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September 27, 2010

Government wants people to keep paying on underwater mortgages -- Dean Baker

Banks want the government to get people to keep paying on underwater mortgages as long as possible. While this may make little sense for these homeowners, since they will never accumulate equity and are likely paying more in ownership costs than they would pay to rent a similar house, it does help the banks' bottom line. Each additional month that underwater homeowners stay in their homes paying the mortgage the banks are getting money they would not otherwise receive.

This explains the value of a program like the Home Affordability Modification Program (HAMP). Only a small fraction of the people who enter this program will end up with a permanent modification that will actually allow them to accumulate equity. However, the entire time that they work with the program, they keep sending a mortgage check to the bank -- and the government kicks in some taxpayer dollars as well. This is a real win-win from the standpoint of the banks as they get more checks from the homeowner than would otherwise be the case, plus the subsidy from the government for stringing homeowners along.

-- Dean Baker

September 24, 2010

Aphix Twin, Window Licker

Today's fuzzy downtempo:

September 22, 2010

$1300 per square foot to build, $130 per square foot per year to rent: 1 World Trade Center , 1776 Freedom Tower

This building's economics are still nothing to write home about. One World Trade Center is going to cost somewhere on the order of $1,300 a square foot to build, more than double the cost of most new skyscrapers. And because it is what's called Class A office space, meaning that everything is top of the line, maintaining the building is also going to be very expensive. My real estate sources say they believe that the Port Authority will need to charge $130 a square foot to break even on the building.


But of course the Port Authority can't possibly charge anything close to that -- not in this real estate market or any market in the foreseeable future. The average rent for a downtown high-rise is $55 to $60 a square foot. Even if the Port Authority were able to charge higher, Midtown rents, it would still only be getting, at best, $80 a square foot.

In Skyscraper at Ground Zero, Sentiment Trumped Numbers
Published: September 17, 2010
Few people seem willing to question whether building 1 World Trade Center makes any sense.

September 21, 2010

Recession was preceded by the bursting of the credit bubble

This recession was preceded by the bursting of the credit bubble (especially housing) leading to a financial crisis. And there is research showing recoveries following financial crisis are typically more sluggish than following other recessions. See Carmen Reinhart and Kenneth Rogoff: "The Aftermath of Financial Crises" [PDF].

An examination of the aftermath of severe financial crises shows deep and lasting effects on asset prices, output and employment. ... Even recessions sparked by financial crises do eventually end, albeit almost invariably accompanied by massive increases in government debt.

September 20, 2010

Dangerous Chinese Drywall: sulfur, corrosion, health, ...

Exciting feature of boom-time construction: imported Chinese drywall with health effects,
brings litigation opportunities to depressed communities.

Drywall Flaws: Owners Gain Limited Relief
Published: September 17, 2010
Even as hundreds of lawsuits have been filed over tainted drywall, which was mostly made in China, most insurance companies have not paid a dime.

September 19, 2010

Insurance for college students

Says something about the perceived or projected demographics of NYT readers,
and of 'deep pocket's liability theories.

PERSONAL PROPERTY When most parents think of insurance, they think of theft and probably figure their homeowner's policy covers it.

Most homeowner's policies cover items like computers or other digital devices stolen from dorms. But Robert Courtemanche, chief executive of ACE Private Risk Services, said that the deductible on the policy still applied. "To get around this, parents could schedule items that are easily lost or stolen -- such as a laptop -- on their valuables policy, which has no deductible," he said. "Or, they could ask if the college offers access to an insurance program with much lower limits and lower deductibles."

For wealthy students who may go to college with expensive watches or jewelry, Mr. Laconi said putting those items on a valuable personal property policy was a must. An existing personal property policy may have been written based on the security of the child's home. That may well change now that the child is living in a dorm.

For children living off campus, taking out a renter's policy may make sense. These policies have lower premiums and deductibles to cover damage to furniture, appliances or the apartment in general. The insurer USAA said premiums could be as low as $10 a month for $2,500 in coverage, with more comprehensive policies offering $100,000 of coverage for $30 a month.

LIABILITY The more serious risks are those that can ruin students' lives -- and their parents' finances -- like being sued by a student who drank a beer in the child's dorm room and then got in a car accident. This is where liability, or umbrella, policies come in. Their coverage starts when the liability on, say, an auto policy is exceeded.

Most affluent parents have these policies, with $1 million to $2 million in extra coverage. But Ms. Alderman said Chubb had written these policies up to $50 million. She said the wealthy had to ask themselves, "Would your job title or role in the community make you an appealing target for a lawsuit?"

Mr. Laconi recalled a claim in which a family was sued because their son was working at a party where another student drank too much, fell down the stairs and died. Because of that state's laws, the lawyers for the dead student's parents sued the student with money, even though he had not served the dead student any alcohol.

Choosing Insurance for the College Life (Grades Not Included)
Published: September 17, 2010
Many parents may be as uninterested in talking about insurance as their children, but their policy options are numerous.

September 18, 2010

Modern Love

"Keeping kids safe or making a wise decision about where your kids go to school is more complicated than reviewing the police log at the college security office," said Christopher Falkenberg, president of Insite.

