Felix Salmon

How transit investments pay for themselves

Felix Salmon
Jun 22, 2009 14:44 UTC

Kaid Benfield has a great wonky post on the connection between carbon emission reductions and land-use regulations. It turns out that the latter can have an enormous effect on the former: in a number of cities and states, the cost of implementing things like transit-oriented development and growth boundaries can actually be negative, thanks to the resulting reduction in vehicle miles driven. (And that’s not even including the fact that household carbon emissions, as opposed to vehicle emissions, are much lower in high-density developments.)

The problem of course is one of political will. The state of Georgia, for instance, could save more than $400 billion over 30 years if it started getting strategic about infrastructure investment, while saving 18 million metric tons of CO2. But will it? I very much doubt it.



Dubious numbers Felix. Are you truly trying to say that people should be forced into highrises, squashed together like sardines? Are you saying that we should all ride choo-choo trains to our green jobs in the new urban nirvana? Felix, the last time I saw statistics for who liked this mode of living, only young pups like you with no small children and empty nesters one step from The Home thought this was a good idea. Would you and your socialist friends force us to live a lifestyle that we don’t choose? Apparently so. Thanks comrade Felix.

Posted by Guy Thompto | Report as abusive

Regulatory arbitrage anecdote of the day

Felix Salmon
Jun 22, 2009 14:19 UTC

Connie Bruck has a profile of Angelo Mozilo in the latest New Yorker, which annoyingly isn’t freely available online. There’s lots of interesting material in it, but I was particularly struck with Countrywide’s regulator-shopping:

Mozilo called some of the regulators’ concerns “much ado about nothing.” He decided that Countrywide should try to switch regulators, leaving the Fed and the O.C.C. for the weaker Office of Thrift Supervision (O.T.S.)…

Under the existing system, banks may choose their own regulators, which in turn are funded by the fees that the banks pay; the O.T.S. had lobbied Countrywide to make the switch.

Call me naive, but while I knew that companies would try to get themselves regulated by the toothless OTS, I had no idea that the OTS itself would lobby them to make the switch. Of course in hindsight it makes perfect sense — I’m sure that the likes of Countrywide and AIG accounted for a large chunk of the OTS’s income. But the idea that the OTS and the OCC were competing with each other, in a regulatory race to the bottom — well, let’s just say it explains quite a lot. And it’s one reason why I’m uncomfortable that even after the OTS and the OCC merge to become the National Bank Supervisor, there’s still going to be some measure of competition between the NBS and the FDIC to see who gets to regulate whom.
Update: Binyamin Appelbaum and Ellen Nakashima had more detail, back in November, even going so far as to name Darryl W. Dochow as the individual responsible for bringing Countrywide into the OTS fold.


From http://www.forbes.com/2009/06/15/banking -regulation-obama-business-beltway-regs. html

“Last year Colonial BancGroup, an embattled Birmingham, Ala., bank, switched from an OCC charter to an Alabama bank charter after months of scrutiny by federal regulators over its loan books. It had switched from an Alabama charter to an OCC charter just five years earlier.

Colonial tried to portray the switch as a way to save $1 million a year–federal regulation is more expensive than state regulation–and to have the “ability to pursue business strategies that best suit its strengths.”

The $26 billion-asset Colonial is heavily exposed to the Florida real estate market as a major construction and commercial real estate lender. Its maneuvering may have backfired. Last fall when applying for federal money under the Troubled Asset Relief Program, Colonial was told it would only get it if it could first raise private funds.

In April, Colonial struck an as yet incomplete deal with a Florida firm, Taylor Bean & Whitaker, which would inject $300 million into the bank and convert it to an OTS charter from a state banking charter, contingent upon getting final approval for $550 million in Federal TARP money.

Stuck with that chicken-and-egg dilemma, Colonial last week got slapped with a cease and desist order by the Federal Deposit Insurance Corp. and Alabama banking regulators, who are demanding the bank increase capital levels and reduce problem assets.”

