Author Archives: nottoobigtofail.org
“If you intentionally manipulated an asset’s marketplace by artificially restricting its supply, causing the asset’s price to rise to astronomical levels and then you sold a chunk of your supply (raising $359 million for yourself) near the top, to hardworking and largely uneducated immigrant American entrepreneurs,…
…many of whom borrowed to finance these purchases, should you be prosecuted for fraud and pay a big fine for this? What if less than three years later, you decided to no longer control the supply, so the asset price plummeted in value and these immigrant entrepreneurs were driven to default on their borrowings and/or declare bankruptcy (significantly impairing their ability to earn a living), should you be prosecuted for fraud and pay a big fine then? What if you are the City of New York and you did this with New York City taxi medallions and to NYC taxi cab owners?”, Mike Perry, former Chairman and CEO, IndyMac Bank
September 10, 2017, Winnie Hu, The New York Times
Taxi Medallions, Once a Safe Investment, Now Drag Owners Into Debt
By WINNIE HU
Uppkar Thind said he has to drive his yellow cab as many 13 hours a day, as he struggles to pay off a taxi medallion that he bought 11 years ago. Credit Caitlin Ochs for The New York Times
Owning a yellow cab has left Issa Isac in deep debt and facing a precarious future.
It was not supposed to turn out this way when Mr. Isac slid behind the wheel in 2005. Soon he was earning $200 a night driving. Three years later, he borrowed $335,000 to buy a New York City taxi medallion, which gave him the right to operate his own cab.
But now Mr. Isac earns half of what he did when he started, as riders have defected to Uber and other competitors. He stopped making the $2,700-a-month loan payment on his medallion in February because he was broke. Last month, it was sold to help pay his debts.
“I see my future crashing down,” said Mr. Isac, 46, an immigrant from Burkina Faso. “I worry every day. Sometimes, I can’t sleep thinking about it. Everything changed overnight.”
Taxi ownership once seemed a guaranteed route to financial security, something that was more tangible and reliable than the stock market since people hailed cabs in good times and bad. Generations of new immigrants toiled away for years to earn enough to buy a coveted medallion. Those who had them took pride in them, and viewed them as their retirement fund.
Uber and other ride-hail apps have upended all that.
Just as homeowners faced ruin when housing markets sank, struggling cab owners in Chicago, Boston, San Francisco and other cities are now facing foreclosure and bankruptcy. Many took out loans to pay for taxi medallions, counting on business that has instead nose-dived amid fierce competition. They are falling behind on loan payments, being turned away by lenders and stand to lose not only the medallions that are their livelihoods but also their homes and savings.
Nowhere is the crisis more dire than in New York, which has the largest taxi fleet in the country. Medallions now sell for a fraction of the record $1.3 million price in 2014, and in many cases, are worth far less than what their owners borrowed to buy them. Even if these owners sell their medallions, they still owe hundreds of thousands of dollars — far more than in many other cities where medallion prices were lower to begin with.
In an unprecedented fire sale of medallions, up to 46 of them are expected to go on the auction block later this month as part of bankruptcy proceedings against taxi companies affiliated with an embattled taxi mogul. While the city has previously held auctions to sell a limited number of new medallions — about 1,800 since 1996 — this is believed to be the first auction to dispose of foreclosed medallions, according to city officials.
While the auction has drawn attention to the precipitous fall of the once-mighty taxi industry, it does not reflect the hardship — and heartbreak — of individual owners like Mr. Isac. It is their stories that often get lost in the larger debate over new technology and commutes, and tell of the human cost of the city’s rapidly evolving transportation landscape.
Since 2015, a total of 85 medallions have been sold as part of foreclosure proceedings, according to city records. In August alone, 12 of the 21medallion sales were part of foreclosures; the prices of all the sales ranged from $150,000 to $450,000 per medallion.
Many more taxi owners say they do not know how much longer they can hold on. Didar Singh, 65, who took out a loan to buy two medallions for a total of $2.6 million in 2013, said he can only afford to pay the interest — $4,816 a month — on the loan. As it is, his taxis do not bring in enough to cover his expenses, forcing him to rely on savings and help from his children.
Sohan Gill once saw his medallion as such a good investment — ”better than a house” — that his wife bought two more in 2001. Now they cannot find enough drivers for the cabs because business is so bad. And Mr. Gill, 63, who had retired from driving, had to go back on the road. “How many more years am I going to drive to take care of these medallions?” he asked.
As recently as three years ago, taxi medallions sold for well over $1 million. Today, some have sold for as low as $150,000. Credit Caitlin Ochs for The New York Times
Gone are the years when taxi medallions steadily rose in value, largely because there was a limited supply of them. The city controls the number of medallions — currently capped at 13,587 — to prevent an oversupply of cabs like what occurred in the 1930s when concerns over congestion, reckless driving and cut-rate fares prompted the city to step in. The last time there was an auction for medallions was when the citysold 350 new medallions in 2014 at the height of the market, generating $359 million in revenue.
But today, yellow cabs are dwarfed by cars working for ride-hail apps, which face far fewer regulations. Taxi owners and their supporters complain that their competitors do not have a similar cap on their cars, and are not subject to strict rules on taxis that cover fares, vehicle equipment and access for disabled people, among other things.
There are more than 63,000 black cars providing rides in the city through five major app services: Uber, Lyft, Via, Gett and Juno. Of those, about 61,000 cars are connected with Uber, though they may also work for the other app services, too.
“We are not against competition, we are not against technology, but we want to compete fair and square,” said Nino Hervias, 58, a taxi owner and spokesman for the Taxi Medallion Owner Driver Association, which represents about 1,500 individual taxi owners, most of whom are immigrants.
Taxi owners have sought to sue the city over what they see as an unfair playing field, with little success. Earlier this year, a lawsuit filed against the city and taxi commission by taxi owners, trade groups and credit unions was dismissed by a federal judge who found that they had failed to show they were denied due process or equal protection.
