Books read in 2020

Not much blogging going on here still, but here's my annual list of books read for 2020.

• Nicholson Baker, Baseless: My Search for Secrets in the Ruins of the Freedom of Information Act
• John Bolton, The Room Where It Happened: A White House Memoir
• Ben Buchanan, The Hacker and the State: Cyber Attacks and the New Normal of Geopolitics
• Susannah Cahalan, The Great Pretender: The Undercover Mission That Changed Our Understanding of Madness
• Michael Cohen, Disloyal: The True Story of the Former Personal Attorney to President Donald J. Trump
• Myke Cole, Legion versus Phalanx: The Epic Struggle for Infantry Supremacy in the Ancient World
• Libby Copeland, The Lost Family: How DNA Testing Is Upending Who We Are
• Barton Gellman, Dark Mirror: Edward Snowden and the Surveillance State
• Fiona Hill and Clifford G. Gaddy, Mr. Putin: Operative in the Kremlin (2012)
• James W. Johnson, Arizona Politicians: The Noble and the Notorious (2002)
• Gene Kim, The Unicorn Project: A Novel about Developers, Digital Disruption, and Thriving in the Age of Data
• Maria Konnikova, The Biggest Bluff: How I Learned to Pay Attention, Master Myself, and Win
• Talia Lavin, Culture Warlords: My Journey Into the Dark Web of White Supremacy
• Carol D. Leonnig and Philip Rucker, A Very Stable Genius: Donald J. Trump's Testing of America
• Ben Macintyre, The Spy and the Traitor: The Greatest Espionage Story of the Cold War (2018)
• Nancy MacLean, Democracy in Chains: The Deep History of the Radical Right's Stealth Plan for America (2017)
• H. Keith Melton and Robert Wallace, with Henry R. Schlesinger, Spy Sites of New York City: A Guide to the Region's Secret History (2020)
• Jefferson Morley, Morley v. CIA: My Unfinished JFK Investigation
• Bastian Obermayer and Frederik Obermaier, The Panama Papers: Breaking the Story of How the Rich & Powerful Hide Their Money
• Thomas Rid, Active Measures: The Secret History of Disinformation and Political Warfare
• Brad Smith and Carol Anne Browne, Tools and Weapons: The Promise and Peril of the Digital Age
• Mary Trump, Too Much and Never Enough: How My Family Created the World's Most Dangerous Man
• Robert Wallace and H. Keith Melton with Henry R. Schesinger, Spy Sites of Washington, DC: A Guide to the Capital Region's Secret History (2017)
• Anna Wiener, Uncanny Valley: A Memoir
• Isabel Wilkerson, Caste: The Origins of Our Discontents

Top for 2020: Copeland, Macintyre, Cahalan, Smith and Browne, Buchanan, Obermayer and Obermaier, Gellman, Rid.

I started the following books I expect to finish in 2021 (yes, I also said that about LeFeber and Wilson last year--I'm well in to LaFeber's book and thought I might finish before the end of the year, but had only read Wilson's intro so it's barely started):

William Dalrymple, The Anarchy: The East India Company, Corporate Violence, and the Pillage of an Empire
Walter LaFeber, Inevitable Revolutions: The United States in Central America (2nd edition)
Peter H. Wilson, The Holy Roman Empire: A Thousand Years of Europe's History

I've also pre-ordered and am looking forward to reading:

Nicole Perlroth, This Is How They Tell Me the World Ends: The Cyberweapon Arms Race (due to be published on February 9)

(Previously: 2019, 2018, 2017, 2016, 2015, 2014, 2013, 2012, 2011, 2010, 2009, 2008, 2007, 2006, 2005.)

Help Talk Origins bid for "Expelled"?

The assets of Premise Media, including rights to "Expelled," are going up for auction.  The Talk Origins Foundation plans to bid for the film, which includes production materials.  Their stated plan seems to be just to determine what interesting information might be in the production materials or raw footage and make that known, not, as I've suggested, make an "MST3K"-style version, or a version that points out and corrects the errors.

UPDATE (June 28, 2011): The winning bid for "Expelled" was $201,000.  My guess is that the film would only be worth that much to somebody who plans to promote it as-is without any significant re-editing, and thinks they can extract at least that much value out of it--perhaps via charitable deduction by giving it to a creationist organization.  There was a bidding war at the end between two bidders that drove the price up this morning from $43,000 (last night's high bid) to $201,000, which caused the bid to be extended 10 minutes beyond it's scheduled end time in one or two minute extension increments.  It was at $122,000 at the original auction end time, so that last $79,000 increase occurred in the last 10 minutes.