Posted by A | Report as abusive

The welcome hike in bankers’ salaries

Felix Salmon
Jun 22, 2009 13:51 UTC

I don’t know whether bankers’ pay is really “soaring” or not, as the FT would have it. But this I think is a positive development, and doesn’t for a minute mean that pay is actually going up:

According to insiders and rivals, market salary rates for managing directors have jumped from about $250,000 (€180,000) only a few months ago, to closer to $400,000.

The point here, of course, is that base salary is finally become important again, after many years of being to all intents and purposes irrelevant. It got stuck at $250,000 at some point in the distant past, and never really rose from there — and in the context of managing directors who were pulling down seven- and even eight-figure packages, it was essentially an afterthought.

With a base salary of $400,000, bankers might start feeling that they’re actually getting paid to turn up to work every morning, and also that they’re being paid enough to be able to be asked to give up their bonuses should things fall apart again and their institution require a massive bailout. The concept of a bonus as something to be paid over and above a base salary, rather than as the only reason to turn up to work at all, will slowly start migrating out of Congress and popular culture and into the banks. And that’s a good thing.

On the other hand, there is the question of whether bonuses are going to be $150,000 smaller now than they were before, all things being equal. I suspect they won’t — and that once again, bank employees will take home more money at the expense of bank shareholders. ‘Twas ever thus.


> On the other hand, there is the question of whether bonuses are going to be $150,000 smaller now than they were before, all things being equal. I suspect they won’t

what is your reasoning here? compensation expenses are compensation expenses. they come from the same revenue and the same budget.

Posted by q | Report as abusive

Cap-and-trade datapoint of the day

Felix Salmon
Jun 22, 2009 04:05 UTC

I am very happy that the CBO has finally gotten around to costing out Waxman-Markey, so that we don’t have to put up with pseudoscientific scaremongering any more.

The Congressional Budget Office (CBO) estimates that the net annual economywide cost of the cap-and-trade program in 2020 would be $22 billion—or about $175 per household… households in the lowest income quintile would see an average net benefit of about $40 in 2020, while households in the highest income quintile would see a net cost of $245… Overall net costs would average 0.2 percent of households’ after-tax income.

A reasonable price to pay, I think, for massively reducing the economy’s reliance on oil imports and working to curtail the potentially catastrophic tail risk associated with global climate change. Note that ancillary benefits, such as economic and competitiveness advantages which flow from the private sector making significant investment in clean-energy technologies, are not included in this calculation; it doesn’t even include $22 billion a year in energy savings which will result from the act.

Note also that if there’s a faster-than-expected move from giving permits away to auctioning them, the scheme could in and of itself generate significant net benefits: the CBO assumes that only 17% of allowances would be sold in 2020, while fully 83% would be given away.

So yes, the ideal cap-and-trade bill would be much better than Waxman-Markey. But Waxman-Markey is vastly better than what we’ve got right now, which is nothing.

(HT: Avent)


$175 Don’t make me laugh.
Everything we purchase would increase in price.
And $40 credit to do what. Buy toilet paper?
CAP and TRADE is ENRON forced onto everyone.
CAP and TRADE is not about emissions it’s all about
the government creating a hugh slush fund for world government expansion.
CAP and TRADE places the entire U.S. economy on the shoulders of speculation, manipulation within the Chicago Climate Exchange(CCX)
CAp and TRADE is the most damaging plan for America changing our freedom in a very bad way.

Posted by Les Horn | Report as abusive

When anonymous sources disappear entirely

Felix Salmon
Jun 21, 2009 17:55 UTC

John Gruber notes the weird lack of sourcing in the WSJ’s article about Steve Jobs’s liver transplant:

There are several highly unusual aspects to the Journal’s story. First is that they offer no source for the information — not even an “according to sources familiar with the matter”. But yet they state it flatly as certain fact that Steve Jobs had a secret liver transplant in Tennessee. Blockbuster news with no sourcing whatsoever. To call that curious is an understatement. And, coming in the opening paragraph of a page one story, it could not be a careless omission.

The basic tenets of journalism are simple. One reports facts and how one knows them.

