Felix Salmon

How to buy political access, charitable-donation edition

Felix Salmon
Dec 11, 2011 00:13 UTC

Eric Lichtblau has a depressing, must-read story today detailing how strong government regulation of the for-profit eduction sector was diluted into toothlessness by effective lobbying. Lobbyists, of course, trade on their access to politicians. And one way that they obtain that access surprised me — although it clearly didn’t surprise Lichtblau, who dropped it into his story in a subordinate clause with nary a raised eyebrow. Here it is with my emphasis:

Senator Tom Harkin, the Iowa Democrat who has led Congressional hearings into the colleges, got into a heated exchange with Mr. Stein, the Education Corporation investor.

The senator said that during a hallway conversation after lunch in the Senate dining room, Mr. Stein promised to “make life rough for me” if Mr. Harkin kept up his attacks.

“I took it as a threat — it was one of the most blatant comments ever made to me in my years in the Senate,” Mr. Harkin said.

Mr. Stein, a frequent Democratic donor who had bought the lunch with the senator at a charity auction, would not discuss the details of the conversation. But he said Mr. Harkin’s account was “totally incorrect”.

I’m sure that nothing illegal happened here, but it seems ethically well over the line to me. For one thing, Harkin is rich even by Senate standards: with an eight-figure net worth, he’s the 17th-richest member of the chamber. If he wants to support a certain charity, he’s more than capable of writing a check, rather than selling his own availability to any lobbyist who wants to bend his ear for an hour.

(Technically, Avy Stein is a private-equity investor who owns a network of schools called Education Corporation of America; he’s not a registered lobbyist. But that, of course, makes no difference.)

My point is that it would be obviously unethical and possibly illegal for Harkin to simply sell his lunch hours to anybody willing to pay his price. But isn’t that effectively what he’s doing here? Yes, the money went to charity rather than directly to Harkin. But the point is that Harkin got something he values greatly in return for his time, and it shouldn’t really matter if a politician is paid in cash or in kind.

According to Alex Knott, lobbyists — among whom Stein isn’t even included — made six donations in Harkin’s honor in 2010, adding up to a total of $218,000.

I don’t know how much Harkin and his wife donate to charity each year, but it’s surely more than nothing. And every time they donate a dollar to charity, they’re making the clearest possible statement that they would rather that charity have that dollar than hold on to it themselves. As a result, if you donate money to one of Harkin’s favorite charities, you can consider that your donation has roughly as much value to him as if you’d given the money to him directly.

Even if you apply a generous discount rate and assume that Harkin would personally prefer cash to a charitable donation in his name, the donation is still worth something to him. He might prefer $10,000 in cash to a $10,000 donation on his behalf, for instance, but he wouldn’t prefer $1,000 in cash to a $10,000 donation to a favored charity. And so you can consider that a $10,000 donation is worth at least $1,000 to Harkin.

Which raises the question: if you wouldn’t be allowed to give $1,000 to Harkin personally, how is it OK to tie a $10,000 donation to some quid pro quo with him? (I have no idea how much Stein paid for his lunch, but I assume it was a substantial amount.)

This is an ethical issue I’ve faced myself. Every so often I’m invited to give a talk somewhere, with a fee attached, and I’d happily give the talk even if there wasn’t a fee. If I ask them to donate the fee to charity, does that eradicate the kind of conflict that would be seen if I accepted a check? I don’t think it does, entirely. On the other hand, if I give the talk and I don’t ask them to donate the fee to charity, I feel as though I’ve missed an opportunity to support a great organization.

Normally I say that I won’t accept a fee, but that I invite them to donate the sum to Doctors Without Borders; they don’t have to tell me whether they did or not. It’s a not-entirely-satisfactory compromise. But then again, I’m just a pundit. For US Senators, the bar should be set high. And if you wouldn’t sell your availability for cash, you shouldn’t do it for a favored charity, either.


Do you think Senator Harkin really wanted to have a lunch like this? He may have hoped it would be an interested citizen or fervent supporter. He probably has things he would prefer more on his lunch break than getting surprised by someone who is battling against a major reform effort of his…

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Chart of the day, NYC biking edition

Felix Salmon
Dec 10, 2011 18:44 UTC


This is a chart of the number of bike commuters in New York. It’s known as the NYC Commuter Cycling Indicator, and it comes from surveys taken ten times per year at predetermined points around the city. It doesn’t give a good count of the number of bike commuters in New York, but it gives an excellent idea of the trends: bike commuting has essentially quadrupled in the past decade, and has doubled over the past four years. Which just happen to be the four years during which Janette Sadik-Khan has run the Department of Transportation.

