Four Years Ago …

Looking at the North side of my house on the day after Hurricane Katrina. (Taken by a neighbor who stayed.) You can see there is no flooding and my roof is on. I still had to stay in Omaha for FIVE weeks before they'd let me come back home.

Four years ago, I was sitting on a pink futon on the floor of a motel in Lake Charles, LA with two blond labs and a cat named after Miles Davis wondering if I still had a place called home. In the bed on the right was a finance Phd student from Macao and on the bed on the left, her roommate, a sociology Phd student from Japan. I actually got my place on the floor because I called all the foreign Phd students at UNO (New Orleans) in the Econ/Finance Department and said, get hotel rooms and get out of here, as soon as you can! We had the United Nations there. My friends from Syria, Turkey, and then, of course, the other two I mentioned took me right in! My lama from Nepal showed up there eventually too.

I had planned to stay in New Orleans. It wasn’t until I remembered the aftermath of other hurricanes that went else where (like Georges) and the mess that went on inside and around the Superdome that I thought, I bet I could survive the Hurricane, but NEVER the aftermath. I knew the aftermath would be a Hell Realm. After boarding up the house, I left with my pets, a pink futon, a poorly packed overnight bag, and little else since I was waiting for a paycheck due on that Monday that wouldn’t arrive until three months later. I went to bed that night, thinking I could drive back home. I woke up the next morning wondering where I was going to seek refuge.

Louisiana Senator Vitter Declares War on Canadian Users of Viagra

Okay, that headline is way misleading, but it’s Friday and I’m in a wrascally mood. Actually, what Republican Senator David (the Diaper) Vitter is suggesting is that we overwhelm the Canadian Prescription Drug Market via re-importation to drive prices up there and prices down here. It’s a strategy to break a system where Big Pharma gets to practice price discrimination which is basically charging different prices to different markets. TPM posted this Vitter explanation on YouTube.

Vitter’s economics seem like they might just work — or maybe not. Canada and other countries negotiate lower prices with the drug companies, who then demand exorbitant profits from U.S. consumers and our relatively free market. Arguably, by overwhelming other countries with American demand, their systems would break down. The next step here, is that Vitter believes this will cause prices to go up for everyone else, and down for us. (But we’d be curious what health care economists would say).

As Vitter told his questioner, who is apparently an Obama supporter: “I don’t support price controls, but I actually think re-importation would cause that system, as well as these varying prices, to collapse. That make sense?”

Of course, this is assuming the drug companies wouldn’t take advantage of their inelastic demand curves by just jacking up prices for everyone. And really, this whole scheme to destroy other countries’ social welfare programs for American benefit isn’t mighty neighborly of Vitter, is it?

It’s just so fiendish, it make actually work! But sheesh, aren’t there easier ways to take care of this like making some legislation here in the U.S. that lets Medicare bargain for its subscriber’s benefits or a public health option that could do the same? Why crash the Canadian system when just a little law writing could force the same result? We have laws that outlaw price discrimination! We could do something novel and let the Justice Department go after them with our antitrust laws! But, Senator Vitter, why pick on the poor Canadians, isn’t just living up there in the middle of ice fields and glaciers enough punishment as it is?

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Do NOT Buy A Used Health Care Program from This Man!

I’m going to bring out some information I put out on Bobby Jindal in December of last year so you’ll know exactly how little to pay attention to this man. Jindal is obviously positioning himself for a run at national office which doesn’t surprise me at all, because the guy’s been a bigger job hopper than our current POTUS. It’s evident that anything to be learned from any of those short-lived jobs is lost on him because he never puts facts, people, or effectiveness before ideology. He’s a faith-based ideologue. He’s totally convinced of the ‘rightness’ of his view regardless of what the facts are on the ground. Contrary to his insistence that Louisiana is improving when it isn’t, and contrary to his insistent that he’s cut state bureaucracy when the payrolls have gone up, he’s still just a man that never lets facts get in the way of a good dogmatic speech opportunity. I don’t think the man exactly lies, he just appears to be totally delusional.