Challenge for Harold Camping followers

On May 22, 2011, we will either see that many Christians have disappeared and we've been left behind, or that the claims of billboards like this are completely false.  If any individual or group of Camping followers have a strong belief that the former is the case, I challenge you to sign an agreement to transfer to me $100,000, effective May 22, 2011, in return for one of two things.  In the case that you have, in fact, been raptured, I promise to use those funds to evangelize in support of your beliefs to try to save as many of those left behind as possible.  In the far more likely case that you remain behind, I promise not to engage in public ridicule and humiliation of your nonsense for a year.  So it's a win-win.  Any takers?

UPDATE (May 20, 2011):  Via Tom McIver:  "Camping has a very idiosyncratic scheme: basically amillennial, and a hybrid of his own Bible numerology and a variant of the World Week (world lasts 6,000 yrs after Creation) framework. Camping puts Creation at 11,013 BC, Flood at 6,000 + 23 yrs later at 4,990 BC, Christ's birth 7 BC, and end of Church Age / beginning of Tribulation 13,000 yrs after Creation. 7,000 yrs after Flood (13,000 + 23 yrs after Creation) is 2011. 1988--13,000 yrs after Creation--was beginning of Tribulation (and also the year Camping left the established church, deciding it was heretical and that all churches had been taken over by Antichrist). 2011 is 23 yrs after 1988 (previously, Camping had predicted a shorter Tribulation ending in 1994). May 21 is Rapture and Judgment Day, world is destroyed Oct 21." And: "Camping also made much of 1948 (founding of Israel), with next Jubilee supposedly 1994. He has much more numerology as well. Interestingly, he doesn't focus on political leaders or natural disasters (although I think the news reports of catastrophes and wars has increased his following)."

Would you like some Scientology with your libertarianism?

A few years ago, I noted that popular and wealthy libertarian investment writer Douglas Casey was making tacit references to L. Ron Hubbard doctrine in his writing.  For example, I noted that he wrote (in an article titled "The New Praetorians" in the March 1996 issue of Liberty magazine):

I have long believed that about 80% of the human race are basically people of good will.  About 17% can be classified as potential trouble sources--PTS's--who will basically bend with whatever wind prevails.  Only 3% are actively destructive sociopaths.  But that 3% tend to gravitate toward politics, the military, the media, the financial system, and other centers of power."

I noted that the term "potential trouble source" (PTS) derives from Hubbard, who also identifies a similar percentages of the population into the categories of PTS and "suppressive persons" (SPs).  In a letter to Liberty which they refused to publish, I noted:

L. Ron Hubbard wrote much about "potential trouble sources" (PTS's) and "suppressive persons" (SP's) whom he claimed made up 17.5 and 2.5 percent of the population, respectively (see Jon Atack, A Piece of Blue Sky: Scientology, Dianetics and L. Ron Hubbard Exposed, 1990, Carol Publishing Group. p. 155).  Hubbard's views on PTS's and SP's are set out at length in his book An Introduction to Scientology Ethics, where his definitions of crimes and suppressive acts make it clear that he is no friend of liberty.  The Church of Scientology has a long history of harassment and barratrous litigation against its critics which continues to this day on the Internet (see Spy, February 1996; Wired, December 1995; Skeptic, June 1995; and the Internet resources linked from http://www.thecia.net/~rnewman/scientology/home.html).

I've further noted that Casey was on the financial committee of Libertarian Party presidential candidate Harry Browne in 1996, along with Michael Baybak.  Baybak is a Scientology OTVIII who played a major role in a sidebar story to Time magazine's famous 1991 "Cult of Greed and Power" article about Scientology, titled "Mining Money in Vancouver."

Finally, I noted that a Scientology-critical website that publishes Scientology service completions shows multiple Scientology courses completed by a Douglas Casey, who may well be the same libertarian investment writer.