Mr. Hervias and another driver have also taken legal action, known as an Article 78 proceeding, to compel the city and its regulators to establish and enforce standards that will make sure that all licensed cars — including yellow cabs — “are and remain financially stable.” The case is pending in State Supreme Court in Manhattan, with a court appearance scheduled in October.
Yellow taxis made an average of 277,042 daily trips and collected $4 million in fares per day in July, down from 332,231 daily trips and $4.9 million in fares the year before, according to city data.
Allan J. Fromberg, a spokesman for the taxi commission, said it had taken a number of steps to help struggling taxi owners, such as lifting a requirement for individual owners to personally drive their taxis at least 150 shifts a year, which was not only a burden for older people but also limited the pool of potential buyers for medallions. It has also supported laws that have eased restrictions on who could buy the medallions and significantly lowered the transfer tax on medallion sales.
The commission has also provided financial incentives to defray the cost and maintenance of handicap-accessible cars, Mr. Fromberg said. And it has created a pilot program that is intended to help fleet owners attract more drivers; the program allows drivers to pay a percentage of their earnings during a shift to lease the cab, in lieu of a flat fee up front that puts drivers under pressure and leaves them in the hole if they do not earn enough back.
But for many taxi owners, such measures have not been enough.
Mr. Isac is again leasing yellow cabs since he no longer has his own medallion. At times, he picks up only one passenger an hour. Even so, he is not ready to give up on yellow cabs yet.
“I’m still driving a yellow taxi because I want them to come back,” he said. “I don’t want to see yellow cars disappear from the streets.”
Uppkar Thind, 46, an immigrant from India, said he now has to drive 11 to 13 hours a day and can no longer take time off if he wants to break even. He is paying off a medallion that he bought for $357,000 in 2006 with money borrowed from his relatives and a credit union.
“I worked hard,’’ he said. “I achieved my American dream and it turned into a nightmare.”
A version of this article appears in print on September 11, 2017, on Page A1 of the New York edition with the headline: As Uber Ascends, Debt Demolishes Taxi Drivers
“It is ironic that the Great Depression was produced by government but was blamed on the private enterprise system. The Federal Reserve System explained in its 1933 annual report how much worse things would have been if the Federal Reserve had not behaved so well, yet the Federal Reserve was the chief culprit in making the depression as deep as it was. So the government produced the depression, the private enterprise system got blamed for it, and there was a tremendous change in attitudes…
…When you say ideas are not important, that change in attitudes would not have been possible if the groundwork had not been laid by the socialist intellectuals in the 1920s. It is interesting to note that every economic plank of the 1928 Socialist party platform has by now been either wholly or partly enacted…Financial System: You are fully aware of the weakness of our financial system. Is there any doubt that the weakness owes much to Washington? The savings and loan crisis was produced by government, first by accelerating inflation in the 1970s, which destroyed the net worth of many savings and loan institutions, then by poor regulation in the 1980s, by the increase in deposit insurance to $100,000, and more recently, by the heavy-handed handling of the crisis. You know the litany; I don’t have to spell it out.”, Nobel Laureate in Economics, Milton Friedman, Excerpt from “Why Government is the Problem”, Essays in Public Policy, no. 39, Stanford California: Hoover Institution Press, 1993
“The 2008 financial crisis is pretty much a repeat of the above…government again blaming the private sector (and those on the Left calling for the jailing of bankers) for a crisis caused mostly by government and the rise of socialism under Bernie/Warren…but we no longer have the brilliant Milton Friedman to say as much. P.S. By the way, the entire essay and especially the Q &A is a MUST READ (and is similar to Nobel Laureate in Economics F.A. Hayek’s views)…Mr. Friedman discusses at-length the government-created taxi monopolies (almost fore-telling Uber’s rise, nearly two decades later) and the healthcare crisis and government’s key role.”, Mike Perry, former Chairman and CEO, IndyMac Bank, July 26, 2017
“And it is quite fitting that “volatility” comes from volare, “to fly” in Latin. Depriving political (and other) systems of volatility harms them, causing eventually greater volatility of the cascading type. This section, Book II, deals with the fragility that comes from the denial of hormesis, the natural antifragility of organisms, and how we hurt systems with the very best intentions by playing conductor. We are fragilizing social and economic systems by denying them stressors and randomness,…
…putting them in the Procustean bed of cushy and comfortable….but ultimately harmeful…modernity.”, Nassim Nicholas Taleb, Antifragile: Things That Gain from Disorder
Comments from Mike Perry, former Chairman and CEO, IndyMac Bank: It is clear from Taleb’s comments in Antifragile and elsewhere, that he believes The Federal Reserve Bank of The United States, through its powerful monetary policies, created an artificial environment that distorted finance and the economy for years, lulled them into a state of fragility, and this led to the 2008 financial crisis. I agree. I know that the normal business/economic cycle (which the Fed did its best to eliminate) is important for proper credit risk management. Credit has its own normal cycle of expansion and tightening. Because the Fed smoothed out the natural business/economic cycle for years, the credit downturn was the worst in modern history. That’s on The Federal Reserve. I am with Mr. Taleb, Ron and Rand Paul, and many others….it is time to at least Audit the Fed and possibly time to End the Fed.
Great Moderation: A turkey problem. Before the turmoil that started in 2008, a gentleman called Benjamin Bernanke, then the Princeton professor, later to be chairman of the Federal Reserve Bank of the United States and the most powerful person in the world of economics and finance, dubbed the period we witnessed the “great moderation”—putting me in a very difficult position to argue for increase of fragility. This is like pronouncing that someone who has just spent a decade in a sterilized room is in “great health”—when he is the most vulnerable. Note that the turkey problem is an evolution of Russell’s chicken (The Black Swan).
The Great Turkey Problem…..