This is important because it shows just how effective strong leadership can be, when combined with a dedication to creating good infrastructure. And if you delve a bit into the numbers behind the indicator, this comes out even more clearly. For instance: in 2007, the Queensboro Bridge saw an average of 1,292 cyclists per day, about 80% of the 1,626 cyclists per day on the Brooklyn Bridge. By 2011, the Queensboro number had shot up to 2,904 bikers per day — 25% more than the 2,322 cyclists crossing the Brooklyn Bridge. That’s entirely a function of the fact that the Brooklyn Bridge is unpleasant for cyclists, despite the fact that by dint of its location it should be one of the busiest bike corridors in the city.

The lesson of this chart, then, is that if you build bike lanes, cyclists will appear to fill them. That’s fantastic news, since cities with lots of cyclists are always the most pleasant cities to live and work in — even for people who don’t bike themselves. New York City has a long way to go before it can be considered genuinely bike-friendly. But it’s moving in the right direction, and the bike-sharing scheme to be launched next year will provide a massive boost. Let’s hope that now Sadik-Khan has provided the necessary momentum, her successors embrace and extend what she has started.


I certainly remember the hundreds of New Yorkers leaving NYC on foot 9/11/01 after the two planes crashed into the World Trade Center towers. Those New Yorkers could have escaped the dust and smoke faster on bicycles and negotiated traffic jams by bike better than by car.

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Nick Rizzo
Dec 10, 2011 00:49 UTC

Europe’s banks need to raise an extra $153 billion — Bloomberg

Warren Buffett is buying a $2 billion solar plant in California — Businessweek

While George Soros bought the same amount in MF Global’s European bonds — WSJ (paywall)

NPR couldn’t find a millionaire who thinks the “millionaire’s surtax” affects hiring — NPR

AOL might be clipping Patch — AdAge

And Norway faces a massive butter shortage — Vancouver Sun/Reuters


Norway has a goal of having a farm sector. The reason is to protect the landscape, but also as a security measure in case of a major catastrophe. The current financial crisis should be a reminder that Black Swans happen, and the hunt for maximum efficiency decreases the ability to deal with unexpected situations.

A bad summer created the butter shortage, and even a private market would be unable to suddenly create more cows to produce more milk. And in a totally free market, little mountainous Norway would be immediately out-competed. There would be NO butter produced in the country.

Butter is being imported to Norway right now, but it is difficult because there is a lack of butter in the rest of Europe too.

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The markets didn’t just vote on the Euro summit

Felix Salmon
Dec 9, 2011 22:09 UTC

Am I feeling a bit sheepish about my extreme pessimism of last night, in the wake of a healthy stock-market reaction in both Europe and the US? Not really. Markets did rise, but the movement was within what you might consider standard noise for stock indices these days: roughly 2% in Europe, a little lower in the US. A resounding vote of confidence in the EU this was not: instead, it looks more like the bad deal done in Europe was already priced in, and the markets just continued, today, on their normal volatile and noisy path. In fact, it’s not at all clear that the EU treaty was responsible for any of today’s market move at all.

In the video I shot yesterday with TBI’s Simone Foxman, Simone talks about how Europe’s bailout mechanism is a fragile thing. For one thing, she admits that “the ECB has to get involved in one way or another”, and that we’re not seeing that right now; later on, she wonders whether the markets would even place all that much faith in a German guarantee of PIIGS debts if Germany has been downgraded. “It’s going to be really tricky to not lose a lot of investor confidence” if and when the eurozone breaks up, she says, and when Germany is called upon to provide guarantees, “by then, markets may not trust them enough. If that fear keeps rolling, it snowballs down the mountain and all of sudden becomes an avalanche”.

This is one of those situations where the conventions of reporting market moves on a daily basis are decidedly unhelpful if you want to get a feel for what’s going on in Europe. The fact is that Europe still has a lot of very strong companies, which are worth real money going forwards; in many ways, owning those companies is a much smarter thing to do than simply putting your euros on deposit in a European bank. So looking at the share prices of European companies is really not a great way of working out what the market thinks of the prospects for the future of the eurozone. And looking at the value of the euro doesn’t help much either. Instead, you want to look at more obscure indicators, like the amount that Italian and Spanish banks need to pay if they want to borrow money on the interbank market.