I’ve written two things on him. One being his insistence that the state of Louisiana is all hunky dory just cause he’s in office. It’s not, our unemployment statistics are moving up now like the rest of the country because the FEMA and Federal Hurricane monies that were stimulating our economies are running out. We’re getting our dose of recession and it’s not going to improve for us any time soon. Of course, it goes against his ideology to suggest that government funding may have actually helped our state, so he just prefers to take all the credit himself.

He also has been insisting he’s passed these tough ethic laws, which is true, but he conveniently forgets to mention he’s exempted the governor’s office. Ask Jindal about those tickets to see Miley Cyrus at the SuperDome if you’re a reporter and you get a chance.

Governor Bobby Jindal, in the midst of Day 4 of a special session on ethics, is having to deal with a controversy surrounding Disney sensation, Hannah Montana. 9NEWS has learned that Governor Jindal’s chief of staff and several state legislators were able to get tickets for free. WAFB’s Jim Shannon has the story.

Much has been said down at the legislature about free tickets and lavish meals for lawmakers and appointed state employees. Granted, all of that talk is for future legislation. However, the governor’s office is not ignoring the perks that come with being governor. Governor Bobby Jindal’s special session on ethics is moving through the legislature on a fast pace. Amid cries of no more fat cat meals or tickets to sporting events and concerts, the governor is dealing with a ticket controversy within his own office.

Unraveling the Greed

I remember during my Hurricane Katrina Exile from New Orleans that I was invited by a good friend and colleague to attend a gathering of social workers and others to discuss the impact of being “unbanked” and hearing about predatory lending practices. For about two years, I did several research papers and gathered quite a collection of stock prices and balance sheet information on DiTech, Advance America, Dollar Financial, and other credit type companies that provide a bevy of financial services to the poor. At the time, I also put Wells Fargo into that mix. I was studying the impact of monetary policy on this little studied area of financial institutions. I basically argued that the increasing reliance on this type of company for debt financing and the potential volatility in their portfolios could explode and impact the larger financial markets. I’m looking back at my paper (dated December 6, 2006) and remembering how everyone thought that a trivial question at the time it was presented.

Here are some questions that I asked in my introduction.

Traditional lenders achieve profits from low operating costs and positive interest rate spreads. Credit Services Companies hold risky assets, charge numerous fees (some not covered by Truth-in-Lending Laws), and have higher than normal interest rates due to the nature of the borrower or the loan. Some of these companies are associated with banks that have fiduciary responsibilities. Others rely on commercial paper or retained earnings to finance loans. Companies such as Dollar Financial specialize in servicing the consumers called the “unbanked” or “underbanked”. They charge fees to cash checks and receive fees from utilities to take payments from cash paying customers. Franklin Credit specializes in subprime lending in the mortgage area.

One of the most interesting trends in this particular business has been the spread of credit service company branches into poor and working class neighborhoods vacated by traditional financial institutions. It is really difficult to drive around a poor neighborhood and find a bank branch these days. It is very easy to find a branch of a credit services company on nearly every block. Credit service companies are also aggressive marketers. GMAC, traditionally the lending arm of General Motors for floor plan loans to dealers and car loans to those unable to get bank loans is the parent company of Ditech; undoubtedly the most over-advertised Credit Service Company on television.

Do these companies respond to interest rate movements and volatility in rates the same way that more traditional financial institutions like banks do? Do their already high spreads protect them? Do their many fees provide them with some insulation from interest rate movement? OR will many of the come crashing down in a period of high interest rates or an economic downturn? What will this mean to the high number of un-banked? The Federal Reserve Bank, GNMA and FNMA have developed an interest in credit sector companies recently. Sallie Mae is under some scrutiny by Congress for its considerable profits. The Fed reports and monitors those credit companies owned by bank holding companies. Their aggregate financial data is published monthly at the Board of Governor’s Website. There appears to be increasing interest by many parties in these financial institutions but little is understood about how their explosive growth will impact the financial system at large.

I basically had to quit the research line at the time and switch to something less ‘kitschy’ as one senior researcher told me. However, I keep going back to my work on predatory lenders when I read something like this in the NY Times:

Bank Accused of Pushing Mortgage Deals on Blacks.