It looks like a drop in volatility—and it is not. A turkey is fed for a thousand days by a butcher; every day confirms to its staff of analysts that butchers love turkeys “with increased statistical confidence.” The butcher will keep feeding the turkey until a few days before Thanksgiving. Then comes the day when it is really not a very good idea to be a turkey. So with the butcher surprising it, the turkey will have a revision of belief —right when its confidence in the statement that the butcher loves turkeys is maximal and “it is very quiet” and soothingly predictable in the life of the turkey. This example builds on an adaptation of a metaphor by Bertrand Russell. The key here is that such a surprise will be a Black Swan event; but just for the turkey, not for the butcher.
We can also see from the turkey story the mother of all harmful mistakes: mistaking absence of evidence (of harm) for evidence of absence, a mistake that we will see tends to prevail in intellectual circles and one that is grounded in the social sciences. So our mission in life becomes simple “how not to be a turkey,” or, if possible, how to be a turkey in reverse—antifragile, that is. “Not being a turkey” starts by figuring out the difference between true and manufactured stability.
Some people have fallen for the naïve turkey-style belief that the world is getting safer and safer, and of course they naively attribute it to the holy “state”. It is exactly like saying that nuclear bombs are safer because they explode less often…..When we look at risks in Extremistan, we don’t look at evidence (evidence comes too late), we look at potential damage: never has the world been more prone to more damage: never.* It is hard to explain to naïve data-driven people that risk is in the future, not in the past. (*A more rigorous reading of the data—-with appropriate adjustment for the unseen—shows that war that would decimate the planet would be completely consistent with statistics, and would not even be an “outlier.” As we will see, Ben Bernanke was similarly fooled with his Great Moderation, a turkey problem; one can be confused by the properties of any process with compressed volatility from the top. Some people, like Steven Pinker, misread the nature of the statistical process and hold such a thesis, similar to the “great moderation” in finance.
Other Taleb comments about The Federal Reserve….
Another expression of domain dependence: ask a U.S. citizen if some semi-governmental agency with a great deal of independence (and no interference from Congress) should control the price of cars, morning newspapers, and Malbec wine, as its domain specialty. He would jump in anger, as it appears to violate every principle the country stands for, and call you a Communist post-Soviet mole for even suggesting it. OK. Then ask him if the same government agency should control foreign exchange, mainly the rate of the dollar against the euro and the Mongolian tugrit. Same reaction: this is not France. Then very gently point out to him that the Federal Reserve Bank of the United States is in the business of controlling and managing the price of another good, another price, called the lending rate, the interest rate in the economy (and has proved to be good at it). The libertarian presidential candidate Ron Paul was called a crank for suggesting the abolition of the Federal Reserve, or even restricting its role. But he would also have been called a crank for suggesting the creation of an agency to control other prices.
I have called this mental defect the Lucretius problem, after the Latin poetic philosopher who wrote that the fool believes that the tallest mountain in the world will be equal to the tallest one he has observed. We consider the biggest object of any kind that we have seen in our lives or hear about as the largest item that can possibly exist. And we have been doing this for millennia. In Pharaonic Egypt, which happens to be the first complete top-down nation-state managed by bureaucrats, scribes tracked the high-water mark of the Nile and used it as an estimate for a future worst-case scenario. The same can be seen in the Fukushima nuclear reactor, which experienced catastrophic failure in 2011 when a tsunami struck. It had been built to withstand the worst past historical earthquake, with the builders not imaging much worse….and not thinking that the worst past event had to be a surprise, as it had no precedent. Likewise, the former Chairman of the Federal Reserve, Fragilista Doctor Alan Greenspan, in his apology to Congress offered the classic “It never happened before.” Well, nature, unlike Fragilista Greenspan, prepares for what has not happened before.* (*The obvious has not been tested empirically: Can the occurrence of extreme events be predicted from past history? Alas, according to a simple test. no, sorry.)
Likewise, those in corporations or in policy making (like Fragilista Greenspan) who are endowed with a sophisticated data-gathering department and are therefore getting a lot of “timely” statistics are capable of overreacting and mistaking noise for information—Greenspan kept an eye on such fluctuations as the sales of vacuum cleaners in Cleveland to, as they say, “get a precise idea about where the economy is going” and of course he micromanaged us into chaos. In business and economic decision making, reliance on data causes severe side effects—data is now plentiful thanks to connectivity, and the proportion of spuriousness in the data increases as one gets more immersed in it. A very rarely discussed property of data: it is toxic in large quantities—even moderate quantities.
Epiphenomena: The Soviet-Harvard illusion (lecturing birds on flying and believing the lecture is the cause of these wonderful skills) belongs to a class of casual illusions called epiphenomena. What are these illusions? When you spend time on the bridge of a ship or in the coxswain’s station with a large compass in front, you can easily develop the impression that the compass is directing the ship rather than merely reflecting its direction. The lecturing-birds-how-to-fly effect is an example of epiphenomenal belief: we see a high degree of academic research in countries that are wealthy and developed, leading us to think uncritically that research is the generator of wealth. In an epiphenomenon, you don’t usually observe A without observing B with it, depending on the cultural framework or what seems plausible to the local journalist. One rarely has the illusion that, given so many boys have short hair, short hair determines gender, or that wearing a tie causes one to be a businessman. But it is easy to fall into other epiphenomena, particularly when one is immersed in a news-driven culture. And one can easily see the trap of having these epiphenomena fuel action, then justify it retrospectively. A dictator—just like a government— will feel indispensable because the alternative is not easily visible, or is hidden by special interest groups. The Federal Reserve Bank of the United States, for instance can wreak havoc on the economy yet feel convinced of its effectiveness. People are scared of the alternative.