More simply still, just look at the amount of new capital that Banco Santander — one of the strongest banks in Spain, if not Europe as a whole — is now being asked to raise. (More than €15 billion, if you must know.) Here’s Santander’s share price, over the past couple of years. The thing to notice is the inexorable downward slide, not any small uptick today. Does anybody really think we’ve now seen the all-time lows for this indicator? If not, then let’s stop treating intraday market noise as some kind of referendum on the latest Euro treaty.


Clearly Felix your pessimism was misplaced since the markets didn’t react.

People are finally realising that change in the EU takes time, and while journalists have daily deadlines, the EU politicians and officials do not. Perhaps it would be a good idea for journalists to refrain from hyperbole and hyping up each successive meeting as a ‘last chance to save the Euro/EU/World Economy/mankind’ so we might then begin to see what’s really going on?

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Hedgies vs Obama

Felix Salmon
Dec 9, 2011 17:59 UTC

Jim Chanos claims not to understand why hedgies are so critical of Barack Obama: after all, they’ve done pretty well for themselves over the past three years. But maybe this chart, from Thomas Piketty and Emmanuel Saez, might help him out:


What we see here is the very strong correlation between tax cuts for the rich (on the x-axis) and increased wealth for the rich (on the y-axis). This correlation comes as no surprise, of course. But Obama doesn’t want tax cuts for the rich: he wants to roll their taxes back to Clinton-era levels. Instead, he wants lower taxes for the middle classes, which won’t help hedge fund managers at all.

As Piketty and Saez note, lower top marginal tax rates don’t translate into higher growth — which means that the extra wealth going to the 1% really is a zero-sum game, and being taken out of the pockets of the 99%.


But it’s hard for a gazillionaire to come out and say that he wants more of everybody else’s money. So instead we get this kind of thing, wherein Leon Cooperman pulls out every rhetorical trick in the book in an open letter to Barack Obama:

What I can justifiably hold you accountable for is your and your minions’ role in setting the tenor of the rancorous debate now roiling us that smacks of what so many have characterized as “class warfare”. Whether this reflects your principled belief that the eternal divide between the haves and have-nots is at the root of all the evils that afflict our society or just a cynical, populist appeal to his base by a president struggling in the polls is of little importance. What does matter is that the divisive, polarizing tone of your rhetoric is cleaving a widening gulf, at this point as much visceral as philosophical, between the downtrodden and those best positioned to help them. It is a gulf that is at once counterproductive and freighted with dangerous historical precedents. And it is an approach to governing that owes more to desperate demagoguery than your Administration should feel comfortable with.

The first thing to note, here, as Piketty and Saez show, is that the 1% are not actually the people “best positioned to help” the 99%. When the 1% do well, the 1% do well. But that rising tide is nowhere to be seen.

But there’s another question raised by Cooperman’s letter, and Andrew Ross Sorkin phoned up Cooperman to ask it. What, exactly, is he referring to when he talks about Obama’s “divisive, polarizing tone”? Go on, take a guess. Here’s the answer:

“What pushed me over the fence was the president’s dialogue over the debt ceiling,” Mr. Cooperman said, explaining that just when it seemed like a compromise was near, President Obama went on national television and pressed harder on “millionaires and billionaires,” a phrase that has stuck in the craw of many of the elite. For example, Mr. Cooperman zeroed in on what he described as the president’s belittling remarks about taxing the wealthy: “If you are a wealthy C.E.O. or hedge fund manager in America right now, your taxes are lower than they have ever been. They are lower than they have been since the 1950s. And they can afford it,” the president said back in June. “You can still ride on your corporate jet. You’re just going to have to pay a little more.”

This just doesn’t make sense. Cooperman supported Obama in the 2008 election, when he trotted out the line about “tax cuts for millionaires and billionaires” many times. And the corporate-jet line was a specific reference to a specific tax break which Obama wanted to abolish as part of the deal.

I think the real reason that Cooperman has started throwing his toys out of the pram right now is Occupy Wall Street — a movement which is more opposed to Obama than aligned with him. But saner heads, like venture capitalist Nick Hanauer, understand that higher taxes on millionaires and billionaires are a necessary part of any successful fiscal policy going forwards:

Without consumers, you can’t have entrepreneurs and investors. And the more we have happy customers with lots of disposable income, the better our businesses will do.

