Opinion

Ben Walsh

from Counterparties:

Renters get owned

Ben Walsh
Dec 19, 2013 23:15 UTC

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In 2012, the federal government spent $240 billion on housing aid, according to a new study by the Center on Budget and Policy Priorities. Despite the fact that 65% of American households are homeowners, 75% of housing aid, or $180 billion, is set aside for homeowners. Not only is federal housing aid disproportionately targeted to homeowners, it’s disproportionately targeted to the wealthiest homeowners. Here’s the CBPP:

The bulk of homeownership expenditures go to the top fifth of households by income, who typically could afford to purchase a home without subsidies... More than half of federal housing spending for which income data are available benefits households with incomes above $100,000.  The 5 million households with incomes of $200,000 or more receive a larger share of such spending than the more than 20 million households with incomes of $20,000 or less.

At the same time as housing aid focuses on relatively well-off, home-owning Americans, more renters need aid. HUD data show that the number of renters with household incomes that are 30% or less of the local median income (that’s about $19,000 nationally) has risen from just over 8 million in 1999 to 11.8 million in 2011. A recent Harvard study pointed out that for these 11.8 million renters, there “just 6.9 million rentals affordable at that income cutoff—a shortfall of 4.9 million units”. Affordable, at 30% or less of the local median income, means $375 a month or less. The Harvard study also pointed out that the problem is getting worse: the number of extremely low-income renters is rising, and 2.6 million of the affordable rentals are being occupied by higher-income households.

Felix looked at that data, combined with the “inexorable rise of rents”, and concluded that there “is an unprecedented squeeze on the people who can least afford the shelter they need”. The rest of America is starting to look more and more, he wrote, like San Francisco.

from Counterparties:

Greenspan shrugged off

Ben Walsh
Oct 21, 2013 22:12 UTC

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Based on the reviews of his new book “The Map and The Territory”, Alan Greenspan’s stock has fallen precipitously since he left the Federal Reserve to widespread acclaim in 2006.

Bloomberg’s Daniel Akst calls the book infuriating, writing that the “plodding text oscillates maddeningly between equivocation and chutzpah”. Akst slams Greenspan for calling the financial crisis “almost universally unanticipated”, despite what Akst says were “a host of indicators that were pointing to trouble”. Akst is frustrated that despite the book’s subtitle (“Risk, Human Nature, and the Future of Forecasting”), and the author’s self-professed expertise in economic forecasting, how Greenspan could have not seen danger ahead is barely explored. Furthermore, Greenspan’s claimed concern for federal deficits is undercut, Akst writes, by his endorsement of both of President Bush’s rounds of tax cuts.

from Counterparties:

Twitter economics

Ben Walsh
Oct 16, 2013 21:57 UTC

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As its mid-November IPO approaches, Twitter is losing money at an accelerating pace. The company’s amended filings show that last quarter it approximately doubled revenues to $168.6 million compared to a year ago, while its net loss more than tripled to $64.6 million. Fortune’s Stephen Gandel digs into the new numbers, and how Twitter changed the way it's booking revenue:

Twitter derives most of its revenue from advertising. Most of the deals it strikes with advertisers are not fixed upfront... Twitter says that in most instances it only counts the revenue from a deal after the services have been delivered and the company knows how much it will get paid. But it says in some more complicated deals, it resorts to estimating what it might get paid.

from Felix Salmon:

Counterparties: Government’s governance problem

Ben Walsh
Jun 12, 2013 22:21 UTC

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The US and UK have a unique sort of corporate governance mess on their hands. Both countries are trying to deal with the complications of owning a multi-billion dollar financial institution, and are having a hard time doing so.

Britain’s problem is RBS, which the government owns 81% of as a result of 2008 bailout that ended up costing $71 billion. In the US, it’s Fannie Mae and Freddie Mac, the mortgage giants that have been under federal conservatorship since 2008.

from Felix Salmon:

Counterparties: Living longer with less

Ben Walsh
Jun 10, 2013 22:31 UTC

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Americans with $1 million in savings may be in for a dispiriting surprise -- they still haven’t saved nearly enough. The problem, reports the NYT’s Jeff Somer, is that bond yields have fallen and life expectancies have risen.