My objection is not that Casey is a Scientologist, though I think it is legitimate to criticize anyone who knowingly supports the unethical activities of the Church of Scientology.  Rather, my objection is to his making unfounded claims based on Scientology and Hubbard doctrines without being open about his sources.  It's a common tactic by the Church of Scientology and other cults to use front groups and try to conceal their nature until after they've persuaded someone to participate in a program--the Unification Church calls it "heavenly deception."  I've also wondered to what extent Scientology principles are used in Casey's investment advice, and whether Casey has promoted investment in Scientology-related companies, and whether there were any other Scientologists on Browne's financial committee, but I haven't seen any evidence of those things.

A recent interview with Casey on his own website points out that he is something of an apologist for the Church of Scientology and Hubbard:

L: It actually sparked something of a religion for a time. People were adopting Heinlein's Martian philosophy and starting "crèches" around the country. Do you know if it's true that L. Ron Hubbard, another SF author, founded the church of Scientology as a result of Heinlein betting him he couldn't do it and make it stick?

Doug: There's no way to know the actual facts, of course, other than Hubbard started researching Dianetics just after World War II. But they were friends, after all, and both SF writers. The model for the character of Michael Valentine Smith was supposed to have been Hubbard – there were supposed to be a lot of similarities between the two. The religion racket can be an easy way to make a million dollars, but I don't think that was on Hubbard's mind when he founded Scientology. A surprisingly large percentage of the human potential movement was a direct result of his work. He was sincere in promoting it, notwithstanding a lot of negative PR surrounding the subject.

Hubbard's sincerity may be legitimately questioned by anyone familiar with his biography.  And I'm not sure "a surprisingly large percentage of the human potential movement" being inspired by Scientology (e.g., est, Landmark Forum, Eckankar, etc.) is to its credit.

Last month, the website The Daily Bell published an interview with Casey titled "Doug Casey Revisits the Greater Depression" in which Casey referred to the Roman emperor Tiberius as "a degraded being," another use of Scientology terminology.  This prompted a commenter who identified as an ex-Scientologist to ask if Casey was a Scientologist, and another commenter to point to my website on Casey.  This prompted a response from The Daily Bell:

Doug Casey is the author of numerous hard-money/free-market best-sellers and has established himself as a reliable and prominent libertarian-oriented commentator over years and years.

He may or may not have Scientology connections (we have no idea) but unlike DC we don't see any overt or even covert evidence of specific dogma infecting his commentary - which is concise, to-the-point and in-line with the free-market message that he's been purveying for decades.

Scientology is alleged to be a "bad church." But modern Western governments inflate economies to ruination, cost tens of millions pensions and savings, freely wiretap, prosecute and imprison millions, foment endless authoritarian regulations and illogical laws, mandate poisonous vaccines, engage in punitive taxation and serial warfare, etc. ...

We think we would be more concerned if Casey were an apologist for modern Western regulatory democracy rather than a courageous and principled opponent of it. We are grateful for his voice and message, especially during the 20th century when very few spoke out.

Again, we have no knowledge of any affiliation of his with Scientology, but we do know what we can read on the printed page. We believe that Casey has contributed greatly to an understanding of free-markets, especially in the 20th century when he emerged courageously as a prominent spokesperson at a time when there were very others.

But let us reverse the issue. What is the agenda of those who are bringing up a Scientology link? Casey doesn't mention it. His arguments are the same as they have always been - lucid, elegant and inspiring.

In fact, it seems to us a despicable canard - and an obscene red-herring - to read an honest interview freely given and then drag someone's alleged religion into it. It is like questioning one's veracity simply because he or she is Jewish or Roman Catholic.

Please respond to what is on the page, not to some malicious or false gossip about someone's supposed religious affiliation with a church that is alleged by some to do bad things - with many accusations coming from Western governments such as France, Germany or the United States.

I've submitted the following response comment to The Daily Bell:

Since I am here accused of "some malicious or false gossip about someone's supposed religious affiliation with a church that is alleged by some to do bad things" and of "a despicable canard - and an obscene red-herring" and asked "What is the agenda of those who are bringing up a Scientology link?" I would like to respond.