That’s why our current policies are so upside down. When the American middle class defends a tax system in which the lion’s share of benefits accrues to the richest, all in the name of job creation, all that happens is that the rich get richer.

And that’s what has been happening in the U.S. for the last 30 years.

Rich businesspeople like me don’t create jobs. Middle-class consumers do, and when they thrive, U.S. businesses grow and profit. That’s why taxing the rich to pay for investments that benefit all is a great deal for both the middle class and the rich.

So let’s give a break to the true job creators. Let’s tax the rich like we once did and use that money to spur growth by putting purchasing power back in the hands of the middle class. And let’s remember that capitalists without customers are out of business.

Hanauer’s absolutely right: the idea that millionaires (that is, people with seven-figure incomes) are job creators simply isn’t borne out by any empirical evidence whatsoever. And I particularly like NPR’s idea of asking the GOP to point to a single business owner who would hire fewer people if the top marginal tax rate were to go up. Astoundingly, in a country of 300 million people, they couldn’t find a single one.

So while people like Cooperman are interesting as a political phenomenon, their rhetoric doesn’t stand up to scrutiny. I do, however, continue to wonder at the ability of the Republican Party to sell higher incomes for the 1% to the public as a whole. Is there any other country in the world where a major political party panders so cravenly to such a tiny base — and gets broad political support for doing so?


I think this argument is basically about the value of different groups of people to the Nation as a whole. As a group, do the millions of people in the middle classes provide more economic value through their work and spending than that provided by the managers of the companies they work for and buy from?

At the rarified upper end, the 1%, things have become so dislocated from what happens lower down that I don’t think the same principles can necessarily be applied. In economic terms, yes, the 1% do sometimes create work – but in which country? More often the jobs would be created in China, not the US. In effect, their tax breaks subsidise the Chinese economy. Their tax breaks also subsidise the politicians who are complicit in moving the jobs to China by supporting all that the 1% want, and by blocking anything of benefit to the 99%.

Is this good for the US economy? On that I am not so sure, there must be some kind of small benefit from selling the products to US consumers, but since most consumers are over-indebted and use credit to pay for consumption, is the benefit real? At some point this borrowing money from future earnings that may not actually be there will reach a crossover point where it will be impossible to repay the credit.

To use an ecological analogy, successful parasites do not kill their host, just weaken it and make it more vulnerable to external threats (competitors, predators, disease). Far better for the 1% to act as a symbiont and gain self-benefit through allowing the 99% to benefit more. After all, who benefits from the activities of the 99% more than the 1%?

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Europe’s disastrous summit

Felix Salmon
Dec 9, 2011 05:56 UTC

I thought disasters were all meant to happen over the weekend? Somehow, in Brussels, EU leaders have contrived to pull defeat out of the jaws of victory on Thursday night, leaving Friday for finger-pointing and recriminations and wondering whether anybody who signed on to this deal has any chance at all of even getting re-elected, let alone being remembered as one of the leaders who saved the euro.

Remember how Wolfgang Münchau said that the Euro zone had to get it right at this summit or it would collapse? Well, the Euro zone has most emphatically not got it right. Take any of the list of prescriptions of the minimum necessary right now — from Münchau, from Larry Summers, from Mohamed El-Erian — and the one thing that jumps out at you, especially in light of the most recent news, is that if you look at anybody’s list, there’s an enormous number of items which has zero chance of actually happening.

Here’s how the FT put it on Wednesday:

It borders on hysterical to say there are but hours to save the euro, but there is a risk that if the crisis is not now tamed the price of a rescue might start to spiral out of politicians’ grasp. The stakes are therefore very high at Friday’s summit. The world cannot afford another half-baked solution.

And yet, inevitably, another half-baked solution is exactly what we got. Which means, I fear, that it is now, officially, too late to save the Eurozone: the collapse of the entire edifice is now not a matter of if but rather of when.

For one thing, fracture is being built into today’s deal: rather than find something acceptable to all 27 members of the European Union, the deal being done is getting negotiated only between the 17 members of the Euro zone. Where does that leave EU members like Britain which don’t use the euro? Out in the cold, with no leverage. If the UK doesn’t want to help save the euro — and, by all accounts, it doesn’t — then that in and of itself makes the task much more difficult.