“Can anyone explain to me how the Italian banking crisis, which has been swept under the rug for years, fits the liberal American, Bernie/Warren narrative that greedy and reckless U.S. mortgage lenders and Wall Street’s greedy and fraudulent securitization of these “risky” mortgages caused the financial crisis? As I understand it, Italy didn’t have a housing bubble/bust…
…and Italian banks didn’t buy American mortgage-backed securities. Doesn’t government regulation, mandates, and intervention, like central banker’s manipulation of money and rates, fit (as an explanation for) a banking crisis in nearly the entire developed world, better?”, Mike Perry, former Chairman and CEO, IndyMac Bank, July 12, 2017
June 10, 2017, Paul J. Davies, The Wall Street Journal
How Fixing Italy’s Banks Is Helping Europe Heal
Italian banks, long a source of worry, might finally be aiding Europe’s recovery
By Paul J. Davies
Italian banks are out of the emergency room. There is a long convalescence ahead, but it is good news for the recovery of Europe as a whole.
The healing under way in Italy and elsewhere is making room for new lending, which can help to fuel economic growth.
Monte dei Paschi di Siena, Italy’s most troubled big bank, finally struck a deal with European regulators to complete its €5 billion ($5.7 billion) bailout this month.
A Monte dei Paschi di Siena bank logo in Rome in 2016. The troubled lender won approval from European regulators for a €5.4 billion ($6.1 billion) bailout. PHOTO: ALESSIA PIERDOMENICO/BLOOMBERG NEWS
Meanwhile, a smaller troubled bank, Banca Carige , which had also been keeping fears of financial crisis alive, announced a capital raising and bad-loan sale plan that sent its shares up 30%.
These solutions came swiftly after the state-backed sale to Intesa Sanpaolo of two banks in the Veneto region, which had been casting a shadow over the financial system. Italian bank stocks have rallied sharply, outperforming European rivals significantly since mid-June.
Between them, these events promise to take almost €50 billion of bad loans out of Italy’s banks, leaving about €275 billion in the system. However, UniCredit has pledged to sell €18 billion worth as part of its restructuring; and €57 billion are on the books of Intesa Sanpaolo, which as Italy’s healthiest bank is well placed to deal with them.
Italy’s problems are starting to look less dramatic. Yes, the country could have dealt with its weak banks sooner and in a less complicated way had there been the political will. But it has now neutralized its worst problems at a direct cash cost to the taxpayer of less than 1% of GDP—significantly less than Spain or Ireland spent several years ago.
And loans are turning bad at a slower rate: New bad debts at the 15 biggest banks in 2016 were at their lowest since before 2009, according to rating agency DBRS.
Now banks have the capacity to start lending again: Italian banks finally returned to growth in the first quarter of 2017, along with the banks of Germany and France, after years of near constant balance-sheet shrinkage.
Growth in those three countries turned the tide for the eurozone as a whole. Total eurozone bank loans were still shrinking at an annualized rate of 11.6% of GDP in the first quarter of 2016 and 3.8% in the last quarter of that year, but that became annualized growth of 1.4% in the first quarter of 2017, according to UBS.
Italy, long the source of worries about European instability, might finally be aiding the Continent’s recovery.
—Paul J. Davies
“Nobel Laureate in economics (for asset prices like housing/stocks/bonds & bubbles) Robert Shiller says we still (in 2017!) don’t know what caused the mid-1990s to mid-2000s, housing bubble, but liberal politicians like Senators Bernie Sanders and Elizabeth Warren, FCIC Chair Phil Angelides and their friends in the liberal Press, had no trouble calling (and continue to this day) for crisis era bankers to be jailed anyway, like totalitarian societies like Russia or Cuba (or like American McCarthyism),…
…, despite Democrat and Obama-appointed NY US Attorney, Preet Bharara, who led many of the banker investigations saying, “no bankers were jailed because there were no crimes committed.” Read the below, it also makes the case that bankers weren’t primarily responsible (non-criminally or morally/ethically) for the housing bubble and its bursting in 2008-09. In fact many would say home prices (and other assets like stocks and bonds) today are another bubble…..yet banks can’t be wrongly blamed this time. What’s the same? I and many others believe a lot of real estate and other asset speculation today has been caused by artificially low rates due to central bankers (The Federal Reserve), manipulation of rates and the supply of money.”, Mike Perry, former Chairman and CEO, IndyMac Bank, July 10, 2017
May 18, 2017, Robert J. Shiller, The New York Times
How Tales of ‘Flippers’ Led to a Housing Bubble
By ROBERT J. SHILLER
Credit Minh Uong/The New York Times
There is still no consensus on why the last housing boom and bust happened. That is troubling, because that violent housing cycle helped to produce the Great Recession and financial crisis of 2007 to 2009. We need to understand it all if we are going to be able to avoid ordeals like that in the future.
But the explanations for what happened in housing are not, I think, to be found in the conventional data favored by economists but rather in sociologically important narratives — like tales of getting rich through “flipping” houses and shares of initial public offerings — that constitute the shifting mentality of the era.
Consider the data for a moment. It shows us that extreme changes took place but doesn’t tell us why.
Real home prices rose 75 percent from February 1997 to December 2005, according to the S&P/Case-Shiller National Home Price Index, corrected for inflation by the Consumer Price Index. And then, from 2005 to 2012, real prices reversed course, falling to just 12 percent above their 1997 level. In the years since 2012, they have climbed 29 percent, about halfway back to their 2005 peak. This is a roller coaster in national home prices — it has been even scarier in some more volatile cities — yet we have no clarity on why it happened.
The problem for economists is that these changes don’t correspond to movements in the usual suspects: interest rates, building costs, population or rents. The Consumer Price Index for Rent of Primary Residence, compiled by the United States Bureau of Labor Statistics and corrected for inflation, went up only 8 percent in 1997 to 2005, so unmet demand for housing services can’t explain the huge increase in real home prices. It doesn’t explain the 29 percent rise in real home prices since 2012 either, because inflation-adjusted rents increased only 10 percent in that period. So what has been driving the wild ride in home prices?