My criticism of Casey is not for being a Scientologist, but for injecting Scientology doctrine and claims from L. Ron Hubbard into his writing without being explicit or open about it.  This criticism is neither malicious nor false, but is backed up with specific citations.  Further, the Church of Scientology is not merely "alleged by some to do bad things," it has been caught doing so, which has been repeatedly and thoroughly documented (e.g., its breaking into numerous government offices and engaging in wiretapping, its attempt to frame author Paulette Cooper for a bomb threat which led to her arrest, its illegal covert operations against the mayor of Clearwater, FL, its attempt to cover up its responsibility in the death of Lisa McPherson, its formal policy of harassment using the legal system, and on and on).  Many of the documents that expose Scientology's involvement in such activities were seized in FBI raids in the mid-1970s or have been leaked by ex-members and are available on the Internet at locations such as http://shipbrook.com/jeff/CoS/index.html, http://www.xenu.net/, and http://www.cs.cmu.edu/~dst/Secrets/index.html

This week will offer an opportunity for many to hear Doug Casey speak at the FreedomFest in Las Vegas, July 7-11 at Bally's/Paris.  If you have some familiarity with Scientology and the writings of L. Ron Hubbard, listen carefully, and let me know if you hear anything of interest.

The market for creationism

Todd Wood of the Center for Origins Research at Bryan College has gotten around to doing what I haven't done, updating my analysis of the market for creationism that I did in early 2007.  He confirms some of the trends I noted, such as that the market for creationism has been growing and is dominated by Answers in Genesis.  His update goes further, and includes a comparison to the National Center for Science Education, noting that he market for criticism of creationism has grown along with the market for creationism.  He also points out that the groups involved got a boost revenue in 2005 during the Dover trial, that the AiG split from Creation Ministries International doesn't appear to have hurt AiG, and that "Godquest," formerly known as Creation Science Evangelism, the Hovind organization, is the #3 creationist organization for revenue behind AiG and the Institute for Creation Research.

Wood reports the following numbers for recent years:

2003:
$14.6 million market
AIG: 61.6%
ICR: 30.6%
*CEM: 4.2%
*CRS: 1.7%
*CM: 1.6%
*CSC: 0.4%

2004:
$15.8 million market
AIG: 65.7%
ICR: 26.8%
CEM: 3.1%
CRS: 2.0%
CM: 1.9%
CSC: 0.4%

2005: **
$10.8 million market
AIG: 50.4%
ICR: 40.3%
CEM: 5.1%
CRS: 1.0%
CM: 2.5%
CSC: 0.6%

2006:
$21.3 million market
AIG: 64.1%
ICR: 30.9%
CEM: 2.2%
CRS: 1.1%
CM: 1.3%
CSC: 0.3%

2007:
$25.6 million market
AIG: 69.5%
ICR: 27.6%
CEM: no data
CRS: 1.2%
CM: 1.1%
CSC: 0.3%
CMI: 0.3%

2008:
$33.3 million market
AIG: 68.2%
ICR: 26.2%
CEM: no data
Godquest: 2.8%
CRS: 0.7%
CM: 1.0%
CSC: 0.2%
CMI: 0.9%

Check out Todd Wood's post for more details.

Who's behind the financial meltdown?

The Center for Public Integrity, an organization I support, has just published the results of an investigation into the roots of the recent economic crisis and the major players involved:

The top subprime lenders whose loans are largely blamed for triggering the global economic meltdown were owned or backed by giant banks now collecting billions of dollars in bailout money — including several that have paid huge fines to settle predatory lending charges. The banks that funded the subprime industry were not victims of an unforeseen financial collapse, as they have sometimes portrayed themselves, but enablers that bankrolled the type of lending threatening the financial system.
...

According to the analysis:

• At least 21 of the top 25 subprime lenders were financed by banks that received bailout money — through direct ownership, credit agreements, or huge purchases of loans for securitization.

• Nine of the top 10 lenders were based in California, including all of the top five — Countrywide Financial Corp., Ameriquest Mortgage Co., New Century Financial Corp., First Franklin Corp., and Long Beach Mortgage Co.

• Twenty of the top 25 subprime lenders have closed, stopped lending, or been sold to avoid bankruptcy. Most were non-bank lenders.

• Eleven of the lenders on the list, including four recipients of bank bailout funds, have made payments to settle claims of widespread lending abuses.

Check out the full report.

Obama's $100M proposed budget cut, in perspective

A nice visual depiction of what it amounts to.



(Via The Agitator.)