But that’s just the beginning of the failures we’re seeing from European leaders right now. It seems that German chancellor Angela Merkel is insisting on a fully-fledged treaty change — something there simply isn’t time for, and which the electorates of nearly all European countries would dismiss out of hand. Europe, whatever its other faults, is still a democracy, and it’s clear that any deal is going to be hugely unpopular among most of Europe’s population. There’s simply no chance that a new treaty will get the unanimous ratification it needs, and in the mean time the EU’s crisis-management tools are just not up to dealing with the magnitude of the current crisis.

The fundamental problem is that there isn’t enough money to go around. The current bailout fund, the European Financial Stability Facility, is barely big enough to cope with Greece; it doesn’t have a chance of being able to bail out a big economy like Italy or Spain. So it needs to beef up: it needs to be able to borrow money from the one entity which is actually capable of printing money, the European Central Bank.

But the ECB’s president, Mario Draghi, has made it clear that’s not going to happen. Draghi is nominally Italian but in reality one of the stateless European technocratic elite: a former vice chairman and managing director of Goldman Sachs, he’s perfectly comfortable delivering Italy the bad news that he’s not going to lend her the money she needs. He’s very reluctant to lend it directly, he won’t lend it to the EFSF, and he won’t lend it to the IMF. Draghi has his instructions, and he’s sticking to them — even if doing so means the end of the euro zone as we know it.

And there’s more bad news, too. All of Europe’s hopes right now are being placed in something called the European Stability Mechanism — a permanent successor to the temporary EFSF. Since it’s permanent, the ESM is going to have to be constructed with the ability to put out fires of any conceivable size. And as such, it’s going to have to be able to borrow enormous amounts of money, and lend them on to countries which have found themselves in trouble.

But that would make the ESM, essentially, a bank. And the European leaders seem determined, today, to prevent the ESM from operating as a bank at all. Which means it will never get the firepower it needs to be taken seriously.

Oh, and did I mention that the ESM seems set to be capped at a mere €500 billion euros? That’s a lot of money, of course, but compare it to Italy’s total debt of roughly €2 trillion. And that isn’t even counting Spain, or Portugal, or Ireland, or whatever money Greece might yet still need.

Don’t think that Europe’s banks might be able to step in and lend their governments the money they need, either. The European Banking Authority, with exquisite timing, informed the world on Thursday that the continent’s banks need to raise €115 billion in new capital, including more than €15 billion for Spain’s Banco Santander alone. Where are they going to find that kind of scratch? Certainly not from their beleaguered governments. And there aren’t many private investors clamoring to invest in this particular train-wreck, either.

It all adds up to one of the most disastrous summits imaginable. A continent which has risen to multiple occasions over the past 66 years has, in 2011, decided to implode in a spectacle of pathetic ignominy. Its individual countries will survive, of course, albeit in unnecessarily straitened circumstances. But the dream of European unity is dissolving in real time, as the eyes of the world look on in disbelief.

Europe’s leaders have set a course which leads directly to a gruesome global recession, before we’ve even recovered from the last one. Europe can’t afford that; America can’t afford that; the world can’t afford that. But the hopes of arriving anywhere else have never been dimmer.


I think the likelihood of the eurozone nations emerging from this cosy, sensible-sounding ‘fiscal compact’ with so much as the right to paint their own lamp-posts without EU permission is on a par with my chickens preparing cold fusion. This whole euro-crisis is a sham and a scam, deliberately engineered by the EU, through its policy of massive handouts and easy loans, to bring the eurozone nations to their knees so they would cry out for rescue at any cost. They will be rescued, but the eventual cost, without a shadow of doubt, will be the cessation of their existence as independent nations.

Are we seriously expected to believe that the massed ranks of expert EU economists were incapable of predicting the virtual certainty that such an ill-matched currency union would collapse? They knew full well it would only work under the aegis of a political union, which it was clear the people would never accept. So they came in through the back door. Those strutting on the EU stage may be buffoons, but the ones pulling their strings are not.

I have no idea of the financial and political implications of Cameron’s decision, but I’m sure I can safely say that few ordinary Brits would want to be ruled by these deceitful and callous dictators. And there can be little doubt that all the EU members will, sooner or later, be sucked down this euro plughole.