This is true, as far as it goes. But it seems to me that although the lack of sourcing is unusual, it actually reflects quite well on the WSJ — and I wouldn’t be too unhappy to see more of it in future.

The WSJ is notorious for using the exact same formula in substantially all of its stories which don’t have named sources: “according to people familiar with the matter”. Since no one would ever knowingly report a story based on information from people unfamiliar with the matter, this formula has exactly zero utility for readers.

What’s more, the “according to people familiar with the matter” formula can sound, to the literal-minded, like a little bit of a CYA move. Assuming someone familiar with the matter really did say that X, a story saying “X, according to people familiar with the matter” is technically true even if X is false.

By contrast, here’s the first paragraph of the WSJ story:

Steve Jobs, who has been on medical leave from Apple Inc. since January to treat an undisclosed medical condition, received a liver transplant in Tennessee about two months ago. The chief executive has been recovering well and is expected to return to work on schedule later this month, though he may work part-time initially.

In this case, if the WSJ’s sources are misguided or lying, the WSJ has no recourse — it’s telling us simple unadorned facts. As Gruber says, “if it’s not true, it would amount to one of the biggest mistakes in their esteemed history”.

I, then, welcome the deletion of the lazy and unhelpful formula — it makes it clearer that the WSJ is reporting facts, and is standing foursquare behind its story. Given the choice between a simple assertion and that same assertion backed up by “people familiar with the matter”, I’ll take the simple assertion any day.

The New York Times has a 1,646-word policy on confidential sources which urges reporters and editors to provide as much information as possible about anonymice. It’s honored more in the breach than in the observance, but at least it’s there, which is a good start. The WSJ, by contrast, has never placed much emphasis on providing helpful descriptors of confidential sources: the fact that a story appears in the WSJ should be all that a reader needs to take the information at face value.

Personally, I prefer to see more detailed information about anonymice than the completely unhelpful fact that they’re “familiar with the matter”. But if you take it as granted that the WSJ is comfortable using such a meaningless description, then I think everybody is much better off just dropping the pretense that it’s adding any information at all. The Jobs story, reporting the facts sans any attribution whatsoever, is a significant improvement, I think, on the overworn formula of old. It’ll be interesting to see whether the WSJ goes down this road more often in future — and what readers are meant to make of the distinction between stories which are just asserted, on the one hand, and stories which are sourced to “people familiar with the matter”, on the other.

Update: I asked Dow Jones if they had any comment on this; they replied by saying that “as a matter of policy, we don’t discuss sourcing”.


“as a matter of policy, we don’t discuss sourcing”.

This is pretty weak sauce, since they weren’t being asked for a comment on their sourcing, they were being asked for a comment on their *policies for (not) discussing sourcing*. It’s funny too, at a meta-level, since the statement they give us here ends up being one on their policy for (not) discussing their policies for (not) discussing sourcing.

Posted by melior | Report as abusive

Wine datapoint of the day

Felix Salmon
Jun 20, 2009 18:33 UTC

From the WSJ wine column:

In the first four months of the year, Argentina’s imports rose yet another 31% by volume, overtaking imports from France, which dropped more than 8%.

The US now imports more Argentine wine than French wine? Wow. I haven’t been able to track down the figures — trade.gov is down all weekend for “scheduled maintenance” — but this is a huge development, I think, especially since French wines, for my money, have never been better value. But I generally stick to the southeast, which I guess never accounted for much in the way of French imports.

There’s certainly much more variety in French wines than in Argentine wines — but maybe that’s precisely why the Argies are doing so well: they’re becoming a known quantity, predictable in a way that French wines are not. But in any case, at the margin reduced demand for French wine means cheaper French wine, which is surely a good thing, while increased demand for Argentine wine doesn’t seem to have driven up the price of Malbec particularly, and good Malbec is becoming much easier to find, to boot. So I’m counting this as a welcome development on all fronts.

Incidentally, if you’re in New York on June 30, do come along to a wine contest I’m hosting down by South Street Seaport; it should generate some very interesting price/quality data. No Malbecs, though: this one’s white wine only.


It’s not all that surprising. The UK imports more Australian wine than French, and we’re just a couple of dozen miles from France.