Nassim Taleb's ten principles for a black-swan-proof world

At the Financial Times (with more detail for each item):

1. What is fragile should break early while it is still small.

2. No socialisation of losses and privatisation of gains.

3. People who were driving a school bus blindfolded (and crashed it) should never be given a new bus.

4. Do not let someone making an “incentive” bonus manage a nuclear plant – or your financial risks.

5. Counter-balance complexity with simplicity.

6. Do not give children sticks of dynamite, even if they come with a warning .

7. Only Ponzi schemes should depend on confidence. Governments should never need to “restore confidence”.

8. Do not give an addict more drugs if he has withdrawal pains.

9. Citizens should not depend on financial assets or fallible “expert” advice for their retirement.

10. Make an omelette with the broken eggs.

(Via Will Wilkinson.)

The banker who said no

A banker who resisted the urge to invest in toxic assets during the boom is cleaning up during the bust. Andy Beal of Beal Bank in Plano, Texas "virtually stopped making or buying loans" from 2004 to 2007, leading people around him to think he was crazy. Now he's buying up loans at fire sale prices and has tripled his bank's assets to $7 billion in the last 15 months, and without government bailout money.

Beal is also known for high-stakes poker games against the top poker players in the world, in which he has lost more than he's won, but occasionally taken for a lot of money (including an $11 million win in one day).

Using the stimulus to accelerate the downturn

$10.1 billion in federal stimulus money has been released to the states by the Department of Housing and Urban Development, and Arizona is receiving more than $150 million of that. And what is that money to be used for, in a state where there are tens of thousands of homes for sale with few buyers (50,000+ in Maricopa county alone)?

Building more housing.

The Arizona Republic reports that

Millions of dollars more will go to state and local programs. That includes $32 million to begin construction of affordable rental housing, $22 million to prevent homelessness and $12 million to build or repair public housing across the state.

To the extent this money is used to build new homes, as opposed to repairing deteriorating ones, it's just going to accelerate the decline of home prices, putting more homeowners underwater and providing them with more incentive to walk away from their mortgages. Now, I think that a further decline in home prices is inevitable, no matter what the stimulus money tries to do, but it's ridiculous to throw additional money at accelerating that process. It makes about as much sense as using federal stimulus money to give grants to investment bankers to develop more complex collateralized debt obligations.

Now, this isn't actually quite that bad, since it does apparently focus on some particular communities--a third of the money is for Native American communities that didn't get a housing bubble of speculative buying. Some of it is also for families that need short-term help with utility bills, rent, or other expenses (something that the Modest Needs Foundation has been doing for years with private donations). And Tucson is apparently using it to improve energy efficiency of existing public housing units. Those are all much more reasonable uses of the money than building more houses.

Best Nigerian 419 scam ever

I just read this email this morning, which has to win a prize for the best Nigerian 419 scam I've ever seen:

Reply-To:
From: "Mrs. Mary S. Derrick"
Subject: Stop Contacting those people !!!
Date: Fri, 27 Feb 2009 04:43:50 +0100
X-Priority: 3
X-MSMail-Priority: Normal
X-Mailer: Microsoft Outlook Express 6.00.2600.0000
X-MimeOLE: Produced By Microsoft MimeOLE V6.00.2600.0000
To: undisclosed-recipients:;
X-NetStation-Status: PASS

Attn: My Dear,

I am Mrs Mary Susan Derrick, I am a US citizen, 48 years Old. I reside here in New Braunfels Texas. My residential address is as follows. 108 Crockett Court. Apt 303, New Braunfels Texas, United States, am thinking of relocating since I am now rich. I am one of those that took part in the Compensation in Nigeria many years ago and they refused to pay me, I had paid over $20,000 while in the US, trying to get my payment all to no avail.

So I decided to travel down to Nigeria with all my compensation documents, And I was directed to meet Mr. Henshaw I. Anderson, who is the member of COMPENSATION AWARD COMMITTEE, and I contacted him and he explained everything to me. He said whoever is contacting us through emails are fake.

He took me to the paying bank for the claim of my Compensation payment. Right now I am the most happiest woman on earth because I have received my compensation funds of $1,500,000.00 Moreover, Mr Henshaw I. Anderson, showed me the full information of those that are yet to receive their payments and I saw your name as one of the beneficiaries, and your email address, that is why I decided to email you to stop dealing with those people, they are not with your fund, they are only making money out of you. I will advise you to contact Mr. Henshaw I. Anderson

You have to contact him directly on this information below.

COMPENSATION AWARD HOUSE
Name : Mr. Henshaw I. Anderson
Email: henshawanderson@sbcglobal.net
Phone: +234 802 739 4935

You really have to stop dealing with those people that are contacting you and telling you that your fund is with them, it is not in anyway with them, they are only taking advantage of you and they will dry you up until you have nothing.

