Opinion

Ben Walsh

from Felix Salmon:

Counterparties: Why your house is getting more valuable

Ben Walsh
Nov 30, 2012 22:38 UTC

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Two things you don’t expect to see together are the nation’s highest foreclosure rate and a housing shortage. Yet as Bloomberg’s John Gittelsohn and Prashant Gopal report, that’s exactly what Stockton, California is experiencing right now. While there are lots of foreclosures, they’re not happening at heavily-discounted prices. “People see a foreclosed home for sale in this area and they’re going to jump on it”, said one longtime Stockton realtor.

There’s also evidence that Obama administration’s much-maligned foreclosure relief program is now picking up pace. Susan Wachter, a Wharton professor, was particularly impressed:

Changes to Obama’s loan-modification program had the biggest impact on reducing pending foreclosures since late 2010 by creating a template that lenders followed, Wachter said. That included incentives to compensate loan servicers for reducing principal on loans for delinquent borrowers. In January, the administration tripled the award to 63 cents for every $1 in writedowns.

Nationally, there’s been some very good housing news of late: the Case-Shiller home price index showed prices rising 3.6% nationally year-on-year. Especially impressive were the gains in areas that have been hard hit by the housing bubble: 20% in Phoenix, 7.6% in Detroit, and 7.4% in Miami.

from Felix Salmon:

Counterparties: Inflate your turkeys

Ben Walsh
Nov 21, 2012 22:14 UTC

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Thanksgiving is getting more expensive. The WSJ’s Ian Berry reports that wholesale turkey prices are up 26%, on the East Coast, compared to last year. That’s far above the modest increases in other food prices.

As Ben Bernanke noted in his speech at the New York Economic Club yesterday, for most consumers, short-term commodity price spikes don’t translate into higher grocery bills. Despite “the increase in farm prices brought on by this summer's drought”, he said consumer price increases have averaged “almost exactly 2%”. Turkey is an exception, Berry says, thanks to the peculiarities of a seasonal, capital-intensive industry loathe to expand production in the aftermath of the 2008 recession.

from Felix Salmon:

Counterparties: We know what the fiscal deal will look like

Ben Walsh
Nov 19, 2012 22:57 UTC

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The fiscal cliff has already found at least one victim, the WSJ reports: “half of the nation's 40 biggest publicly traded corporate spenders have announced plans to curtail capital expenditures this year or next”.

Investors and small business owners, the NYT reports, are worried about about things like higher capital gains taxes -- one lawyer says he’s never seen such a “flood of desire and action to transfer a business and cash out”. For big companies, meanwhile, there’s $150 billion worth of corporate tax breaks to fret about.

from Felix Salmon:

Counterparties: When climate change gets fiscal

Ben Walsh
Nov 15, 2012 22:43 UTC

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Neither candidate paid much attention to climate change during the presidential election: it wasn’t so much as mentioned in any of the three debates. Then came Superstorm Sandy, Mayor Bloomberg’s climate-motivated endorsement of President Obama, and Businesweek’s mince-no-words cover. There’s also the fiscal cliff (or austerity bomb, if you prefer). What better time to start taxing carbon?

The logic is simple: a carbon tax could raise $1.25 trillion over a decade, and according to Treasury officials, the President could be on board. Even anti-tax crusader Grover Norquist, famous for his pledge to never raise taxes, was open to the idea of a “carbon tax swap” -- until the denialist Koch brothers intervened and Norquist hastily reversed his position.

from Felix Salmon:

Counterparties: The lessons of tuition inflation

Ben Walsh
Nov 14, 2012 22:47 UTC

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Why have college costs risen 12 fold in 30 years? In a terrific story today, John Hechinger points to “administrative bloat” at public universities like Purdue, which has made a habit of doling out six-figure salaries to armies of administrators:

Purdue has a $313,000-a-year acting provost and six vice and associate vice provosts, including a $198,000 chief diversity officer. It employs 16 deans and 11 vice presidents, among them a $253,000 marketing officer and a $433,000 business school chief.

Wall Street’s rational Romney bet

Ben Walsh
Nov 14, 2012 16:01 UTC

It was never a secret that much of Wall Street put its money behind a Romney presidency. The publicly available tally shows that extent of their support: $19.6 million to Romney directly and more than $100 million to Romney and Republicans via other channels like Super PACs and advocacy groups. Beyond dollars, financial heavyweights like Steve Schwarzman and Leon Cooperman publicly criticized Obama in hyperbolic terms. Other executives, most notably Jamie Dimon, took almost every chance possible to make their deep displeasure with the administration’s policies clear. Some lifelong Democrats, like Lloyd Blankfein, remained pointedly disengaged.

And yet, unlike in 2008 when Wall Street backed Obama, their guy lost.

How stupid, right? Time to mock bankers for screwing this up too! Backing Romney, the argument goes, was Wall Street’s “second worst trade of 2012” (after JP Morgan’s CIO blowup). Couldn’t they see that the numbers pointed to an Obama win? New York Magazine went back to the well of masculinity metaphors, with Kevin Roose saying Obama’s win was a defeat for “Wall Street’s impotent billionaires“. And the statistically savvy Paul Krugman ridiculed their “bad investment decision“:

The limits of their power have been cruelly exposed, and the reelected president now owes them nothing. Did I mention that Elizabeth Warren is going to the Senate — a Senate that will be substantially more progressive and less Wall Street friendly than before?

from Felix Salmon:

Counterparties: The hunt for spurious causality

Ben Walsh
Nov 7, 2012 22:16 UTC

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Yesterday Americans were choosing a president and the S&P 500 was up 0.8%. As one trader put it, “any time you take an element of uncertainty off the table, volatility comes down and the market tends to look higher”. We have now chosen Barack Obama to be president and the S&P is down 2.4%.

Is Wall Street reacting sourly to the possibility of four more years of hurt feelings, increased regulation, and (shudder) Elizabeth Warren sitting on the Senate Banking Committee? The outcome really shouldn’t have been any surprise: an Obama re-election has been clear to numerate observers for quite a while.

from Felix Salmon:

Counterparties: White collar crime

Ben Walsh
Nov 6, 2012 23:29 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

HSBC is now almost certain to face the largest anti-money laundering fine in history. The only question is how large it will be.

The bank is negotiating a civil settlement in the US for executing thousands of transactions for drug cartels and organizations with terrorist connections between 2001 and 2010 (full 334-page Senate report here). Among HSBC’s actions: providing at least $1 billion in financing to Al Rajhi Bank of Saudi Arabia, even though some of the owners of the firm were linked to the financing of terrorism; and funnelling at least $7 billion from Mexico to the US, despite being warned that such sums had to include drug proceeds.

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