Opinion

Felix Salmon

Bike lane datapoints of the day

Felix Salmon
Oct 8, 2010 21:00 UTC

Matt Chaban has found a new study from Manhattan borough president Scott Stringer, looking at the amount of misbehavior going on in New York’s bike lanes. I’ve uploaded the study here and embedded it below; many thanks to Stringer for putting together the resources to make it happen. The study’s main finding will come as no surprise to anyone, although it’s good to have in vaguely empirical form:

The data is clear: while bike lanes bring a tremendous benefit to New York City, misuse by all parties—motorists, pedestrians and cyclists—undermines their success.

Stringer sent out observers to 11 different bike lanes on three days this week during the morning and evening rush hour. Over that time, a total of 1,781 infractions were observed. Stringer has his own pie chart, but I’ve made my own to more clearly separate out who’s at fault in each case:

infractions.png

All of the observation points were at bike lanes, so it shouldn’t come as much surprise that bike-lane salmon outnumber street salmon. All that says is that when there’s a bike lane to hand, the salmon will flock to it, rather than ride in the street. Also, it’s worth noting that the chart adds up only bike-related infractions. If a car ran a red light, or a pedestrian jaywalked, or anything like that, it wasn’t counted.

A few of the findings were particularly striking:

  • Unmarked police vehicles love to use bike lanes to speed past traffic in non-emergency situations. The police love to flaunt their impunity.
  • For one hour at Grand and Bowery, there were more bike salmon in the bike lane than there were bikers riding the right way.
  • Pedestrians completely ignore the bike lane on Broadway, treating it as pedestrian space.

Stringer’s recommendations make a lot of sense. Top of the list is increased enforcement against motorists blocking bike lanes: over the course of three days of observations, there were more than 275 vehicles blocking bike lanes, which between them got just 2 tickets.

And a dedicated bike lane patrol is a great idea: mobile police who can get around quickly and nimbly, and who experience the frustration felt by cyclists at first hand. I also suspect that cyclists might be less aggrieved if they got their tickets from someone on a bike.

The main good news here, though, is that Stringer is taking this issue seriously, he’s not taking sides, and he’s helping to push the city government in the right direction. Good for him.

Respect the Lane

The cost of being unbanked

Felix Salmon
Oct 8, 2010 19:42 UTC

Candice Choi has a great first-person story about the cost of not having a bank account. She gave up her account for a month, to experience the inconvenience and expense of being unbanked at first hand.

The latter is relatively easy to quantify, and it’s substantial: Choi paid $93 in fees over the course of the month, which is a rate of well over $1,000 per year — very big money, given the disposable income of most of the unbanked. And she has a lot of advantages over most of the unbanked — a very high degree of financial literacy, an ability to read and understand English-language small print, and residence in a state (New York) which caps check-cashing fees.

Go read her story in full: it’s not so long, and after reading it you’ll be hard pushed to understand why people might voluntarily remove themselves from the banking system.

Yet that’s exactly what they do, for reasons Choi elucidates well:

A federal study last year found that about one in four U.S. households skirts banks and relies on services such as check-cashing and payday loans. Many of these households bring in less than $30,000 a year.

Some do it because they believe they don’t have enough money to open a bank account or were burned by fees in the past. But it’s not always a matter of choice: Many can’t open an account because of a history of bad checks or damaged credit.

There are other reasons too. Language barriers intimidate some would-be customers, or they simply feel banks aren’t welcoming. For others, literally handling their own money offers a sense of control at a time of financial anxiety.

One thing worth remembering here is that below a certain level, the poor have much the same relationship with money as the hungry do with food. It becomes something you’re always conscious of, something you’re always worried about. At that level, it really does feel a lot better to have a dollar in your pocket than to have a dollar on deposit at a financial institution which is prone to charging seemingly arbitrary fees for any or no reason.

One of my readers, Brian Jaklitsch, sent me Choi’s article with some questions of his own, making the important point that if the fees were cut in half, the savings would certainly be put to much better use elsewhere. He added:

I realize that the world isn’t as simple as I wish it were, so maybe what I am about to suggest is impossible, but you have to wonder why some large institution with enough clout to begin to change the way things are done hasn’t looked into capturing some of this market as a way to bring the lower end of the spectrum into the system. Or at least, I do. Is it really that impossible for a large bank to work on lowering such fees to the point where they either end up breaking even or making a very small profit (or, possibly, taking a tiny loss) but figure out a way to bring lower-income people into the system by allowing them to take advantage of the lower fees?

