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Spreading slums throughout the land

Wednesday, April 2, 2014

We usually consider slums to be an urban phenomenon, with slum dwellings usually consisting of run down apartment buildings. But, thanks to Wall Street and the wonders of securitization, slums may be coming to a previously middle class, single family neighborhood near you:

One of the reasons many investors have been skeptical of the way private equity firms have gone full bore into buying distressed single family homes is that property management is a hands-on business even when it’s done it the most favorable possible setting, an apartment building. Individuals who have invested in single family home rentals almost without exception report that even when they found it to be an economically attractive proposition, it was still oversight-intensive. Admittedly, there are some private equity firms who have bought rental properties who actually do seem to be targeting markets and renters in such a way that they might be able to do a decent job of property management, for instance, by buying homes where they can rehab the kitchen and bath plumbing using the same fixtures, screening tenants in person, and then inspecting the properties monthly and giving the tenants points for passing that they can convert into credits against a purchase or take in cash.

But the biggest fish in this ocean, Blackstone, is clearly taking the opposite approach, of doing as little as they can to maintain the houses and trying to fob off the responsibility onto the tenant, even when local regulations clearly prohibit it. So managing dispersed homes is no problem if you never planned to do the job in the first place.

via Naked Capitalism

The blogger at Naked Capitalism (Yves Smith) is optimistic that local landlord tenant laws will stymie operators like Blackstone, but I'm not so sure, and this is something I actually know something about first hand, having been engaged in landlord-tenant law for many years. Smith's post quotes from the Arizona landlord tenant law that is much like Connecticut's. Our laws require that the landlord perform all repairs, but makes a limited exception in the case of single family homes. There's qualifying language. The clear intent is to allow the parties to agree that the tenant will do certain things (such as mow the lawn) or that the tenant will do other repairs (presumably in exchanged for a reduced rent). These types of arrangements can work if both parties are reasonable, but, clearly, Blackstone and its ilk will try to stretch these somewhat vague provisions beyond recognition, and they may very well be able to do so more often than not. If a tenant balks at doing the repairs they may or may not get help from local building departments, and if they withhold rent they will almost certainly end up being evicted and replaced by another tenant. Even when tenants “know their rights” there are institutional barriers to actually getting those rights vindicated, among them the fact that tenants hardly ever have access to lawyers.

The states should take a proactive approach to this, by taking a long look at their statutes and amending them to prevent abuse before it happens. There are a number of approaches you could take. One possibility is to change the law as it applies to anyone owning three or more one family rental dwellings to clearly limit the work that can be fobbed off on the tenant. Another approach is the Truth in Lending approach. That statute contains what was often referred to as a private attorney general provision. A consumer with an offending contract could bring suit against a bank and collect statutory damages (no need to prove actual damages; the amount of damages is set by the statute) plus attorneys fees for establishing a failure to disclose in accordance with the act. For several years after the act was passed many lawyers made a living out of bringing such cases, until the banks cleaned up their acts. You could take the same approach with leases. Require them to contain certain clauses, and forbid other clauses. Give tenants a private right of action with statutory damages upon proof of violation, along with attorneys fees, and let the fun begin. If the states (obviously we'll get nothing from Congress) are a little proactive, they may prevent those slums from spreading.

Filed in Corporate Crime | | Comments (0)

Make it simple

Tuesday, April 1, 2014

The explanations for things are often not simple, though our politicians of a red hue often claim that they are. On the other hand, it is often the case that the best remedy for stuff that ails us is the simplest solution, a fact which politicians of both parties seem to do their best to ignore. Witness the Dodd Frank bill, which, in various half ass, complicated and confusing ways, attempts (or claims to attempt) to achieve the same result as the comparatively simple Glass-Steagall act in fact achieved for over forty years. While there are some voices crying in the wilderness, no one seriously believes we will reenact the Glass-Steagall act, precisely, one suspects, because everyone knows it would work, and that would displease the people who count.

For reasons probably related to the will of God, or some such thing, I have run across many references to simplicity today. In each , we are reminded that we live in a country that is averse to simple solutions, while being totally enthralled with simplistic explanations.

First on the list is Dean Baker's post, in which he again points out that we could seriously limit the activities of what have now been christened Flash Boys (insider traders by any other name) very simply:

There are many complicated ways to try to address this problem, but there is one simple method that would virtually destroy the practice. A modest tax on financial transactions would make this sort of rapid trading unprofitable since it depends on extremely small margins.

He then points out that this simple solution is unlikely to be adopted for the simple reason that it would work.

Here, we have Paul Krugman explaining why we couldn't get a simple solution to our health care mess:

I’ve always thought of Obamacare as a sort of Rube Goldberg device that awkwardly simulates the results of a single-payer system. It’s run through private insurance companies in part to buy off the industry, in part to let most people with good insurance keep it. It relies on a mandate plus subsidies, rather than full funding via the tax system, in part to keep down the headline spending number. And so on. The resulting system isn’t what anyone would design from scratch; it was, however, probably the only kind of system we could get.

via Paul Krugman's Blog

So here you have the supreme irony. We cannot enact simple solutions to complex problems because we are a nation of simpletons.

