  Wave after wave of them, about twenty per group.  Honking and mocking me in my overly bundled up, but still not warm state.

No matter which direction you walk in the winter, you’re always walking into the wind.


The UnIntelligent Investor

December 10, 2009

From
today’s Wall
Street Journal
comes an article about two guys who just
don’t get it. One, Jonathan Wurfel of Rolling Meadows, Illinois,
doesn’t seem to understand even the most rudimentary thing about
being an investor in common equity. “Should common shareholders now
serve as the final scapegoat for others’ flaunty egos and suffer a
total and complete loss?, he asks the Federal Bankruptcy Judge.
YES, that’s what common equity is, the last place money goes after
lenders get paid on their claims.  The people from whom CIT borrowed money
accepted stock in lieu of cash.  That’s
the way it works when
you owe more than you can repay.  That’s the definition of
“bankrupt.”  If there’s no equity, owners get nothing. You,
Mr. Wurfel, were and owner and you get nothing. In a fitting piece
of irony, Wurefl’s letter head is reported to be adorned with an
image of Wile E. Coyote from Looney Tunes.  I would have
suggested Porky Pig.  “Abedee, abedee, abedee That’s all
folks!” This is why people know there’s money to be made in the
stock market.  You’re not picking company stocks, you’re
taking money from fools.e


Words of wisdom for Notre Dame football fans

November 17, 2009

Don't let the bastards get you down

This from the Tuesday Morning Quarterback column on ESPN.com’s Page 2.  I am in complete agreement.  Winning college football games isn’t everything.  Conducting yourself with class and pride counts for much more over the long run–something that Nick Saban either never learned or forgot.  When these Notre Dame players tell their grandkids about their playing days, they won’t talk about their won-loss record, but the kids will know from watching grandpa what kind of a man ND helped make him.

Sportstalk radio continues to call for the head of Charlie Weis of Notre Dame, whose team is “only” 6-4 after close losses to power schools. Must be that when Weis got to South Bend, immediately he forgot how to coach. Bob Davie and Tyrone Willingham, his predecessors, saw their coaching careers hit the rocks, too, upon arrival at South Bend, followed by boosters’ demands that it become 1966 again and Notre Dame roll over opponents. TMQ thinks Notre Dame alums should be proud of the football program’s recent struggles — because the reason for the struggles is that Notre Dame still requires football players to attend class. Over the past couple of decades, increasingly most top 20 football schools have discarded any pretense of education. With a 94 percent football graduation rate, Notre Dame is competing against programs with a 68 percent football graduation rate (Florida), a 55 percent graduation rate (Alabama) and a 50 percent graduation rate (Texas); other football power schools have similarly miserable grad rates. Low graduation rates at big football schools mean players cut class to concentrate on sports, being pros in all but pay. “Don’t go to Notre Dame, they make you study there, come to our college and party, party, party” has become a recruiting pitch that undercuts the Fighting Irish. It is extremely cynical of other football powers not to educate their players; Notre Dame is among the few football powers (others are Boston College, Nebraska and Stanford) to refuse to give in to such cynicism. Want the Irish to win more games? If the school stopped making football players do term papers, results would improve. That would hardly be in the best interest of the players — or of Notre Dame.

Two weeks ago, when Navy defeated Norte Dame in the closing seconds at South Bend, both teams and 80,795 people stood quietly and respectfully in the twilight as “Blue and Gold,” the Navy alma mater song, was played — only a genuine institution of learning like Notre Dame could produce such a moment. Wasn’t it worth more than a victory? Wasn’t it far more impressive than the mindless fist-shaking exhibited by some big-deal football programs after 40-point wins against cupcakes?

Amen.


Progress Paradox Redux

November 4, 2009

Kellogg’s Corn Flakes has been running full page ads in the New York Times in which they reprint the front page of the Times from the current date, one hundred years before.  It’s  fascinating to read what people thought worthy of front page coverage and how they wrote it.  The language used has clearly evolved since then.

Included on the front page for November 4, 1909 was this item:

FARMAN UP FOR OVER FOUR HOURS

Breaks Endurance and Distance Records in 144-mile Aeroplane Flight

Paris, Nov. 3—Henry Farman broke all aeroplane records for distance and duration to-day in a flight for the Michelin Cup at Chalone Camp.  He remained in the air four hours seven-teen minutes and fifty-three seconds and covered 144 miles.

The weather today was ideal, it being gray and windless, although the cold was severe.  The aviator received an ovation when he landed.

Think about it; the world record flight was Chicago to Fort Wayne, and it took four hours to do it, and got an ovation when he was done.  Fly to Fort Wayne today and nobody even grunts at the pilot.

We’ve come so far and there’s so much further to go.  If we could get our smartest people to stop trying to figure out ways to game the financial markets with complex securities, maybe we’d have a chance to achieve it (seriously, I once worked with a brilliant physicist and real live rocket scientist who thought the highest and best use of his skill was working in the foreign exchange group at Continental Bank).

By now you’ve seen this clip from Conan’s show about how people take progress for granted.   This is of a piece with that, and Gregg Easterbrook’s 2003 work Progress Paradox:  How Life Gets Better While People Feel Worse.  We’ve become so blasé about the incredible progress that we’ve achieved.  You get the sense from reading these old news pages that the people of that time knew they were in remarkable times and appreciated it.


Droopy Lieberman

October 30, 2009

Separated at birth?I don’t know who first planted the idea in my head of “Joe Lieberman as Droopy Dog”, but now that it’s there, I can’t shake it.  Maybe it was Jon Stewart.

The fact that the Wikipedia description of Mr. Dog includes the following only adds the similarities:

Droopy moved slowly and lethargically, spoke in a jowly monotone, and, though he didn’t look like much, was shrewd enough to outwit his enemies and, when finally roused to anger, capable of beating adversaries twice his size with a comical thrashing.