I was aware that there were a lot of lending seminars going on in my neighborhood. I live in the ninth ward in New Orleans. My neighborhood is the very antithesis to the gated suburban community. I am the minority here. These seminars were sponsored most times by ACORN (their HQ is less than a mile from my house) and local churches. I used to get fliers all the time on my front door of the little house I bought with my FHA loan. Wells Fargo has my loan now. My loan probably qualifies under the CRA. I wish I still had the fliers or that I actually had gone to one of the meetings, because I thought it odd that these seminars would be offering chances to meet with actual lenders. I was never motivated to actually go to one.

It came as no surprise to me then to read this in the NY Times article.

Nobody Knows You When You’re Down and Out

The military patrols in front of my house after Hurricane Katrina: Hummers, guns, and soldiers

I moved to New Orleans sight unseen about 14 years ago.  It’s a city with much charm and beauty, tons of eccentricities and eccentrics, and it’s own brand of food, architecture and music that make you feel like you’re not quite in the US.   For as much culture shock as I experienced when I first moved down here from cold, efficient, clean, crime free,  marvelously developed and governed Minneapolis, I’ve learned to love my quirky home.  I really don’t feel right when I go other places these days.  It always feels like something is missing.   I come back again to New Orleans own brand of wonderful food which rivals its music and architecture for my love and adoration.  All of them are cheap, readily available, and wonderful.  For those of us that live here, those cultural things completely outweigh the lack of amenities and civilities found around the rest of the country.

Hurricane Katrina changed some things.  I was hoping that the aftermath would bring the best parts of this city to light so that we would be appreciated as the National Treasure that is New Orleans.  It seems folks were fascinated with us for awhile, but there’s always a new thing to distract our fickle media and citizenry.  For every celebrity and charity that is still hanging in here with our painfully slow recovery, there is now the old refrain that there is something ‘not quite right’ with us.

The first thing I would like to do is to ask Time Magazine if this headline is really necessary?  Is Baghdad Now Safer Than New Orleans? The article uses murder statistics around the world to compare to the level of violence experienced in Baghdad.  Even this quote shows the reach to meet the comparison.  It further dismisses the roots of our problems which are related to our huge problems with black-on-black crime associated with drug use, poor education systems, and basic lack of opportunity for inner city teenagers.  How do the problems of a largely ignored, poorly run and funded US city compare on any level with a city in a developing nation that we invaded only to unleash a set of bloody tribal wars?

Let’s go to the numbers: Caracas, with about 3.2 million people, is in a bloody league of its own, with an estimated murder rate of 130 per 100,000 residents according to government figures. Cape Town is about the same size as Caracas but nearer to Baghdad’s murder rate with 62 violent deaths per 100,000 people. New Orleans, with an estimated post-Katrina population of just over 300,000, is tiny in size compared to its rivals. But the number of murders is huge; figures vary, but even the low estimate puts the city on a par with Cape Town. By way of comparison, Moscow, one of the most violent cities in Europe, has an estimated murder rate of just 9.6 per 100,000 residents. New York City’s murder rate is 6.2, Washington D.C.’s about 32.

Today, the NY Times had a feature article on our goofball mayor, Ray Nagin who may have just achieved the lowest approval rating of all times, any where. Here’s the article: Term Limits Say New Orleans Mayor Can’t Return; Residents Say They Don’t Mind.

In a recent poll by the University of New Orleans, Mr. Nagin was cited as one of the “biggest problems” for the city, coming in third after crime and education. Just 24 percent of residents over all said they approved of the mayor, a drop from 31 percent the year before.

“It’s the worst approval rating we’ve reported since 1986,” when the poll was first conducted, said Robert T. Sims, the director of the university’s survey research center.

Among African-Americans, support dropped to 36 percent from about half of those polled last year. Among whites, who constituted much of Mr. Nagin’s voting base in his first election, the approval rating was 5 percent. (The survey’s margin of sampling error for whites was plus or minus five percentage points.)