I believe the price swings have something to do with the changing mentality of the times, changes caused by narratives that have gone viral and swept across the population. Looking for answers in such popular stories contrasts starkly with the prominent approach of modeling people as though they react logically to economic forces. But a less orthodox approach can be quite useful.
One thing is clear: The prevalent narratives of 1997 to 2005 did not include the concept of a housing bubble, not at first. A computer search using ProQuest or Google Ngrams shows that the phrase “housing bubble” was hardly used until 2005, the end of the boom. What is a bubble? It typically includes the notion that, spurred by the public’s expectation of ever further price increases, demand eventually reaches levels that cannot be sustained, and so the enthusiasm wanes and the bubble collapses. But that thought was just not on many people’s minds then, the evidence suggests.
Instead, during the 1997 to 2005 boom there were multitudes of narratives about smart investors who were bold enough to take a position in the market. To single out one strand, recall the stories of flippers who would buy a house, fix it up, and resell it within months at a huge profit. These stories appear to have been broadly exciting to people who didn’t flip houses themselves but who appear to have begun to think that stretching a little and buying a house with a large mortgage would make them wise investors.
In his book “The Complete Guide to Flipping Properties,” published in 2004, Steve Berges extolled what he called “the O.P.M. principle,” meaning “other people’s money.” He wrote, “Your objective is to control as much real estate as possible while using as little of your own capital as possible.” In other words, borrow as much as you can. He wrote about the upside of leverage but not about the perils of leverage during the kind of big price drops that were just around the corner.
It can take a long time for narratives like this to grip the popular imagination. Flipping was “a thing” in the condominium conversion boom of the 1970s and ’80s. The idea then was this: Big-time converters with deep pockets would buy apartment buildings and convert the rental apartments to owner-occupied condos, selling units to diverse individuals, some of them flippers. For public relations purposes, converters would offer to sell at reduced prices to renters already living in a building, and typically to some outsiders, too.
This generated buzz. When renters and speculators flipped their purchase contracts at a big profit, sometimes using borrowed money for down payments to flip multiple units without actually even closing on the condos, it was thrilling. It seemed that anyone with energy and initiative could get rich doing this.
Some people eager to make quick profits bought Donald J. Trump’s well-timed 2004 book, “Trump: Think Like a Billionaire: Everything You Need to Know About Success, Real Estate, and Life,” written with Meredith McIver. Some enrolled in the less well-timed Trump University, which emphasized real estate investment in 2005, at the very end of the housing boom; it shut down, amid lawsuits and recrimination, in 2010.
Narratives about flipping weren’t restricted to real estate. Just after the time of the condo boom, stories of rapid buying and selling of initial public offerings took off as well. As with the condo promoters, I.P.O. underwriters would sell some shares below market prices to customers, who might then flip the I.P.O. for a quick profit.
The promoters of condo conversions and I.P.O.s were onto something. By giving discounts to buyers who would make a high return, they captivated the nation with tales of people who had no advanced degrees or hefty résumés but made fortunes anyway.
By now, the notion of getting rich by flipping houses is entrenched. I searched Amazon for books on “flipping houses”and came up with 328 hits, most written in the past few years. Buying and rehabbing existing houses for resale is a legitimate business. But many of these books make extravagant pitches and seem aimed at inspiring amateurs to plunge into risky ventures.
The public fascination with speculating in housing has been held in check by regulators empowered by the 2010 Dodd-Frank Act, but that restraint is tenuous with the election as president of a real estate promoter intent on reducing regulators’ power. These narratives are still potent and could easily spur further spirals in the housing market.
Robert J. Shiller is Sterling Professor of Economics at Yale.
A version of this article appears in print on May 21, 2017, on Page BU3 of the New York edition with the headline: How Tales of ‘Flippers’ Led to a Housing Bubble.
“In high school English, most of us were taught to write essays by developing a thesis and providing three or more facts, to support this thesis. I’m not sure, but I suspect this has created a huge problem and a lot of fake news. Today, there were articles in my LA and NY Times discussing individual “victims” of the Trump Administration enforcing our existing immigration laws (which Congress, the people’s representatives, can change at anytime and has chosen not to). The “spin” was negative for Trump and his immigration policies…
…So the conservative article below, has similar individual facts, that clearly support the President and his policies. Yes, these individual facts are all true, but they distort the truth, because the truth on matters that affect large populations, is that anything that is not an entire population or statistically-valid sample, of such…is just an anecdote (an example, no matter how rare)…it’s like citing three facts to support your thesis statement in high school. Professional journalism should be better than this. How do we fix it? Courts just need to rule that with articles not based on entire populations or statistically-valid samples, the reporters and news groups can be sued for libel/defamation, even if the individual facts (anecdotes) are all true, if the overall thesis is false. And all of us need to read articles like this, whether supporting our views or not, and understand that they are not accurate, if they only cite examples and not entire populations or statistically-valid samples. mp. p.s. I came to see this as a BIG issue, as a result of all the anti-banker articles published in the media re. individual mortgage “victims” (by the way, every mortgage “victim” I checked out, they were not a “victim” in my view!), where they almost never mentioned the entire population of mortgages and never mentioned the concept of statistically-valid samples. Taleb raises this exact issue, re. journalists, in his books and its why he despises them and does not read newspapers.”, Mike Perry, former Chairman and CEO, IndyMac Bank, July 5, 2017
June 27, 2017, Peter J. Patrisi, The Daily Signal
SOCIETY / COMMENTARY
Open Borders and Missing Adjectives in the Liberal Media
The open-borders lobby long has sought to muddy the issue of immigration by deliberately—and dishonestly—omitting the word “illegal” whenever possible and conflating all immigrants, legal and otherwise.
“Human beings can’t be illegal,” they insist.