The only money I paid after I met Mr. Henshaw I. Anderson was just $580 for the paper works, take note of that.

Once again stop contacting those people, I will advise you to contact Mr Henshaw I. Anderson so that he can help you to Deliver your fund instead of dealing with those liars that will be turning you around asking for different kind of money to complete your transaction.

Thank You and Be Blessed.

Mrs. Mary Susan Derrick.

She's being so honest about those other Nigerian scammers that ripped her off, so surely she must be honest about this compensation fund. The sad thing is that those who have been ripped off multiple times already will probably fall for this one, too.

Chase Bank makes stupid offers, and loses money by failing to live up to them

I recently wrote about how Chase Bank's inflexible systems just cost it money by not allowing me to make a $100 payment to my mortgage account to make up an erroneous underpayment. Instead, I had to make an entire additional payment, depriving them of a significant amount of future interest.

In January, I received an offer from Chase Bank to open a checking account with them, with a minimum deposit of $100. After I set up direct deposit, within ten business days of the first deposit they would deposit $125, which would be mine to keep so long as I left the account open and receiving direct deposits for at least six months.

I asked an online banker whether there was any minimum amount that had to be direct deposited, and was told no. I decided to set up the account in person at a branch near my office, and again asked whether there was any minimum direct deposit. The banker told me no, there was no minimum--if I wanted to deposit only $1 per paycheck, that would be fine.

As I have no interest in using Chase Bank as my primary bank--I'm quite happy with a regional bank that is one of the top-rated places to work in the country and has demonstrated reliability to me repeatedly over several decades--I decided to maximize my return on this otherwise non-interest-earning account by minimizing my deposits. My employer provides a convenient way for me to control my own direct deposits into up to three different banks, so I added a new direct deposit of $0.01 per paycheck into my new Chase Bank account.

The first $0.01 went in on January 15. On January 30, no $125 had been deposited, so I sent an online email inquiry asking when I could expect to see it. A response a couple days later told me I needed to call in to get an answer to my question, so I dialed the toll-free number, waited on hold, and finally got to a person who told me I needed to wait four to six weeks after the first direct deposit.

My second $0.01 went in on January 30. My third $0.01 went in on February 13. Still no $125.

Today, I got another $125 offer from Chase Bank, which prompted me to dig up my application materials and see that they promised my $125 would be deposited within ten business days, not four to six weeks. So I called and left a message for the banker at my branch, I sent another online inquiry asking whether Chase Bank is going to remedy its failure to honor its offer, and called in to the toll-free number again. I described the issue to my "telephone banker," and he asked for my account information. When he brought up my account, he asked if the $0.01 deposits were pre-authorizations for direct deposit, and I told him no, those are the deposits--I was told multiple times that there was no minimum deposit, and there is nothing in the written offer that mentions a minimum deposit. He was unable to solve the problem, and said he would have to send it to be researched, and I would hear back within a couple of days.

If they didn't want to honor the offer, they shouldn't have made it in the first place. By failing to live up to it, they're costing themselves even more money. It's surprising to me that this is probably the strongest of the major banks in the U.S., and the least likely of the majors to end up costing the U.S. Treasury money in the long run from the TARP's preferred investments ($25 billion put into Chase so far).

UPDATE (February 18, 2009): I received a voice mail from Chase Bank stating that the promised $125 will be deposited into my account within the next two weeks. My real-life banker left me a voice mail saying that the issue was that their system doesn't automatically count direct deposits for issuing an award if they are less than $1. So they do intend to honor their offer, it will just take longer since I used the system in a way they apparently didn't anticipate (or did anticipate with the same reasoning companies use with rebates).

UPDATE (February 25, 2009): My $125 was deposited yesterday.

How Chase Bank's inflexibility is costing it money

My mortgage has been purchased by Chase Bank a couple of times (after the first time, I refinanced with another bank and then Chase bought my mortgage from them), and they're my current lender. I pay extra principal with every payment, usually about 30% more. For my February payment, I decided to reduce the extra principal a bit, for various reasons including keeping a bit more cash on hand in current economic conditions.

Unfortunately, I made a $100 error in my payment. Rather than paying an extra $40.37, I underpaid the monthly payment by $59.63. I learned my mistake when I received my mortgage statement, indicating that my entire payment was in "suspense funds received" and had not been applied to my mortgage at all.