The answer here is that banks could try this — but there’s no economic incentive for them to do so. The poor and unbanked tend to be “high-touch” customers: they come in to the branch a lot, they don’t like using automatic bill-pay or ATMs, and generally they consume a lot of teller time without the bank having very much to show for it. Some banks, especially in countries like Brazil, are doing some very novel and interesting things with banking the poor — but they work because the scale there is so enormous, and they’re going after the base of the pyramid. In the US, the unbanked population isn’t nearly as homogenous or as large, relative to the population as a whole.

There are three ways that banks make money from offering basic bank accounts. The first is the old-fashioned way: getting a stable low-cost funding base from deposits. The second is by cross-selling other products, like loans or credit cards. And the third is fee income.

With the Consumer Financial Protection Bureau cracking down on the bad forms of the second two sources of income, that basically leaves the first — and poor consumers simply don’t keep enough money in their bank accounts for it to be worth the banks’ while. Banks can make a little bit extra on interchange fees on debit cards, but that’s not going to make the difference between a profitable consumer and an unprofitable one.

There’s more hope from credit unions: they exist to serve their customers, rather than to make large profits, and they’re generally much more willing to sign up for government programs trying to decrease the rolls of the unbanked. But it’s hard work, and there are no easy ways of doing this. Which means that the check-cashers and payday lenders are likely to be around for a long time yet, acting as yet another tax on poverty.

COMMENT

I feel speechless at the quality of service we have these days. Shouldn’t it be terrifying that we lost confidence in virtually any company we do business with? No tin foil hat here, just amazed that most services, from phone & cable companies to hospital & banks, do not take to heart the interest and trust of their customers. No wonder people feel contempt towards the concept of branding — companies wouldn’t need to spend a dime in branding if they treated their customers with the respect they deserve, if they did business at the most basic level, where trust is one of the most basic elements for a network of commerce to survive. But every transaction these days carry with it research and mistrust at so many levels. Consumers need to either become soldiers or drop out of the system. And it feels no one seems to care…

Posted by minsf | Report as abusive

Strategic default just got a lot more attractive

Felix Salmon
Oct 8, 2010 16:03 UTC

Has Bank of America’s PR department been taking lessons in gnomic utterances from Alan Greenspan? Here’s their announcement today in full:

“Bank of America has extended our review of foreclosure documents to all fifty states. We will stop foreclosure sales until our assessment has been satisfactorily completed. Our ongoing assessment shows the basis for foreclosure decisions is accurate. We continue to serve the interests of our customers, investors and communities. Providing solutions for distressed homeowners remains our primary focus.”

The quote marks are theirs: this is a “statement”, I guess, as opposed to a press release which might actually pretend to explain what’s going on here. But it actually gets even more ridiculous than that: BofA CEO Brian Moynihan is talking at the National Press Club today, and, according to the WSJ, “a person close to him said he isn’t expected to discuss the moratorium decision”.

If the biggest bank in the country announces that it has halted every single foreclosure proceeding in the country, you’d think it would spend a minute trying to explain what it’s doing and why. Instead, we just get meaningless pablum: “We continue to serve the interests of our customers, investors and communities. Providing solutions for distressed homeowners remains our primary focus.”

I can only conclude, here, that this decision was taken in a panicked manner, that it was pretty much imposed upon the CEO rather than decided by him, and that he wants to have some important conversations in Washington before saying anything specific about the bank’s foreclosure strategy.

But now that Bank of America has taken this step, expect GMAC/Ally to follow suit sharpish — it is owned by the government, after all, and should therefore be taking the lead in terms of trying to do foreclosures right instead of trying to push them through in a legally-dubious manner. And if those two firms end all foreclosures, the rest of the industry is going to be under a lot of pressure to do the same.

How long is the moratorium going to last? BofA says “until our assessment has been satisfactorily completed” — which could mean absolutely anything at all. But if I had to guess, I’d say through the end of this year at least. If you’re in default on your BofA mortgage, you just got a nice reprieve. And when the foreclosures start up again, you can be sure they’re going to go very slowly. Strategic default just became a lot more attractive.

COMMENT

If a was an American and I had problem (or not!) with my mortgage repayments, I would certainly try to negotiate a reduction of principal, interest and payments. Why? because the bank is certainly open to negotiate considering the costs and uncertainty of foreclosure. I would be ready to include a clause that if I fail to respect the negotiated conditions, the whole deal is dead and the bank is still at the starting point.
How I know that? Because I am a retired banker of 40 years experience in Canada.