A  65-year old couple with a $1 million nest egg of tax-free municipal bonds that withdraws 4% per year, Somer says, has a 72% chance of running through their retirement savings before they die. The even larger problem is that the millionaire 65-year old couple is far from typical. The median household retirement account balance for Americans aged 55-64 is just $120,000.

from Felix Salmon:

Counterparties: America’s consistently dissatisfying jobs market

Ben Walsh
Jun 7, 2013 21:44 UTC

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America's jobs market seems to have found its boring, dissatisfying comfort zone.

The Labor Department announced today that the US economy added 175,000 thousand jobs in May. (Unemployment ticked up a notch to 7.6%.) Matthew O’Brien writes that this is basically the same thing that’s been happening for the past two and a half years. “There were 175,000 new jobs a month in 2011, 183,000 in 2012, and 189,000 so far in 2013.” Kevin Roose thinks “there's something to be said for this kind of quiet, steady progress”.

from Felix Salmon:

Counterparties: The unbearable lightness of silicon beings

Ben Walsh
Jun 4, 2013 22:04 UTC

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If you build a company on something lighter-than-air, will it inevitably float back to earth? Kara Swisher reported yesterday that Zynga is laying off 520 employees and closing its LA and New York offices. The company’s core business -- selling desktop games for Facebook -- is declining, and the company says it is focusing on the faster-growing but less profitable mobile market. Zynga’s stock is now down 70% since it went public in December 2011.

Two years ago, Zynga was declared the winner of the “great social game Gold Rush”. Better than anyone, it figured how to make money out of the inordinate amount of time wasted on Facebook. It never was, and won’t ever be, a “frighteningly ambitious startup”. Despite being a big financial success, Zynga always had limited ambition.

from Felix Salmon:

Counterparties: Bits of laundry

Ben Walsh
May 29, 2013 21:21 UTC

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Even criminals need financial intermediaries. Yesterday federal prosecutors shut down Liberty Reserve, a currency exchange and payment processor, and indicted seven people connected to the company. The indictment called the company a “financial hub of the cybercrime world... including credit card fraud, identity theft, investment fraud, computer hacking, child pornography, and narcotics trafficking”, and alleges it laundered $6 billion via 55 million illegal transactions for one million users over the last seven years.

The Tico Times has a detailed article on the history of the Costa Rica-based business, not to mention “flashy cars, lavish gifts, multiple identities and armed Russian henchmen”.

from Felix Salmon:

Counterparties: Europe’s longest recession

Ben Walsh
May 15, 2013 22:37 UTC

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Europe is in the midst of its longest recession since it began keeping records in 1995 -- even surpassing the calamity that hit the region in the financial crisis of 2008-2009. While the German economy grew 0.1% from the fourth quarter of 2012 to the first quarter of this year, just about everyone else in the eurozone is shrinking.

France’s economy shrank 0.2% quarter on quarter, and is now officially back in recession after just one quarter of positive growth. It’s not alone: Cyprus, Finland, Italy, Greece, the Netherlands, Portugal, and Spain are all in recession right now. And while the UK managed to just barely avoid a triple-dip recession by growing 0.3% in the first quarter, its economy is still 2.6% smaller than it was 5 years ago.

from Felix Salmon:

Counterparites: Split personalities

Ben Walsh
May 6, 2013 22:11 UTC

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Institutional Shareholder Services’ message is clear: no one man should have all that power.

More specifically, ISS has declared Jamie Dimon shouldn’t be JP Morgan’s chairman and CEO. The firm, which advises shareholders on corporate voting, is also recommending that its clients not support the reelection of three of the bank's directors. Each of those directors -- David Cote, James Crown and Ellen Futter -- sits on the bank’s risk committee. The proposal to split the roles of chairman and CEO is non-binding; the re-election of board members is binding. It’s unclear whether either measure will pass.

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