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Nick Rizzo
Dec 9, 2011 00:32 UTC

In this Counterparties, almost every link will have something to do with Europe:

Citigroup reckons Europe’s headed for a six quarter recession — FT Alphaville

Ireland’s central bank wants more printing presses in the event of a Euro collapse — WSJ

ING makes some charts predicting post-Euro economies — FT Alphaville

Financial stability is a pointless goal, “resiliency and resolution” is better — London Banker

Eurobonds could increase the risk of joint defaults — VoxEU

Ezra Klein: The Euro crisis is really about growth, not debt — Bloomberg

Funny: The shockingly short lifespan of today’s European treaty rumor — WSJ Marketbeat

The AP gets inside a secret CIA prison in Romania — Associated Press

Next week should have the most IPOs in the last four years — Renaissance Capital

And this Dutch wheelchair athlete was in a crash, is miraculously no longer disabled — Reuters


Klein’s article is meandering to the point of being useless. And unless he is simply too afraid to put down his thoughts in writing, he seems to be in the strange habit of leaving most of his thoughts unfinished, most obviously when discussing what the Germans are using the crisis as leverage for. Do they really want to “drive down labor costs in the periphery” (that wonderful euphemism for inducing depressions and creating societies of wage slaves), when they also need those wage slaves to have high enough wages to buy german exports?

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Treasury’s promise, one year on

Felix Salmon
Dec 8, 2011 22:32 UTC

In November 2010, on what was pretty much his last day working for Treasury, I spoke to Michael Barr, an assistant secretary; he was upset about a post of mine which said that Treasury was going to do absolutely nothing with respect to holding banks accountable for the various mortgage scandals.

Not true, he said: in fact, the government was doing a lot of things targeting banks and holding them responsible for their actions.

Barr rattled off a laundry list of reviews which are being done by various arms of the government, including what he described as an “11-agency, 8-week review of servicer practices, with hundreds of investigators crawling all over the banks”. That information is finding its way to the state attorneys general, in their review. Meanwhile, said Barr, an alphabet soup of regulators (OTS, OCC, FDIC) is looking at various financial services companies (MERS, along with lots of different servicers, trustees, and banks); HUD is holding everybody to FHA and HAMP guidelines; and the FTC is looking at non-bank lenders. And keeping everything coordinated is the new Financial Fraud Enforcement Task Force which has been put together under the leadership of Justice’s Tom Perrelli.

“Why are we investing these resources and including Tom Perelli in the discussions?” asked Barr. “We’re holding the banks accountable to fix it.” I asked him whether he thought that was even possible. “Their conduct suggests they can’t,” he said, adding that “they can be held accountable for not following the law. HUD can assess significant fines on them.”

Barr was clear about what he expected to happen in 2011. Specifically, he said, “if there are legal violations found, banks are responsible for fixing them and for addressing the problems.” And more generally, the government’s actions “will increase the chance that when foreclosures happen, they will happen according to established law.”

The timetable for all this? The reviews should be largely completed this year, with the full scope of the problems being apparent by the end of January. By the end of the first quarter, the banks should be in serious discussions about how they’re going to fix what’s broken. And then it gets necessarily hazier: “Institutions are resistant to change and have difficulty implementing,” said Barr, but “you’ll see flow improvement over the course of the next year.”

Could I hold Treasury to that? Sort of: “You should hold us to whether things get better or worse. If a year from now nothing has changed, that would be a reasonable criticism.”

Well, here we are, a year later, and so it’s time to check in and see what has been achieved. I asked Treasury, and they sent me the November Housing Scorecard, which is mainly notable for the fact that JP Morgan Chase “was found to be in need of substantial improvement under the program” and will no longer get servicer incentives from Treasury. They also sent me written testimony from October about how HAMP is coming along. (Slowly.)

What they didn’t point me to — because it doesn’t exist — was any kind of settlement between the attorneys general and the banks. This time last year, it looked almost certain that such a settlement was going to happen; now, with Massachusetts going its own way and California proving unwilling to give in very much, the chances of seeing any settlement at all are diminishing by the day. Realistically, if we don’t see something in the next few weeks, the chances of getting a big settlement will be very small indeed.

So the one big thing which everybody expected to have seen by now hasn’t happened. And because it hasn’t happened, the banks haven’t paid any fines; they haven’t detailed how they’re going to compensate the people who they mistreated in various foreclosure processes; they haven’t substantially improved their servicing operations; and they certainly haven’t embraced principal reductions as a tool for getting the housing market back onto a healthy footing. In fact, they haven’t really done anything at all, since it behooves them to keep any improvements they might be able to make as a bargaining chip they can use in negotiations with the government.