Truer words might never have been spoken about both of them.

Given what’s going on, the fact that when you see Senator Lieberman on television the caption reads “Sen. Joe Lieberman (I-CT)” is pretty rich.  The “I” might actually stand for “insurance”.


Madoff Victims to get IRS Bail Out

October 29, 2009

Where is the outrage?  Or are we just completely numb to these things now?  Investors who did no due diligence and received out-sized rewards are now going to collect a tax-payer financed windfall as a reward for their stupidity.  According to today’s New York Times:

Under the plan, the I.R.S. will allow investors, including those who are suing Mr. Madoff, to claim a theft loss equal to 95 percent of their investments, minus any withdrawals, reinvested gains and payouts from the [SIPC]…

The plan appears generous in that it allows investors to take a deduction against their total ordinary income on investment gains they were told they had received from Mr. Madoff but that turned out to be fictitious.

These were people wealthy enough to pass Bernie’s test in the first place.  Losing it all is the price they pay for a) putting it all in one place and b) not doing any due diligence.  The lesson, learned by many people over the past couple years seems to sadly be:  It pays to be greedy and chase returns because even if it goes bad, if it goes bad in a big enough and spectacular enough way, someone will bail me out of it.  All the rest of us who didn’t max out on our homes and didn’t chase yield with charlatans are nothing but suckers.

I’m not against giving relief to people who paid taxes on what turned out to be ficticious income.  The government wasn’t really owed that money (since it didn’t exist) and should pay it back to those taxpayers.  But giving them tax relief on lost principal is quite another thing.

Here’s an idea:  Anyone who objected to any federal money being used to help homeowners with exotic mortgages or banks or auto companies should be ineligible for this Madoff tax relief.


Riffing on the President’s Nobel – Part 1

October 9, 2009

Maybe Sasha and Melia fight more than we all realize.

Will this make passing Health Care Reform seem small by comparison?

This is really a sign that the Nobel Committee loves getting Rush and them all fired up.  I hope they send a thank you card and a check to Oslo, for giving them more material than they can possibly handle.

This gives you a pretty good idea of the state of what constitutes “peace” these days.

Obama in Oslo is preferable to Bush in The Haig.

In 8 months, Obama received a Nobel Prize, in 8 years, Bush received two shoes. (h/t to TheBigHomieJ)

What can he possibly do for an encore?

What prize will he be awarded when he actually DOES something?

Does this mean that he won’t spend the last two years of his presidency on a “Legacy Project”.

Has the Nobel Committee ever awarded a prize in advance before?

Today’s Headline: President Awarded Peace Prize; Sends 60,000 more troops to Afghanistan.  Discuss.


Faith, healing and parental responsibility

October 8, 2009

I was reminded of an old joke, arguably mildly humorous, this morning about a guy who lived by a river.  Heavy rains come and the river rises quickly.  A neighbor come by with a rope.  “Come on,” the neighbor says.  “We can tie ourselves together and make it out of here.”

“No,” the homeowner replied, “I have faith in God and he will deliver me a miracle.”  As the neighbor wades away to safety and the homeowner keeps waiting and praying.  As the water keeps rising up to the man’s neck, a man comes by in a boat and says “Get in!” but the homeowner demurs, “No, I have faith in the Lord and he will bring me a miracle.”

Finally, the man is forced onto his roof as the waters swamp his home.  The National Guard patrolling in a helicopter spots him and drops him a rope, but he again refuses the rescue, citing his faith that God will deliver a miracle.  The water continues to rise and eventually drowns the faithful homeowner, who arrives at the gates of heaven, shaken by the fact that God failed to deliver the miracle he so faithfully sought.  He tells Saint Peter of his great faith and frustration that his prayers were not answered.

“I don’t know what you’re talking about,” St. Peter told him.  “The Big Guy sent you a guy with a rope, a boat and a helicopter but you were too stupid to accept the help.”

Whatever mild humor that existed in this tale ceased to amuse me this morning as I read this story about the sentencing of a Wisconsin couple who chose prayer over medical treatment for their 11-year old diabetic daughter.  The child, Madeline Kara Neumann died on March 23, 2008, unable to walk or talk in the days leading up to her death.  (This is not a story I’d heard before, as early 2008 is a period that I can only recall being at work trying to save my little corner of the banking industry.  I succeeded in one sense and failed in another, but that’s another story).

The miracle these parents were praying for appeared in the form of pharmaceuticals, myriad doctors, nurses and hospitals within a 25-mile radius of their suburban Wausau, Wisconsin home that had the means and ability to treat their daughter.  Their prayers were answered, they just didn’t get the message in the form that they wanted it, and their child died as a result.

I know this is a sensitive topic for people and I’m sorry if there’s something about this story that I’m missing from a faith perspective.  I am a person of faith. I’m not criticizing these people for having faith.  I’ve been wearing out the prayer rug myself lately, but this is an achingly sad story.  These folks missed the rope, boat and helicopter that God sent for them.  I fear that the only lesson they took away from this (because they expressed no remorse at the sentencing according to the New York Times piece) is that they should have prayed harder and victory would have come their way. It’s not unlike athletes coming off the field after a game.  The winners often thank God for answering their prayers with victory, implying that the losing team isn’t getting their prayers heard or that they’re insufficiently faithful.

I understand that structuring a penalty as they judge did in this case is not uncommon when there are other children to be cared for, but I can’t help feeling that the judge was unnecessarily generous to them after they failed the first responsibility of parenting—protect the child.

If I were one of their remaining children, I know what I’d be praying for: “Please God, don’t let me get sick.”