The liberal media all too often have been complicit in the effort to sidestep the distinction, but it’s a distinction with a very big difference. (Substituting the euphemism “undocumented” for “illegal,” as they often do when including an adjective at all, doesn’t change that.)
The phenomenon was on dishonest display when a young Muslim woman, Nabra Hassanen, 17, was fatally beaten with a baseball bat in the wee hours of Father’s Day morning in what police determined was a “road rage” incident.
Police arrested and charged a suspect, Darwin Martinez Torres, 22, an illegal alien from El Salvador. But The Washington Post buried the detail of Martinez Torres’ immigration status in the 24th paragraph of an article on the crime published online June 19.
Even then, the suspect’s illegal status was referenced only indirectly, with The Post reporting: “U.S. immigration officials requested a ‘detainer’ be placed on him at the county jail, meaning they are interested in possible future deportation proceedings.”
The words “illegal immigrant” were noticeable only by their absence, as they were also from a follow-up article June 21.
Now, six days later, The Washington Post reports that Martinez Torres had been accused the week before Nabra’s slaying of sexually assaulting and battering a young woman he knew. (She asked, however, that no charges be brought against him.)
This latest report in one of the nation’s top newspapers also omits any mention of Martinez Torres’ status as an illegal immigrant.
Then there was the case of the sexual assault charges brought and subsequently dropped against two young illegal immigrants in neighboring Maryland in mid-March.
The case drew national headlines after a 14-year-old girl said she had been raped by the young men, ages 17 and 18, in a restroom of Rockville High School.
Before Nabra’s slaying, it was the worst PR nightmare for the apologists for illegal immigration since a San Francisco woman, Kate Steinle, was fatally shot by a five-times-deported illegal alien in July 2015.
After prosecutors announced May 5 that they were dropping rape and other sex offense charges “due to the lack of corroboration and substantial inconsistencies” in the girl’s initial statements to police, the open-borders lobby and their water carriers in the liberal, mainstream media sought to redirect attention from the suspects’ immigration status, throwing the girl under the bus in the process.
Why did conservative media outlets that had made such a cause célèbre of the case go mute after the charges were dropped, apologists for illegal immigrants demanded to know in an effort to change the subject.
For the record, the dropping of the charges was duly reported, just not as sensationally. The reason why is no more complicated than the “man-bites-dog” formulation of what constitutes news—but the apologists knew that.
The editorial board of The Washington Post weighed in under the headlines “Immigrant-bashing over a crime that didn’t happen” (print edition) and “The Rockville rape charges have been dropped. Will anti-immigration fervor abate?” (online version).
Again, note the consistent, deliberate omission of “illegal.”
“Shouting the allegation, and when it doesn’t add up, whispering the update,” CNN senior media correspondent Brian Stelter tut-tutted and tsk-tsked on the cable outlet’s “Reliable Sources,” taking rival Fox News Channel to task.
So what if it did? This is nothing more than a liberal media “trompe l’oeil,” an illusion designed to take the public’s eye off the ball.
For one thing, the sexual assault charges may have been dropped, but the two young men—Henry Sanchez Milian, 18, and Jose Montano, 17—are hardly off the hook. They might still face child pornography charges over receiving and forwarding nude “selfies” the girl apparently sent to one of them over her cellphone.
But even if those charges are also dropped, the two surely face deportation as illegal immigrants. So does Sanchez Milian’s father, Adolfo Sanchez-Reyes, who is also in the country illegally.
The Post’s editorial to the contrary notwithstanding, “immigration-bashing” didn’t occur in the sensational coverage the case deservedly garnered. Illegal immigrant-bashing, perhaps; immigrant-bashing, no.
Most Americans aren’t against immigration when those coming into the country follow the proper legal procedures, but by wide margins they oppose illegal immigration.
Omitting the adjective doesn’t change that fact. What part of “illegal” do the advocates of uncontrolled immigration not understand?
Nor are those who demand respect for U.S. national sovereignty “nativists” and “bigots,” as The Post’s editorial maligned those who cited the Rockville incident in underscoring the need for greater border security. And no, their “quick-draw condemnation” did not stem from what The Post called the two men’s “otherness”—whatever that means.
All of the cover smoke laid down by the open-borders crowd and its media mouthpieces cannot obscure the real bottom line here.
Regardless of what really happened in that Rockville High School restroom that day, whether the sex was entirely consensual or not, this sordid episode would not—and could not—have happened had Sanchez Milian and Montano not been in the country illegally.
Even more regrettably, had Martinez Torres been deported to El Salvador, police allege, Nabra Hassanen would be alive today.
“Thanks to overbearing post-crisis government mortgage regulation, not only can’t many get the mortgage they want and deserve (costing 2 million jobs per JPMorgan’s Jamie Dimon), but as I pointed out recently, it costs roughly double ($4,000 pre-crisis vs. $8,000 today) for a lender to make a home loan. And now, on top of that, because of reduced competition caused by the crisis and government regulation (which acts as a barrier to entry), mortgage lenders today make almost 2.75 (60.5 bps divided by 16.2 bps) times the profit margin they did pre-crisis…
…This is Elizabeth Warren’s record…great for the surviving lenders and not so great for the American home borrower and prospective homebuyer.”, Mike Perry, former Chairman and CEO, IndyMac Bank
Excerpt from mortgage industry newsletter:
June 4, 2017
To Our Clients, Colleagues, and Friends:
• In the five years ending in 2016, the average profit per loan for mortgage bankers was 60.5 bps. Now go back to the five years ending in 2008, before the financial crisis led to the Fed lowering rates, and the average profit per loan was 16.2 bps. Would you be willing to go five years earning just 16.5 bps per loan?