Edward F. Renwick, a retired professor of political science at Loyola University and a pollster himself, said he found that figure surprising. “I have hardly ever seen 5 percent,” Dr. Renwick said. On the other hand, he added, “I have never met a white person who doesn’t hate him.”

That sentiment can be seen in a $2 bumper sticker that has become popular in the city’s souvenir shops. In vivid Mardi Gras colors, it says: “May 31, 2010: Nagin’s Last Day. Proud to See Him Gone.”

Jindal puts Ideology before Facts (Yet Again)

When I first moved down here to New Orleans I went through culture shock on many levels.  I came from places where there was no viable private education because public education is so excellent that private schools are reserved for the hyper-religious or the hyper-rich with hyper-idiot children.  I was used to good roads.  I can’t tell you how many tires I’ve lost to the roads down here.  I was used to low crime and nearly zero drug-related crime. I was also used to cities with corporate headquarters (Minneapolis, Kansas City, and Omaha) where I could make a nice living consulting.   I’ve come to love it down here although I still realize we’re very third world compared to the rest of the country(at this writing anyway).  I’ve just learned to relax and go with it.

Louisiana has always depended on the kindness of other states since the fall of the Oil and Gas industry in the 1980s.  It has been highly dependent on the rest of the country and the world since Hurricanes Katrina and Rita devastated the bottom and richest part of the state.  One of my displaced friends got a US government supplied  FEMA trailer on campus.  He got his dishes, pots and pans and linens from the Kingdom of Saudi Arabia.  We’ve relied heavily on outside help since that awful day in August, 2005.

I know several economists here in the state that follow the local economy closely and I know we’ve had some real tough times.  Fortunately, we still have two major news organization that are committed to following our recovery and they send reporters down here to do substantive stories as well as the usual “let’s traipse around the ninth ward and see what’s happening”  pieces. This generally keeps the light on the problems.   Our governor also attracts attention as a potential leader of the Republican Party.  I’ve written about him frequently because I’d frankly like to have him some place where he cannot do so much damage to folks with his inability to separate right wing dogma and religious zealotry with governance.  (I’m thinking Spaceship, co-pilot Rush,  and Mars.)

Of course you’ve seen Bobby (Peyush) Jindal on TV now.  You can see he talks very fast and often in ways that really don’t make sense.  He’s got a very interesting background and is known for being intelligent and well-educated.  He never lets that get in the way of his governing Louisiana, however.   You can read more on that from a December post of mine here.

It’s Mardi Gras: You know, the Party before Penitence?

I’m sitting here watching the kids get their costumes together for the big day of celebration called Fat Tuesday.  That’s the day when you pull out all the stops because you know lean days (no meat, no alcohol, no fun) starts tomorrow.  I guess I must be in hyper-metaphorical mode because it’s really striking me this year as a good fable.  Tonight at midnight, the Krewe of Klean will take to the streets of the French Quarter to shovel all the leftovers into the dump trucks. The police will ride their horses down Bourbon street and announce that the Party’s over.  They arrest anyone who want the party to continue at that point.  You can either spend Ash Wednesday doing penitence in your bed or the Parish Prison.

When I first got out of graduate school I went to work at a small bank.  I was soon lured to the biggest Savings and Loan in the middle of the country.   I’d been working on loan pricing models and arranging bank income statements into an exercise called spread management and asset-liability matching.   Big time company working for a big time CEO!

I have to admit, the only person that I really knew that was a CEO was my dad and he was great.  His employees loved him.  He gave them wonderful benefits and when they had sick children or they were gravely ill,  he gave them time off with pay.  His office manager was openly gay.  His mechanics and body technicians were a diverse group for small town Iowa.  Most of them worked for my dad the entire 30 years and loved him as much as I did. From the time he bought it when I was one, until he retired when I was in my 30s, the entire employee base was my extended family.  So, I entered the business world thinking this was the model for management and boy, was I wrong.