I immediately called Chase. Even though it was an hour before their call center closed, I was unable to get to a human being. Instead, after being told I was being transferred to customer service, I got an automated message saying that my call could not by completed. I looked for online options for payment, but the Chase website referred me instead to their phone-based "FastPay" system. The "FastPay" system by phone charges a $15 fee (which the phone system says can be avoided by using the online payment system) and only allows making a full payment.

I tried again the next morning, and got through to Tonja, a customer service rep who told me that I could only make a full payment through the phone (not the $100 I wanted to pay), but said if I connected an external bank account online, I could make the payment that way, and as soon as the extra $100 was received, the payment would be applied as normal. I'm also well within the 15-day grace period for a payment, so I don't have to worry about late fees.

Online, I searched through some counter-intuitive menu options--within the mortgage account, payment options send you to the page about FastPay over the phone--I finally found that from the front page I could get to an option to connect an external account. I started the process, and learned that my bank could not be connected instantly by putting in my online banking authentication information, but had to use a method of verification where Chase puts two small deposits in my account and I come back later and input those amounts back to Chase to prove that it's my account (or at least that I have access to it). It then allowed me to attempt the instant verification method, despite its previous claim that my bank didn't accept it, but that failed (and I probably shouldn't have tried--Chase shouldn't have my authentication credentials to another bank). It then said it would take up to two business days for these deposits to go through.

The next day, my bank showed me that there were two pending deposits from Chase (yet another cost Chase is incurring), so I went back to the verification page and entered those amounts. Chase's website informed me that because those deposits had not been made yet, I was not allowed to verify the amounts yet. Dumb design. I tried again later in the evening, and my verification was accepted. Now I went to the page to make a payment, only to find that once again, the only option is to make an entire payment. Contrary to what Tonja told me, I cannot pay just an additional $100, because there is an outstanding payment that hasn't been made, and my $1100 sitting in "suspense funds" doesn't count and can't be used.

Well, I've got the money in savings, so I decided that if Chase is going to make things so difficult, I'm going to go ahead and make a full extra payment and deprive them of a little more interest over the life of my loan, in addition to the overhead costs they've incurred through this episode. The website told me it would take two business days to process, so it will be applied on February 11--still during the grace period. But now I still am not sure that the $1100 will be applied to principal reduction, so I called in again and spoke with Kim. I explained what has happened, and pointed out to her that Chase is losing money from its inflexibility, and she offered to move $100 from my January extra payment to February so that I could cancel the additional payment. I thanked her for the option (which I would have needed to take if I didn't have the money to spare), but declined, since that would result in an increase in interest. I asked if she could verify that the $1100 would be applied correctly, and she suggested that I call in again after I see online that the new payment is applied--which will incur yet further costs to Chase.

This is a nice demonstration of how an inflexible payment system doesn't deal well with partial payments can cost a company money and customer goodwill.

Credit Suisse helps solve the toxic debt problem

In a fiendishly clever plan, Credit Suisse Group AG has found a way to reduce its exposure to toxic securities and transfer risk off its balance sheets--it's paying senior executives' bonuses with them.

Managing directors and directors, the two highest ranks at the Zurich-based company, will be paid year-end bonuses in its most illiquid loans and debt. Those assets will be transferred to a "Partner Asset Facility," and those directors will receive shares of ownership in the facility. Those assets will make semi-annual payments to the owners, with the full value only to be known as the assets mature or default.

Bank slogans as signals to depositors

The traditional bank lobby, filled with expensive marble and and furnishings, is designed to signal to the customer that the bank is stable and isn't going anywhere.

Some recent failed banks have used advertising slogans also designed to inspire confidence, such as IndyMac's "you can count on us."

Others, however, should perhaps have been recognized as clues of impending problems:

Dexia: "The short term has no future."
Fortis: "Here today, where tomorrow?"
Countrywide: "[A] lender that actually finds ways to make loans."
Fannie Mae: "As the American dream grows, so do we."
Washington Mutual: "Whoo hoo!"

(Via The Economist, October 2, 2008.)

Quarterbacks, teachers, and financial advisors

I'm generally quite averse to watching sports, let alone reading about them. But I did read Michael Lewis's Moneyball at one sitting and just read Malcolm Gladwell's "Most Likely to Succeed" in the December 15 issue of The New Yorker.