“The political and media hysteria surrounding the Trump administration lies somewhere on the repulsiveness scale between the Jacobin excesses of the French Revolution and the McCarthy era. Thus far the public knows of no presidential action that would justify impeachment. Never mind, the crowd cries, let us have the verdict now…
…We can do the trial later.”, Ted Van Dyk, VP Humphrey’s assistant in the White House and 40+ years serving Democrat administrations and campaigns, The Wall Street Journal, May 22, 2017
“This is exactly how the Democrats attacked bankers after the 2008 financial crisis, except those bankers didn’t have the ability to fight back. In fact, nearly all were silenced by actual or threatened government investigations and/or lawsuits. To this day, the Obama Administration and Democrats in Congress did not prove a single crisis era allegation it made.”, Mike Perry, former Chairman and CEO, IndyMac Bank
Anti-Trump Democrats Invite Chaos
If they succeed in bouncing the president from office, they may find that what comes next is even worse.
By Ted Van Dyk
‘A jackass can kick down a barn,” said the legendary Speaker Sam Rayburn. “But it takes a carpenter to build one.”
Democrats should reflect on that wisdom as they consider the special counsel now appointed to investigate President Trump’s alleged ties to Russia. In the short term, the inquiry will probably hurt Mr. Trump and feed attempts to drive him from office. But in the end the president’s attackers will pay a price.
The political and media hysteria surrounding the Trump administration lies somewhere on the repulsiveness scale between the Jacobin excesses of the French Revolution and the McCarthy era. Thus far the public knows of no presidential action that would justify impeachment. Never mind, the crowd cries, let us have the verdict now. We can do the trial later.
What about discussions between Trump campaign advisers and Russian or other foreign leaders? Don’t they count as high crimes and misdemeanors? No, such conversations take place all the time in national campaigns.
What about the firing of FBI Director James Comey ? Wasn’t that suspicious? No, Mr. Comey disregarded the Justice Department chain of command and the normal proprieties of his office. He made public statements about ongoing investigations. He allowed it to leak that the president had suggested leniency for Mike Flynn, the former White House adviser now under investigation. A presidential suggestion of that nature would be neither illegal nor unprecedented.
What about Mr. Trump’s disclosure of classified information during a meeting with Russian leaders? It’s a tempest in a teapot. The president has the authority to classify or declassify information as he wishes. I have witnessed other presidents doing it.
What about Mr. Trump’s executive order declaring a short-term pause on immigration from countries with active terrorist movements? It may have been poorly handled, but other presidents have done similar things.
What about all Mr. Trump’s flip-flopping? Shouldn’t a president be trustworthy and reliable? Yes, but when Mr. Trump has reversed his campaign pledges it has been mostly for the good.
If Mr. Trump were a conventional president, these missteps would be shrugged off as growing pains or considered worthy of only mild reproof. President Trump, it is true, lacks the knowledge, experience and temperament for the office. His crude narcissism is grating. He has carelessly contributed to his problems with heedless public statements. He nonetheless was duly elected and should be given the leeway that new presidents are traditionally afforded.
Critics, moreover, misread the temper of the American people. Most voters don’t much like Mr. Trump. But they like chaos less.
I spoke recently to a Democratic group consisting mainly of Bernie Sanders supporters. Many were searching for a constructive response to the Trump presidency. They were people, as the saying goes, seeking to light a candle rather than curse the darkness.
I suggested that they concentrate on developing alternatives to Mr. Trump’s proposals—on health care, taxes, the budget. “You mean we should help Trump?” someone asked. “No,” I answered, “you should help your country.” I was surprised by the outburst of applause that followed.
Democrats, in their all-out opposition to Mr. Trump, are missing real opportunities to influence policy. The tax-reform debate is a prime example. If Democrats were shrewd, they would try to negotiate a grand compromise, in which loopholes are scrubbed from the code and Social Security and Medicare put on sounder long-term footing. But to get there, purposeful polarization must give way to constructive engagement.
Trump haters disregard an old rule of politics and history: In the end, voters always choose order over disorder. Kicking Mr. Trump to the curb wouldn’t return the country to the pre-Trump status quo. It would likely bring forth new law-and-order leadership more disciplined and conservative than Mr. Trump’s.
Mr. Van Dyk was active for more than 40 years in Democratic administrations and campaigns, including as Vice President Humphrey’s assistant in the White House.
“If you read this, I know it sounds like very boring, very detailed “political stuff”, but if you have ever had to deal with these federal agencies, like I have, and find out that they “hold (almost) all the cards” over individual American citizens, in violation of our Constitution, you would understand how important and powerful these Bills are for America…
…Glad also to see fabulous Senator Mike Lee say “it’s our fault” (Congress) this happened, we inappropriately abdicated our duties to the Executive Branch”. If you control corporate legal counsel decisions, ask your law firm where they stand on these Bills. I bet most won’t tell you, because the way it is today creates more legal work for them and also a revolving door career between their law firms and these unaccountable federal bureaucracies.”, Mike Perry, former Chairman and CEO, IndyMac Bank
May 17, 2017, Rachel del Guidice, The Daily Signal
3 Bills Sen. Mike Lee Thinks Could Shift Power ‘Back to the People’
“Many Americans now feel that they are not in control of their own government,” Sen. Mike Lee, R-Utah, said during an event hosted at the Federalist Society’s fifth annual Executive Branch Review Conference. “The administrative state is designed to be insulated from the will of the people.”
The Utah senator said that one way he is working to combat this phenomenon is through an initiative he has started called Article One Project.
“Our goal is to develop and advance and hopefully enact an agenda of structural reforms that will strengthen Congress by reclaiming the legislative powers that have been ceded to the executive branch,” Lee said.
Lee said that lawmakers are to blame for the shift in power.
“We are not, in fact, the victims, we are the perpetrators,” Lee said, adding:
We have done this willfully because it makes our job easier. It is a whole lot easier and less politically risky to have somebody else do the lawmaking than it is to do the lawmaking yourself.
There are several pieces of legislation, Lee said, that could help address executive overreach.