Posted by jacqo | Report as abusive

Time’s running out for job growth

Felix Salmon
Oct 8, 2010 13:23 UTC

There’s absolutely nothing to get excited about in the September payrolls report. America has substantially fewer jobs than it did a month ago, in what is meant to be a growing economy. Even the uptick in private-sector employment (+64,000) is pretty pathetic: it’s not enough even to keep up with population growth, let alone to make a dent in the unemployment rate, which stays at 9.6%.

Meanwhile, as the school year begins, we have this:

Employment in local government decreased by 76,000 in September with job losses in both education and noneducation.

As states and municipalities around the nation start running out of money, they’re going to fire people; this is only the beginning. And if October is any indication, the job losses in the local government sector are going to be at least as big as the job gains in the private sector. No wonder the number of discouraged workers is up a whopping 71 percent even from the grim days of September 2009:

Among the marginally attached, there were 1.2 million discouraged workers in September, an increase of 503,000 from a year earlier. Discouraged workers are persons not currently looking for work because they believe no jobs are available for them.

The U.S. does not have the luxury of waiting indefinitely for job growth to resume. Already we’re at the absolute limit: any longer, and most of the unemployed will be long-term unemployed and, to a first approximation, unemployable. This country simply can’t afford an unemployable underclass of the long-term unemployed — not morally, not economically, and not fiscally, either.

COMMENT

Let’s see! Hmmm!!!!!! The “Demos” are POURING Trillions of $$$$ into our broken economy, and naively expect “Private Industry” JOBS to be created? The ONLY sector that’s GROWING is U.S Government jobs. Our own states are either broke or almost broke! Gimme a break “Liberal-minded Guys!” Our nation’s DEBT is through-the-roof and your children will be HURTING just like mine will in attempting to pay it off! Unfortunately they’ll never be able to!!!

People are scared, they’re HURTING financially and they’re “pissed-off”! I voted for Obama to give the “Homie” a chance!!! We and others DID and he’s failed miserably!
He’s the Man in charge, he and his party NOT the Republicans!!!

Posted by Middleclassman | Report as abusive

Counterparties

Felix Salmon
Oct 8, 2010 06:47 UTC

Obama will use a “pocket veto,” which will effectively kill the foreclosure legislation — WaPo

The market is paying a huge premium for traders willing to run weekend risk, which is when all the disasters occurred — ZH

Davidoff has a smart column on AIG — NYT

Judging TARP

Felix Salmon
Oct 7, 2010 20:09 UTC

Warren Olney had a very interesting conversation this afternoon about TARP, as the official disbursements come to an end and the debate begins over whether or not it succeeded.

The official spin is that TARP was a great success. But the official spin is decidedly unconvincing:

Businesses have added jobs for eight straight months. Private investment and confidence in banks have returned. The cost of borrowing for businesses, municipalities and individuals has declined dramatically.

This is true, but it has nothing to do with TARP: instead, it’s almost entirely a function of monetary policy. TARP might have arrested the global panic for long enough that Bernanke’s policies had time to start working, but that’s about it.

Treasury complains that the public think of TARP as being mainly a bank bailout — but in fact that’s exactly what it was. The Detroit bailout might have been done very well, but it was an afterthought, done with funds left over which hadn’t gone to banks.

As a bank bailout, TARP was if anything too successful. The banks were largely responsible for causing the global financial crisis which left millions of people kicked out of their homes, laid off from their jobs, or both. But then, with the TARP bailout, they rapidly bounced back; the bankers who remain — and that’s most of them — are now anticipating bonus checks to rival what they were receiving at the height of the credit bubble. The little guy was hurt hard; the fat-cat bankers are smiling, unremorseful, and back to their old ways already.

Politically speaking, bank bailouts are always going to be fraught things. And the way to prevent the kind of public anger we’re seeing right now is to ensure that while the banks might survive, the bankers have to be prosecuted — just the way they were in the 1930s and in the 1980s, after the S&L meltdown. That hasn’t happened: there has been no accountability for the financial crisis at all. Which is naturally going to make people angry.

And the government tends to go very quiet when asked whether TARP has lived up to its stated aims, which included much more than rescuing banks. TARP was meant to boost small-business lending, for instance; it hasn’t done that. And it was also designed to help the foreclosure crisis — which instead has got worse.