Sidenote: Krugman's reference to buying off the insurance companies reminds me that what is often referred to by economists as “rent-seeking” (which is what the insurance companies did during the health care debate) is simply a “tax” by another name. It would be interesting to know if the amount by which taxes have been reduced (mostly on the rich) in the last thirty years or so, has been more than offset by economic rents (which mainly affect the rest of us) pushed through Congress, in which case one could cogently argue that the Republicans have raised taxes more than the Democrats ever did, the difference being that the general public has gotten no benefit from these tax equivalents. I would pursue this in more depth, however, I just opened a 32 ounce growler from our local Beer'd brewery; my wife has refused to drink her share, and I am therefore somewhat incapacitated for further research. Still and all, a question worth pursuing.

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The right finally gets the joke

Saturday, March 29, 2014

Apparently whoever tweets for the Stephen Colbert show screwed up, and sent out a racially offensive tweet, for which act many on the right (e.g., Michelle Malkin) are demanding that his show be cancelled.

This can mean only one thing. They must have finally figured out that Stephen is not an actual narrow minded conservative bigot, (as they originally believed) but only plays one on television. Otherwise they'd be defending him on free speech grounds.

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Stick a fork in him

Thursday, March 27, 2014

(As Lou Reed would have said, we're he still with us, “he's done”.)

If Chris Christie still has thoughts of becoming president he should, perhaps, think twice after the reception his “investigation” into himself has gotten from the media. See the headlines collected here. Before Christie's fall from grace there was a widespread meme to the effect that he was a media darling, but you have to wonder whether his popularity was confined to the circle jerkers in the Beltway, and that the media frontliners may have had a different view. After all, they saw what an asshole he is on a daily basis.

There is a downside to Christie's demise, and believe me, he is dead. We non Beltway pundits are at a loss. Ask me who I think the next Republican candidate will be and all I can say is that it has to be someone, because they will, no doubt, hold a convention, and someone has to win it. But right now, there is not a single potential candidate on the horizon that even knows how to – Romney-like- pretend that he's sane. We have come to a bizarre place when Rand Paul, of all people, looks to have a chance to get the nomination.

Alas, we Democrats have problems of our own, facing as we do the dismal prospect of a Clinton coronation. No good will come of four to eight more years of a Wall Street friendly Democratic administration. It may very well be that a nation “conceived in liberty and dedicated to the proposition that all men are created equal” cannot “long endure”. The prospects don't look good, and the fact that Christie will not be the one leading us toward oligarchy is cold comfort indeed.

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God **** the pusher girl

Wednesday, March 26, 2014

(With apologies to Steppenwolf)

I briefly noted this phenomenon a few weeks ago. I couldn't resist passing this along, culled from Daily Kos.

 

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Another story from the world of organized crime

Thursday, March 20, 2014

In this morning's Times, Jesse Eisinger documents yet more criminal activity on the part of Goldman Sachs. Perhaps I should amend that and say it is activity that should be criminal, if it's not already. It is an opaque deal which, even upon full explication is sort of hard to follow, but as I understand it, the gist is that Goldman took a company private and engaged in financial deals with itself (operating under various guises), the effect of which was to drive down the value of the preferred stock in the company, enabling Goldman to, in effect, get control of that stock at bargain prices, thus cheating the shareholders to whom, in at least one of its guises, it owed a fiduciary duty. The challenge is to count the number of conflicts of interest that Goldman had.

Eisinger ends like this:

When deals like this go down, I feel like we are nation of Jake Gitteses, watching big bank deals with incomprehension. In “Chinatown,” the private detective asks the wealthy baron Noah Cross: “Why are you doing it? How much better can you eat? What could you buy that you can’t already afford?”

Well, I can answer that question, with yet another repetition of a quote from a different movie, Superman 3 in which the capitalist villain played by Robert Vaughan explains it as follows: “It is not enough that I succeed, everyone else must fail”.

Sidenote: It occurs to me that this story illustrates the relative political and economic impotence of the bottom .99 of the top 1%, many of whom must be among the investors porked by Goldman Sachs.

Filed in Corporate Crime | | Comments (1)

Follow those Bishops!

Tuesday, March 18, 2014

The American Prospect reports that American Evangelicals are creeping toward adopting the Catholic Church's position on birth control. The writer, Amelia Thomson-Deveaux, speculate that should the Evangelical leaders go that route, that they may be able to herd their flocks more effectively than have the Bishops:

Given its pervasive use, it will be much more difficult to convince evangelicals that contraception carries as much of a moral stain as abortion. But if more evangelical leaders begin to conclude that birth control does, indeed, violate the “culture of life,” they may have a more receptive audience than their Catholic counterparts. American Catholics routinely ignore doctrinal commands; majorities favor abortion and gay marriage. But right-leaning evangelicals are primed, after years of anti-abortion activism, to reconsider the uncertain boundaries about where life begins. A small but vocal minority of evangelicals could turn contraception from a foregone conclusion into a potent political force.

via The American Prospect

Well, it's quite true that Catholics have a long and (I would say) proud history of ignoring the absurd dictates of the (alleged) celibates that lay down the law. But I would argue that in the end, evangelicals will be no different. Believe it or not, and it's often hard to believe, at bottom they are people too. It's easy enough to condemn abortion, because for the most part it's not your ox being gored, and, if push comes to shove you can put aside your scruples when it suits your purpose, have an abortion, and then return to the fold. After all, it's not like you have an abortion every day.