Posted by Ginger Yellow | Report as abusive

Friday links take leave of their senses

Felix Salmon
Jun 19, 2009 21:04 UTC

If you want a job with the City of Bozeman, you’ll need to fork over your Facebook and Google passwords.

Alan Richman’s paean to the Brooklyn Flea

Want to be a professional journalist? If you’re sensible, you won’t bother. Which maybe explains today’s journalists.

Commencement speech lies

Banks should pay for their own bailouts

Newspapers shooting themselves in the foot, part 972: Now they want to charge people who link to them.

Crap marketing campaign of the day, Merrill Lynch edition

Felix Salmon
Jun 19, 2009 20:41 UTC

This is the new branding campaign for Merrill Lynch, and it’s stunningly crap. First an old-fashioned fountain pen flies in from the right, to be met by a mirroring BofA logo (the Merrill logo seems to have been ditched) coming in from the left. The fountain pen then does a weird auto-rotate thing, only to start writing in a bold, modern, san-serif font! (I think it might be Benton Sans.)

What does the pen write? The new slogan: “Signed, sealed and delivering”. I’m a fan of the Oxford comma, so I hate this slogan on grammatical grounds alone. But that to one side, the slogan not only means nothing, it also signifies nothing, beyond vague allusions to a Stevie Wonder hit and the even vaguer concept that a brokerage should, er, be delivering something.

Actually, that’s not entirely fair. If you click through to the full PDF, it’ll tell you what they’re delivering on:

Our aim is clear: To continue delivering on the great potential of our union by helping to grow businesses like yours.

Yeah, they used grow as a transitive verb, which is really ugly. But not as ugly as their new logo:


This takes lazy to a whole new level. The location of the logo is particularly odd: it looks as though Bank of America gets to keep its old logo, while Merrill Lynch, having lost its bull, is left with nothing at all.

Finally, to the right of the logo is a bunch of dense all-caps jargon in which the word “global” appears three times and the word “banking” twice, just in case we were unsure what exactly a bank does.

Maybe it’s a good thing that Bank of America is telling me it does banking, because otherwise I might suspect it does little more than put together clichéd and unimaginative marketing campaigns. It seems to be very good at that.


I love people who are easy amused by themselves. Aside from your “expert” comments on the logo and accompanying message, your lack of depth and myopic view of the BOA/MER combination is laughable (exceeded only by a few of your readers). As for the logo issue, I guess the best perspective is that you are writing a blog vs. developing ad campaigns and logos for multi-national companies:-) Best of luck.

Posted by Mike Cress | Report as abusive

Thomas Kinkade: Bad, not evil

Felix Salmon
Jun 19, 2009 19:36 UTC

Hamilton Nolan is snarking gleefully over the fact that Thomas Kinkade, whom he calls “Painter of Darkness”, has lost a round of the endless litigation he’s been involved in for years now, ever since he took his company private in 2004. Now I’m no fan of Kinkade. But the plaintiffs in this case are trying to make a pretty astonishing case: that they’re owed damages on the grounds that Kinkade talked a lot about God, and thereby fraudulently persuaded them to place their trust in him.

This argument doesn’t really hold water, and in fact Kinkade has — justly — won the vast majority of the lawsuits which have been brought against him. I wrote about this case at some length back in March 2006, so I might as well just plagiarize myself here: Kinkade is more of a bad businessman than an evil one.

Kinkade took his business public in 1994, with a $110 million IPO. Between 1997 and 2005, according to Kim Christensen of the LA Times, he earned more than $50 million in royalties. And at the end of Jauary 2004, just over 9 years after going public, Kinkade bought back his company for $32.7 million – a price about $14 million higher than the company’s market capitalisation at the time. People who bought Media Arts Group at $20 per share, of course, weren’t particularly thankful that Kinkade paid them $4 rather than $2.30 for their stock. But the fact is that Kinkade was more optimistic about the outlook for his company than the markets were.