Finally, TARP failed at the very thing enshrined in its name: doing something permanent to solve the problem of troubled assets at banks. Under its original conception, TARP was meant to be used to buy up those assets and get them off banks’ balance sheets. But that plan went by the wayside, and was never resurrected. And so all those troubled assets are still there, festering.

We’re still a long way from being able to render a final verdict on TARP. But the best that can be said for it at this point is that it helped to arrest the sickening downward spiral that the global financial system was falling into, and that it came in handy for bailing out the automakers. Against that, it failed to get banks lending again; it failed to do anything about the foreclosure crisis; it failed to make any kind of a dent in the unemployment crisis; it failed to hold bankers accountable for their actions; and it succeeded in generating a broad-based mistrust of institutions: the government and the financial-services industry certainly, and the judicial system possibly as well.

TARP was always a rushed, ad hoc policy; even its architects never really had much of a vision for how it should be used. As such, its failure comes as little surprise. But let’s not try to pretend that it was some great success. Yes, it’s good that most of the money is likely to be repaid. But that’s neither necessary nor sufficient for TARP to be considered a success.

COMMENT

You and others are vindicated for certain being Barofsky is admitting you were right all along.

Please read the whole article by him below, but this part is especially telling:

“The act’s emphasis on preserving homeownership was particularly vital to passage. Congress was told that TARP would be used to purchase up to $700 billion of mortgages, and, to obtain the necessary votes, Treasury promised that it would modify those mortgages to assist struggling homeowners. Indeed, the act expressly directs the department to do just that.

But it has done little to abide by this legislative bargain. Almost immediately, as permitted by the broad language of the act, Treasury’s plan for TARP shifted from the purchase of mortgages to the infusion of hundreds of billions of dollars into the nation’s largest financial institutions, a shift that came with the express promise that it would restore lending.

Treasury, however, provided the money to banks with no effective policy or effort to compel the extension of credit. There were no strings attached: no requirement or even incentive to increase lending to home buyers, and against our strong recommendation, not even a request that banks report how they used TARP funds. It was only in April of last year, in response to recommendations from our office, that Treasury asked banks to provide that information, well after the largest banks had already repaid their loans. It was therefore no surprise that lending did not increase but rather continued to decline well into the recovery. “(

read the rest here:
http://www.nytimes.com/2011/03/30/opinio n/30barofsky.html?_r=1

Posted by hsvkitty | Report as abusive

Where is the foreclosure mess leading?

Felix Salmon
Oct 7, 2010 14:41 UTC

Yves Smith and 4closureFraud have doing an astonishingly good job of keeping on top of all of the legal matters surrounding mortgage foreclosure. There are lots of them — do you know what phony allonges are? — and they are all very complicated, and they vary from state to state and from bank to bank, with the result that it’s really hard to sum it all up in a simple overview. But it’s impossible to read those sites and not conclude that we’re at the early stages of an absolutely monster legal mess.

Any one of Smith’s posts is astonishing enough — try here for a good starter, although you could do worse than to start here or here if you’re in Florida — but put them all together, and it becomes clear that the mother of all legal messes has already emerged from the foreclosure crisis, and threatens not only a large chunk of the financial system but also venerable civic institutions, like the courts, which have thus far emerged from the crisis largely unscathed.

While there’s some evidence that Congress is willing to find a bank-friendly way out of this mess, I don’t think that’s going to fly, not when state AGs are already filing lawsuits against the likes of GMAC.

Argentina’s sovereign default has been called “the slowest trainwreck in history”, but this one might turn out to be slower, bigger, and much less fair. Millions of people have already lost their houses to lenders who didn’t have the proper paperwork, and it’s unlikely they will ever get any redress. For people who haven’t yet been foreclosed upon, however, it could now be a very long time before they lose their house.

The big-picture consequences here are by their nature unpredictable, as no one has a clue how this might all play out. But I can think of a few themes:

  1. Bond investors, who have seen the value of their mortgage-backed debt rise impressively over the past 18 months, could find themselves unable to find any kind of bid at all. The paper will still be cashflowing, but those cashflows will be surrounded by enormous uncertainty, and no one’s going to want to buy them except at extremely deep discounts until the mess is cleared up.
  2. Mortgage servicers will go from being assets to being liabilities, and banks which own mortgage servicers could find themselves on the hook for substantial losses.
  3. The time from default to foreclosure will become indefinite, and as a result there will be a significant uptick in strategic defaults, especially in states with judicial foreclosures.
  4. The “shadow inventory” of houses which aren’t on the market but will eventually be sold once the bank gets around to foreclosing will grow substantially from its already-enormous level.