But you do take the pill every day. The same financial and social pressures that cause Catholics to ignore the Bishops will, eventually and fairly quickly, lead to the same result among the Evangelicals. I'd argue that the Evangelicals are playing with fire by even thinking about coming out against the pill. Catholics are perfectly comfortable ignoring the Bishops about birth control, but they don't stop there. They ignore them (probably were before birth control was legal) about divorce and about sundry other issues. Most importantly, they care not a whit how the Bishops want them to vote. The end result has been a loss of moral authority so far as the Bishops are concerned. If the Evangelical Bishop-equivalents make demands upon their flock that the flock resists, they too will lose the moral authority they currently, and inexplicably, exercise over their flocks, including their current ability to get them to consistently vote against their own interests. (And here, I must pause to beg pardon of the four legged sheep for comparing them to Evangelicals. ) This will be especially true among the lambs, as they enter their child bearing years. Like all the other young people in this country, they are facing incredible odds trying to make it financially, and having families of eight or nine children (or sexless lives) imposed upon them by the people who live comfortably off their tithes will not sit well for long. They will drift away, and we'll all be better off. So, here's hoping the Evangelicals will follow the Bishops down the path to irrelevance.

Filed in Religion | | Comments (0)

Evidence 101

Monday, March 17, 2014

As most politically aware people know, Paul Ryan recently blamed inner city poverty on “culture, in our inner cities in particular, of men not working and just generations of men not even thinking about working”. It has been pointed out, entirely fairly, that this is a clear signal to the racists in his party that Paul Ryan is on their side.

It is not often that I disagree with Paul Krugman, not being an economist, but I disagree with this statement from this morning's column about Ryan's statement:

Just to be clear, there’s no evidence that Mr. Ryan is personally a racist, and his dog-whistle may not even have been deliberate. But it doesn’t matter. He said what he said because that’s the kind of thing conservatives say to each other all the time. And why do they say such things? Because American conservatism is still, after all these years, largely driven by claims that liberals are taking away your hard-earned money and giving it to Those People.

via the New York Times

This is a very common trope among the punditocracy. When a politician (almost always a Republican) says something racist, or designed to appeal to racists, the pundits may condemn the statement, but often add a caveat to the effect, as Krugman does here, that there is no evidence that the speaker “is personally a racist”.

We'll, I'm not an economist, but I am a lawyer, and I say there is evidence that Ryan is a racist.

Krugman appears to be saying that we don't know what is in Ryan's heart of hearts, and unless we did, we cannot know whether or not he is a racist. That may be true on some sort of theoretical level, but it's not true in real life.

We can't listen in on someone's thoughts, or know what is in his heart of hearts. Only the mythical God can do that. The only “evidence” available to us to judge whether a person is a racist is his or her words, and his or her actions. While it is quite true that a person may say one thing and believe another, it is nonetheless also true that a person's words are one of the only two classes of evidence that we have to make a judgment on this, or any, issue.

So, do we have evidence that Ryan is a “personally a racist”? Yes, we do, right from his mouth, for he endorsed what is by any measure a racist canard. Does this prove he is a racist, either by a preponderance of the evidence (the civil standard) or beyond a reasonable doubt (the criminal standard)? Well, if, in a court of law, the question of whether a person was a racist were before a judge or a jury, this statment, standing alone, might not carrry the day, but it would certainly be admissible as evidence against Ryan. If you verbalize agreement with racist statements (Ryan also endorsed the views of the racist Charles Murray), then there is evidence that you are a racist. At some point, the burden shifts. Has the burden shifted to Ryan to prove he is not a racist? I'd say that since this is just the latest in a series of coded statements, that it most certainly has.

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Spring cometh, at least we hope

Friday, March 14, 2014

My wife and I are in the midst of our annual pilgrimage to the Boston Flower Show. Herewith a few pictures to give all of you other folks afflicted with Seasonal Affective Disorder hope.

 

Edited with BlogPad Pro

 

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None so blind..

Thursday, March 13, 2014

Here's an actual quote from this morning's New York Times:

Money laundering, market rigging, tax dodging, selling faulty financial products, trampling homeowner rights and rampant risk-taking — these are some of the sins that big banks have committed in recent years.

Now, some government authorities are publicly questioning whether such misdeeds are not just the work of a few bad actors, but rather a flaw that runs through the fabric of the banking industry.

via New York Times

Here's a made up quote that never appeared in the New York Times sometime in the 1950's, though I can't imagine why:

Money laundering, drug dealing, tax dodging, selling faulty financial products (protection rackets), shooting competitors-these are some of the sins that Vito Corleone Enterprises has committed in recent years.

Now, some government authorities are publicly questioning whether such misdeeds are not just the work of a few bad actors, but rather a flaw that runs through the fabric of the Mafioso.

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