The people who ran Kinkade stores are upset at him, because he acted a bit like Chrysler towards dealers it ended up closing: Kinkade forced the dealers to buy expensive inventory which simply didn’t sell, and refused to accept returns unless they were accompanied by orders for three times as much art as was being returned.  Obviously, it was hard for the shops to make money in such circumstances. But I get the feeling they’re missing the forest for the trees: they weren’t losing money because of the decisions being made by Kinkade’s company, so much as they were losing money because they’d hitched their wagon to a company which was in a tailspin.

Obviously, they have every right to try to sue. But it’s pretty hard to make the case that one should expect better behavior from Christians than from non-Christians. And any company, once it starts failing, is going to result in people losing money. It’s also worth pointing out that virtually everyone who entered the Kinkade industry did so out of greed – not just Kinkade himself.

The store owners saw a booming market, and then lost money when the market stopped booming and the internet made secondary-market values of Kinkade’s work much more transparent. Suddenly, the enormous growth in past Kinkade sales was no longer a good thing: there were a lot of Kinkades to go around, and many of the buyers were people who bought on the assumption that their paintings would increase in value and they could make money on their investment. Up until the arrival of the internet, that worked for Kinkade, whose company set the prices for all his paintings and would raise them steadily. After the arrival of the internet, a whole industry arose buying and selling Kinkades at market-set, rather than Kinkade-set, prices. And that was the end of the success days for the company: without monopoly pricing power, Kinkade was nothing.

The stores failed, ultimately, not because Kinkade treated them badly, and not because other stores were undercutting them. The stores failed because Kinkades are a commodity, and anybody wanting to buy one could get a second-hand Kinkade online at a much lower price than that charged at retail. Buyers no longer believed that their paintings would increase in value, so they bought fewer than they used to. And when they did buy, they were likely to buy already-existing Kinkades rather than new ones.

As a general rule, no retailer has ever consistently been able to make money by selling the proposition that his goods are going to increase in value after they’re bought. Kinkade managed it for a few years, but then, inevitably, the bubble burst. And when bubbles burst, people get hurt. It’s not the fault of Thomas Kinkade, it’s simple market dynamics.


It seems to me that there are four main reasons why people don’t like Thomas Kincade:
1) He has been quite successful financially in his business
2) His style of artwork doesn’t appeal to them
3) The manner in which his work is produced appears inauthentic to them
4) They have been burned financially due to their business relationship together

It would be a tough case to argue that Thomas Kincade has not been successful in his business. He has made millions. To build up a company and name recognition like he has and to have generated millions of dollars in revenue from scratch is astounding. I challenge anyone to repeat that process if they disagree.

If you happen to like Thomas Kincade’s artwork then great, you have no problem with his sucess. If his style doesn’t appeal to you because you think it’s kitsch, too syrupy sweet, or without substance then the fact that he has been so successful financially is a little dumbfounding and leads one to believe that he must have manipulated people somehow.

As for the way that he produces his work, his “prints” are created with the available technology of the day. I have gone to art school and studied printmaking -relief printing, lithography, intaglio, silkscreen. In their time those were all the high tech ways of producing a series of identical images. I find woodblock printing and intaglio printing more appealing because of the archaic, physical nature of the process, and the visual and physical qualities of the print -the emboss and the way the process informs the character of the image. Therefore giclee prints and canvas transfers are not my cup of tea.

Does it matter if someone else dabs paint on the canvas or if the work is “signed by a machine?” It matters only if that is important to you. Did Thomas Kincade design and produce the original painting before it was recreated in the print? Yes. If someone is buying a print because they think it is an actual painting then that is misleading and material misrepresentation. If they are buying a print with paint dabbed on the surface because it adds to their enjoyment of the piece then so be it. The value of a work of art is determined merely by what others are willing to pay for it.

If someone is disgruntled with Thomas Kincade because of a bad business decision then they really have themselves to blame. No one is forcing an individual into business with Kincade. Investment and business relationships are speculative. You can win and you can lose, and it’s up to you to make the appropriate decision given the terms of the business arrangement.

Am I a Kincade fan? I bet you can tell by looking at my artwork.

Posted by noahmakesart | Report as abusive