Obama Team Announces TARP Plan: Market Crashes

I hope you weren’t planning on using any of those savings that you may still have left sitting out there in anything market-related soon.  The Dow Jones ( at this writing) is off  over 350 points.  All of the blue chip components tumbled.  The S&P and OTC markets aren’t faring any better.  This is how Market Watch sees it right now:

The recent strength shown by U.S. stocks vanished on Tuesday as the government unveiled a new bank-rescue plan and congressional action neared on a fresh round of fiscal stimulus for the wheezing U.S. economy.

That basically amounts to a reaction of last night’s speechification and presser and this morning’s announcement of  thunderous boos.   Fed Chair Ben Bernanke is speaking right now and that’s not really helping either.  The investment/business community doesn’t think any of the largess from either the TARP or the Stimulus Plan are really going to do anything.    Treasury Bond prices are dropping also.    This additional snippet from Market Watch sums it up well.

“First, we’re going to require banking institutions to go through a carefully designed comprehensive stress test, to use the medical term. We want their balance sheets cleaner, and stronger. And we are going to help this process by providing a new program of capital support for those institutions which need it,” said Geithner.
Despite the forceful words, Geithner noted his office was still exploring options and details for an asset value program, with little answer on what to do about banks’ toxic assets.

That last paragraph is basically at the crux of the problem.  The current administration is bringing no plan to the table to actually deal with the problem.  Perhaps because Geithner was so instrumental in the original TARP, he’s just sticking with what already didn’t work rather than trying to think outside of the box.  The market has lost around 3-4% already and there’s several more hours of trading to go.  Hang on to your cookie jars kids, you’re going to need them as a stable replacement for your local bank.

Meanwhile, the senate managed to pass that the stimulus bill 61-37.  That’s way shy of the 80 votes that Obama had wanted. The final bill has $838 billion worth of stuff that includes a lot of tax cuts (not likely to stimulate anything but Grover Norquist and The Club for Growth) and money for cash strapped states.   I’ve brought up links to the Economic Policy Institute earlier but I really like this graph that even my freshmen could grasp about what works and doesn’t work in stimulus plans.

You can see the difference between the items where you get more bang than a buck and less than a buck’s worth of bang while contributing to the deficit.   Notice those tax cuts that wind up costing more than they stimulate and think the last eight years of Dubya of which we seem to be repeating.

Here’s one that I picked up from Brad DeLong’s Grasping Reality with Both Hands that had my Freshman gasping as I was trying to set their hair afire.  (I think it worked, btw.)  Any one facing this job market should panic.  Just anecdotal, but in the market for  finance professors, this year universities were taking resumes only at the last two conferences.  Last year, the best people had been hired up before either of the conferences were held and only the marginal remained.  The hottest academic jobs are definitely on hold.  In my years of both public and private sector economisting, I’ve NEVER seen anything like this.

Please notice the incredible level of job losses.  If you’ve managed to get through a calculus course, you’ll see that the first, second and third derivatives are negative which is not true on the other series at similar points.  Basically, for you nonmath types, this indicates nothing but a downward trend or as I like to put it, straight off a cliff.

So, President Obama rambled an economics lecture last night that made me happy that he was getting all those economics briefings.   It was also pretty obvious that most of his advisers must have their hair on fire too, because he did have a sense of edgy panic when he talked about the situation.  However, ‘edgy panic’ is not what I want in a president.  I want a president to talk about we have nothing to fear but fear itself who then says something to the effect of  let’s do  what works instead of bargaining away what will with folks that aren’t interested in watching you succeed.

I have to say, last night over Margaritas with my neighbors, I was searching for folks that wanted to diversify their food options with neighborhood gardening.  I had a lot of takers.  After all, when the army and your police force spend a good amount of time and money flying sleek black helicopters around the skies of your city practicing for food riots, it’s kind of one of those wake up moments. That goes for sleepy freshmen and drunk Cajuns.  Is your hair on fire yet?  Because if it isn’t, you haven’t been listening.

Meanwhile, I’m adding a page to my own blog for sharing sustainability and survival stories.  Feel free to visit and contribute.

Party like it’s 1929!