1.) REINS Act
The REINS Act, which has passed the House but has yet to pass the Senate, would make progress in regaining ground Congress has lost, Lee said.
This proposed law would require both congressional and presidential approval of major rules, which “have an economic impact of $100 million or more,” Rep. Doug Collins, R-Ga., wrote in a recent op-ed.
“Under this law, the specialized know-how within each agency would still be allowed to contribute to the regulatory process,” Lee said.
“But ultimately, Congress would be responsible for every major regulation that went into effect. This would make it easier for American voters to know who to blame for bad policies. As things currently stand, lawmakers can have it both ways.
2.) Separation of Powers Restoration Act
The second piece of legislation Lee suggested to help restore congressional authority is the Separation of Powers Restoration Act, which has passed the House in 2016.
In a 2016 op-ed in The Hill, Rep. John Ratcliffe, R-Texas, warned that “The practice of administrative agencies engaging in de facto ‘lawmaking’ was exacerbated by a 1984 Supreme Court decision, [Chevron U.S.A., Inc. v. Natural Resources Defense Council], which determined that courts must defer to agencies’ interpretation of ambiguous laws as long as their interpretation is deemed ‘reasonable.’”
The Separation of Powers Restoration Act, which Ratcliffe has introduced in the House again this year, would “[reverse] the 1984 Supreme Court decision that established the ‘Chevron doctrine,’ placing the power to determine ambiguous laws back into the hands of the judiciary.”
“The bill would end the dysfunctional status quo that tilts the legal playing field in favor of bureaucrats who pass the legislation to [place] federal law in the hands of legislators and the power to write and judges power to interpret just as the Constitution,” Lee said.
3.) Agency Accountability Act
The third piece of legislation, the Agency Accountability Act, will do exactly what its name implies, Lee said, and will hold agencies accountable.
The act, which has been introduced in the House, would “make federal agencies accountable … by directing most fines, fees, and unappropriated proceeds to the Treasury instead of letting federal agencies keep the money and then spend it as they see fit,” the Utah senator said.
Right now “agencies have the ability to use funds received through fines, fees, and proceeds from legal settlements without going through the formal appropriations process, thus avoiding congressional oversight,” according to a report from The Heritage Foundation’s Justin Bogie, a senior policy analyst in fiscal affairs.
If signed into law, this legislation would help restore Congress’ role in overseeing how money is spent, Lee said.
“You see the Constitution has this pesky little provision that … Congress has the power and the responsibility to direct spending of federal dollars. The power of the purse is one of Congress’ most potent tools for controlling bureaucracies,” Lee said.
While Lee said that many Americans feel like they have lost control of their government, legislation like the Agency Accountability Act would be a remedy.
“Passing the Agency Accountability Act will go a long way in putting Congress, and by extension, the American people, back in charge of the federal bureaucracies and specifically, the way they spend money,” Lee said.
Lee urged Congress to act.
“If we are able to pass even one of these legislative proposals … then we will have made real progress toward listening to the people and making sure that our government itself has to listen to the people,” Lee said, adding:
If we can pass all three bills, it would constitute a fundamental, generational shift of power in the country, a shift of power back to the people.
“The liberal mainstream media lied about the root-causes of the 2008 financial crisis, and time/historical evidence has either disproved their claims or not proved them…
…One positive for me personally, from what President Trump is experiencing with them, at least half of America (maybe much more) now understand the media in America is massively-biased towards liberal positions and will say anything (with little regard for the facts and the truth) to further their side’s agenda.”, Mike Perry, former Chairman and CEO, IndyMac Bank
May 18, 2017, Adriana Cohen, The Boston Herald
Just five months in, 2017 is going down in history as the year that gave us the worst media bias America has ever witnessed.
It’s worse than slanted, it’s flat-out rigged against our president and he knows it. Yesterday at the Coast Guard Academy commencement ceremony, President Trump said, “Look at the way I have been treated lately, especially by the media. No politician in history, and I say this with great surety, has been treated worse or more unfairly.”
The days of honest, ethical journalism guided by facts, not political motives, have been replaced by agenda-driven activism by political operatives masquerading as mainstream media journalists.
Each and every week, they have manufactured a continual cycle of “fake news” crises about the Trump administration for the sole purpose of smearing the Republican leader so that Democrats can take back power in the midterms and 2020.
Hopefully voters are savvy enough to see through the daily smear campaign against our president by The Washington Post, The New York Times, the Huffington Post, the New York Daily News, the AP and scores of other left-leaning media outlets whose reporters wake up every morning with one goal: take down Trump.
Democratic leaders, CNN and other outlets have been pushing the false narrative that the Trump administration may have colluded with the Kremlin to steal the election from Hillary Clinton. If there was any evidence to support that, rest assured it would have been leaked by now. There’s no there there. No evidence has been produced to suggest anyone committed a crime, let alone colluded with anyone.
Just this week the media lost its marbles over the notion Trump may have shared intelligence with Russian officials in a recent White House visit. Never mind that there is no proof Trump divulged anything inappropriate, or that the media didn’t give a hoot when Obama did it last summer. Democrats get a pass.
Four dead Americans in Benghazi? The media yawned. Targeting of conservatives by the IRS during the Obama administration? The media snored. Colluding with the Iranians in secret deals, with massive money transfers and releasing dangerous actors? That they considered a triumph of diplomacy. But if Trump orders two scoops of ice cream, he’s Dr. Evil and CNN devotes multiple segments to it.
Each and every day the words “impeachment” and “Watergate” are floated by Democrats and anti-Trump media based on trumped-up, distorted information. Every week, they declare a new constitutional crisis.
But Trump won the election despite that toxic media environment. Voters aren’t buying it anymore.
Adriana Cohen is host of “The Adriana Cohen Show,” heard at noon on Boston Herald Radio. Follow her on Twitter @AdrianaCohen16.