Going forwards, it’s still likely that the banks will end up paying some kind of fine, and promising that they’ll clean up their act in future. But the fine won’t hurt — it’ll be a cost of doing business. And the promise will be worthless, as such promises always are — I’ve never seen an agreement with real teeth, where penalties actually get enacted. In other words, the servicing system will continue to be broken, the banks will continue to make things worse rather than better, and the government will have failed in its self-imposed task of getting a grip on this problem and doing something meaningful about it.

I do think that there are people in government who have tried. But I also think that — as I said last year — they’re doomed, ultimately, to failure. Treasury said that we would have seen real progress by now; we haven’t. And there’s very little chance of getting anything substantive done between now and the election — in fact, things seem to be moving in exactly the wrong direction. Which makes me think that in the battle of Treasury vs the banks, the banks — predictably — have won.


What didn’t happen, which you don’t mention, was that “11-agency, 8-week review of servicer practices, with hundreds of investigators crawling all over the banks”. Instead what happened was hundreds of investigators went and drank coffee and ate donuts at the banks and then went home. since there was never an investigation the attorneys general never had any ammunition to get a settlement with the banks. So some of them did their own investigation and what they found was so bad they are suing, not settling. Thanks, Office of Thrift Supervision. Thanks, Fed. Thanks, Treasury. After all, Teh Timmeh said, “Save the banks at all costs.” And so it was tried.

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The density barbell

Felix Salmon
Dec 8, 2011 18:02 UTC

Virtually everybody I know with Instapaper and/or Read It Later uses it all the time — the ability to read long articles in a clean format, at your leisure, on planes or subways or just when you have a few minutes to kill standing in line at the supermarket, is a great improvement to quality of life. And both of them are now popular enough that they can start extracting interesting patterns from their data.

Read It Later has a new post up about which authors are the most read on its platform, and the results are quite startling: the list of most-saved authors, and the list of authors with the highest return rate (the authors who people actually read, after they’ve saved an article) are both dominated by a lot of Gawker Media writers. “Nick Denton’s Gawker Media properties (Lifehacker, Gizmodo, Deadspin, Gawker),” write Coco Krumme and Mark Armstrong, “are among the most popular any way you cut it.”

This is partly because Gawker Media is a big and popular media company. But it’s also, I think, indicative of an important trend in the way that information is presented and consumed online.

There’s no doubt that our digital lives are becoming increasingly cluttered, and that we’re presented with more information per minute spent online than at any time in the past. There’s been a steady rise in the density of information that websites present to us, and the most successful websites (the Huffington Post and the Daily Mail are prime examples here) tend to fill their pages with enormous numbers of links and shiny things to click on.

One of the things that the Gawker redesign did was to make every Gawker Media webpage extremely dense, with lots of links to lots of stories. That’s a good thing. But it also makes it harder to give individual stories, especially long ones, the kind of space that readers like. And so those readers turn to tools like Read It Later when they come across a Gawker Media post they want to give real attention to.

Call it the density barbell: information is being presented in either a very dense form, or else in a very clean and sparse form. Both have their uses. And as tools like Instapaper and Read It Later become more widely used, websites can be even more aggressive in ramping up the density on their pages, safe in the knowledge readers can easily strip it away if they want to.

This kind of binary approach to information stands in stark contrast to what’s going on at Google, where a redesign of Google Reader, Gmail and other web apps has met with a vast outpouring of unhappiness. What’s happened there is that Google, in an attempt to make information easier to read, has massively decreased the density of its pages — even as the rest of the world is going in the opposite direction. For any one piece of information, that’s great — it’s easier to find and read. But for information consumption and navigation purposes, it’s dreadful: the redesigns slow down productivity, in a world where Reader and Gmail are key productivity tools.

What Google should have done, I think, is go in the other direction, and increase the density of the information in its apps — while adding some kind of simple tool allowing extraneous information to be eradicated at the touch of a button. People like simple and uncluttered in theory, but in practice we’re on an inexorable ride towards complex and cluttered — with tools then added on top for the purposes of filtering or reading. Give me everything, and then give me an easy way to find and read what I want. Don’t give me an unacceptable subset of everything and ask me to make do.


I agree I definitely don’t like the new google interfaces either, but essentially I’d disagree with anything that changes just because I’m used to it. I’m sure in 6 months I’ll never remember the old interfaces anyway. The sidebar in gmail is pretty dang annoying though.


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