The economy may be in recession, but the Champagne flowed freely at Tuesday’s celebrations of the inauguration of Barack Obama — thanks in large part to donations from some movers and shakers on Wall Street.

Those figures don’t include the $124 million that federal, state and local governments are providing to pay for security and the official swearing-in ceremony.

The finance, insurance and real-estate industries have been at the center of the recent economic storm, but even so, people who work in those industries contributed at least $7.1 million to help fund the dozens of events and parties celebrating Mr. Obama’s official move into the White House, according to the Center for Responsive Politics, a Washington nonprofit group that studies money and politics.

That is more that a quarter of the $27 million of donations that have been disclosed so far by the Presidential Inauguration Committee, which estimates the festivities will cost about $45 million. That would make it the most expensive inauguration ever.

The market is below 8000 and the list of huge layoffs happening in industries around the country continues.  But hey, we got the nation’s most expensive party ever according to today’s New York Times where the headline read:  A Wounded Wall St. Helps Pay for Inauguration Bash.  I’m beginning to sense the fall of the Roman empire with Nero in charge of the chaos.  Of course, the top of the donor list included the the Uber Lord of the Under World, George Soros whose combined family donations came to $250,000.  Given an average family of four in the US doesn’t even live off of $50,000 a year and the total is about the average price of an average home, I’d have to say there are a lot of people being shunted towards Obamaville and other tent cities that would really appreciate a donation of that size for something other than a big party in their honor.

Let’s just highlight reality a moment and forget about the cost of designer ballroom dresses that would feed entire families for months.

Fear and Loathing in Algier’s Point

Algier’s Point has a history of racism.  It’s a small neighborhood and mostly white enclave located on the west bank of the Mississippi River in New Orleans.  It  started as the place in New Orleans where human beings were bought and sold.  The Slave Market was placed far across the river from the main part of the city that was filled with folks of mixed race, free people of color, and the many assorted European transplants that made it home.  Now it’s a quaint little neighborhood that has shown an ugly white face to the world.

You may remember hearing about the West Bank when the Sheriff of Gretna (another mostly white  working class enclave) stopped many folks from crossing the Crescent City Connection in attempt to wall off the west bank from those fleeing the flooded city.  There was a lawsuit that was recently dismissed and the event attracted attention from national media and civil rights leaders.  The West Bank and its after-Katrina aftermath is once more at the epicenter of controversy.  ‘The Nation’ broke a story last week that included this video-taped admissions from White vigilantes in Algiers Point.  You can  listen to them admit  to shooting Black men on sight for just being in the neighborhood during Katrina.

One transplant from Chicago brags in only the way the truly stupid can:

“It was great! Like pheasant season in South Dakota. If it moved, we shot it.” 

 (You can catch this jerk around the 5:40 mark).

Charges of racism have been bandied about this election so readily that I’ve frequently worried we’ll become immune to the real things when it happens.  This weekend, I actually heard on commentator say that it was racist to even think about running any one against New York Governor Patterson in an upcoming election.  Just about anyone who supported Hillary Clinton during the primary had the racist meme thrown at them.  I was tired of the entire subject, frankly.

 

Watch this video.  It’s the real deal and you’ll recognize it.  It’s incredibly appalling and I hope the MSM airs the most offensive parts because there is an incredible level of hatefulness here that signifies racism at its worse.  I know it when I see it.

Charges of racism have been bandied about this election at the drop of a hat to the point that I’ve worried the nation will become immune to the real thing when it happens.  This weekend, I actually heard one commentator say that it was racist to even think about running any one against New York Governor Patterson in upcoming elections.  Just about every one who supported Hillary Clinton in the primary had the racist meme thrown into their faces. Again, I worried about folks becoming numb to the real deal.

 

Watch this video.  My guess is even if you did support Hillary in the primary and you think it’s possible some one might want to run against Patterson because he could appoint Caroline instead of other pols that you’ll till recognize the real deal.  It’s completely appalling and I hope the MSM airs the most offensive parts because there’s an incredible level of racism there.  I know it when I see it.

NOTE:  you can read more about this and make comments at the website of  the New Orleans Times Picayune