Mr. Falkenberg said a new scam illustrated this problem. It starts with an attractive, older woman pretending to fall in love with a wealthy male student in the hope of getting pregnant, if not married, and laying claim to his family's money.

"They're dweebishly nerdy kids, and the story is always the same," he said. "It's really hard because you have to tell the kid this is not the love of his life."

Preparing Children to Be Safe at College
Published: September 10, 2010
Crime is a fact, even at the most expensive Ivy League school, and many children from wealthy families are ill prepared to protect themselves from becoming a victim.

September 16, 2010

How to debate: tea party synopsis

This doesn't mean that the Tea Party influence will be positive for Republicans over the long haul. The movement carries viruses that may infect the G.O.P. in the years ahead. Its members seek traditional, conservative ends, but they use radical means. Along the way, the movement has picked up some of the worst excesses of modern American culture: a narcissistic sense of victimization, an egomaniacal belief in one's own rightness and purity, a willingness to distort the truth so that every conflict becomes a contest of pure good versus pure evil.

-- David Brooks

An inability to pay one's college tuition bills or a struggle with taxes is a rare sign of moral turpitude:

One thing that Christine O'Donnell is going to have answer is her own checkered background . . . . These serious questions: how does she make her living? Why did she mislead voters about her college education? How come it took nearly two decades to pay her college tuition? How does she make a living? Why did she sue a well-known conservative think tank? . . . . questions about why she had a problem for five years paying her federal income taxes, why her house was foreclosed and put up for a sheriff's sale, why it took 16 years for her to settle her college debt and get her diploma after she went around for years claiming she was a college graduate. . . . when it turns out she just got her degree because she had unpaid college bills that they had to sue her over.

The Backlash Myth
Published: September 16, 2010
Contrary to popular belief, this week's Tea Party victories haven't hurt the electoral prospects of Republicans in November

More on Rove's view:

They're so . . . unruly and unwashed. To members of the establishment and the ruling class (like Rove), these are the kinds of people -- who struggle with tuition bills and have their homes foreclosed -- who belong in Walmarts, community colleges, low-paying jobs, and voting booths on command, not in the august United States Senate.

September 15, 2010


9 to 5 mac is lively Apple iPhone iPad iMac Macintosh news site.

September 14, 2010

Defaulting schools and their students

Under the current rules, schools with default rates of 25 percent or more for three consecutive years, or a default rate higher than 40 percent in a single year, lose their
eligibility for the federal student aid that provides most of the revenues for for-profit colleges.

Student Loan Default Rate Is Continuing to Increase
Published: September 13, 2010
The default rate for federal student loans rose again last year, with the rates for students at for-profit colleges rising the fastest.

September 13, 2010

Useful, practical, durable city-cars: obsolete ?

The durable Ford Crown Victoria and Lincoln Towncar with easy entry back seat are being retired.
Will they be replaced by smaller cars with smaller, painful to access back seats, or with full size SUVs, or with specialty makes like a Checker Marathon Cab or London Taxi ?


"These cars are a facet of people's everyday experience," said David Yassky, the city's taxi commissioner. "Whatever takes their place will have a real and tangible influence on the city's aesthetic."

Passengers should prepare for a bumpier, more cramped ride. Forget roomy trunks that fit a French-door refrigerator; the older models are yielding to smaller gas-and-electric hybrid vehicles with knee-bumping back seats and flimsier frames.

The impending departures have left New York's livery world scrambling. The Taxi and Limousine Commission is holding a contest to design a new taxicab to replace the city's 8,200 Crown Victoria yellow taxis. The Police Department will lose a fast-accelerating sedan it has depended on since 1992. And the black-car industry must replace 75 percent of its fleet.

What's next: Audi A8L, Tahoe Denali XL, or Altima ?

Two Car Models, New York Emblems, Discontinued
Published: June 25, 2010
A decision by Ford Motor Company to drop the Ford Crown Victoria and the Lincoln Town Car will remove a mainstay of New York's executive transportation.

September 5, 2010


Frederick Peters, the owner of Warburg Realty Partners, had run his business well in the 30 years he had owned Warburg Realty. Now through no fault of his own he found himself in a financial crisis that threatened the future of his firm. This was the definition of a clutch situation. Over the next few months, he responded well because his actions were guided by the five traits of people who are great under pressure:

  1. focus

  2. discipline

  3. adaptability

  4. being present

  5. a mix of entrepreneurial desire and fear of losing his business

He also avoided the three traps that cause most people to choke:

  1. he took responsibility for what needed to be done

  2. he did not overthink the situation

  3. nor grow overconfident when his business stabilized.

Alec Haverstick II, a co-founder of Boxwood Strategic Advisers, provided a tool that could take the passion out of financial decision-making. His rule was that when you have less than 12 months of cash left to cover your debt payments, you need to start selling assets. His prescription applied to anyone because the advice was not based on having a lot of money so much as being smart with the money you have left.

The Art of Thinking Clearly Under Great Pressure
Published: September 3, 2010
Through no fault of his own, Frederick Peters arrived in a financial crisis threatening his business. He survived by avoiding distractions and focusing on the problem.