All of this is going to be very costly and very unpleasant for all concerned; the only winners I see here are the lawyers. Add in possible securities-fraud charges against investment banks which underwrote a lot of these bonds, and the end result is a level of legal chaos I can barely imagine, in both the civil and criminal courts. And I see no easy way out at all.

COMMENT

Martskers, the people are not being “dispossed” because of fraud. They are being dispossed because they agree to pay a loan and haven’t. That is the simple truth. Maybe some of them couldn’t pay but apparently enough of them could afford lawyers.

The only possible victims I can see here are the people who bought a foreclosed home, maybe not knowing it was such, and now have to live with the fact they may lose their homes due to populist scare-mongering.

Posted by Danny_Black | Report as abusive

Counterparties

Felix Salmon
Oct 7, 2010 04:55 UTC

The US govt spent $1.15 billion in investment-banking fees in the first 9 months of 2010 — Fortune

The “neural pathways” of New York are often strewn with potholes — Yahoo

The FTTilt paywall question remains unanswered — PaidContent

Sidney Weinberg is dead — Bloomberg

Mishkin and Portes showed no interest whatever in Iceland until they were paid to do so, and they got it totally wrong. Still, they uniformly oppose disclosure of their financial relationships — CHE

If a conference claims that it’s “reputable”, that’s a very strong indication that it isn’t — Spamference

COMMENT

Oh, and there are rumours that Microsoft and Adobe are talking about a merger/takeover/collaboration… what a disaster that would be!

Posted by FifthDecade | Report as abusive

Bloomberg’s move into consumer media

Felix Salmon
Oct 6, 2010 23:01 UTC

Bloomberg CEO Dan Doctoroff wants to become a fully-fledged media mogul, not just in the hermetic space of financial terminals, but in consumer-facing media too. He tells Keith Kelly that the more inescapable Bloomberg’s media properties are, the better the terminals will do:

Said Doctoroff, “We want to gain a greater audience for Bloomberg News, which translates into greater influence, which translates into more market-moving news, which enables us to sell more terminals.”

Ryan Chittum is not convinced:

Hard to see how you’re going to use news to sell more $20,000 a year terminals if you’re dumping more of the same news on your Web sites for free.

I’m with Doctoroff on this one. The more ubiquitous Bloomberg’s news, the more terminals it will sell. The bigger and the better-known you are, the more quickly you’ll get your calls returned and the more exclusive access to newsmakers you will receive. In turn, that improves the quality of your news product, and the willingness of financial professionals to pay $20,000 a year for it.

Those professionals really don’t care if the news is on a Bloomberg website or not; as far as the market is concerned, the information is public as soon as it hits the terminal in any case. The competition for Bloomberg terminals is other terminals, not the web. And insofar as the web provides any competition at all, it’s the web as a whole which does so, not that tiny little corner of the web which is published by Bloomberg. The web is simply too big: no matter how much beefed-up Bloomberg content is “dumped” onto it, that’s never going to suddenly make it a much more attractive alternative to a purpose-built news and information terminal designed very specifically for financial professionals.

Instead, the web will give Bloomberg valuable visibility among the kind of people who will never use a terminal of any description, including large swathes of Washington as well as important people in the non-profit area, or the education sector, or any number of other important yet non-financial industries. And the more that they see and respect the brand, the more likely they are to become valuable sources for exactly the stories that traders with terminals want to see.

The point is that Bloomberg can profit from an asymmetry: if a Capitol Hill staffer reads B Gov a lot, she’ll be more likely to talk to the Bloomberg commodities reporter calling from New York or Sao Paulo. Which is why Doctoroff’s strategy makes sense, and Chittum’s skepticism is misplaced.

COMMENT

I think its fair to say that the access to news is not the primary motivation for purchasing a Bloomberg terminal, but is instead the live data feeds from stock exchanges and banks, along with all the accompanying tools and calculators to manipulate the data. Consequently, I would agree with the general thrust of this post that an improved mass-media news service is not likely to drive additional terminal sales.

http://cautiousbull.wordpress.com/

Posted by spbaines | Report as abusive
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