Gladwell's article looks at examples of jobs where there are few, if any, available measurements of performance available before hiring that correlate with success in the position. The performance of college quarterbacks doesn't track their success in the NFL (apparently due to factors such as the sizes of players and the types of offensive formations used), and none of the items on a resumé seem to predict the success of teachers or financial advisors.

Yet quality of teaching is a huge factor in student educational success (as I've previously noted on this blog with regard to an Economist article about a McKinsey & Co. study that compared education across OECD nations). As The Economist article I referenced noted, "Studies in Tennessee and Dallas have shown that, if you take pupils of average ability and give them to teachers deemed in the top fifth of the profession, they end up in the top 10% of student performers; if you give them to teachers from the bottom fifth, they end up at the bottom. The quality of teachers affects student performance more than anything else."

Gladwell suggests that we should find a way to hire more teachers, have them apprentice with demonstrably successful teachers, and weed out the bad ones. But the most successful nations do not follow Gladwell's suggestion of increasing the number of new teachers, instead doing nearly the opposite. Again quoting The Economist:

Nor do they try to encourage a big pool of trainees and select the most successful. Almost the opposite. Singapore screens candidates with a fine mesh before teacher training and accepts only the number for which there are places. Once in, candidates are employed by the education ministry and more or less guaranteed a job. Finland also limits the supply of teacher-training places to demand. In both countries, teaching is a high-status profession (because it is fiercely competitive) and there are generous funds for each trainee teacher (because there are few of them).

South Korea shows how the two systems produce different results. Its primary-school teachers have to pass a four-year undergraduate degree from one of only a dozen universities. Getting in requires top grades; places are rationed to match vacancies. In contrast, secondary-school teachers can get a diploma from any one of 350 colleges, with laxer selection criteria. This has produced an enormous glut of newly qualified secondary-school teachers—11 for each job at last count. As a result, secondary-school teaching is the lower status job in South Korea; everyone wants to be a primary-school teacher. The lesson seems to be that teacher training needs to be hard to get into, not easy.

Gladwell's suggestion of apprenticeship, however, fits with the McKinsey & Co. study suggestion of improving teacher training and encouraging good teachers to share information and lesson plans with each other, as well as having top teachers provide oversight to teacher training.

Phoenix-area foreclosures

Yesterday the Arizona Republic had an interactive foreclosure map and document of data (PDF) which includes the monthly foreclosure statistics for the last eighteen months:

April 2007: 553
May 2007: 475
June 2007: 579
July 2007: 676
August 2007: 806
September 2007: 1,093
October 2007: 936
November 2007: 1,344
December 2007: 1,617
January 2008: 2,052
February 2008: 2,249
March 2008: 2,365
April 2008: 2,969
May 2008: 3,402
June 2008: 3,717
July 2008: 4,104
August 2008: 4,013
September 2008: 4,378
October 2008: 4,587

Total foreclosures per year:
2004: 4,444
2005: 1,370
2006: 1,070
2007: 9,920
2008: 33,836 through October

This is not good news for a state where construction and real estate provide a large share of the employment opportunities. It is good news for those who do not own homes and have been waiting to buy at lower prices--it looks like next year will offer significantly better prices than this year, but there are still a lot of delusional sellers out there asking way too much. (There's a two-bedroom, two-bathroom house on a half acre in a quiet neighborhood near us that looks very nice, but is probably worth about half of the $429,000 asking price, based on comparable sales and the current downward trend. Zillow says it's worth $277,000.)

See their summary article, which has links to the map and other documents.

Peter Schiff vs. Art Laffer, Tom Adkins, Mike Norman, Ben Stein, Charles Payne

Gee, who was completely full of crap?



I love the captions--Dow over 13,000 and Ben Stein is saying now's the time to buy... Merrill Lynch a buy at $76, Charles Payne says buy Bear Stearns... they were delusional idiots.

Schiff was right about everything except inflation and gold (at least so far--deflation looks like a bigger immediate risk than inflation). He was saying to buy gold at $830 in late 2007; it's at about the same point today, but if you had taken his advice you could have sold higher earlier this year, and at least you wouldn't have taken any real losses.

(Hat tip to Brett Vickers for the video.)

Phoenix-area foreclosures and preforeclosures

October set a new record of 8,503 notices of trustee's sales in Maricopa County, of which 900 were duplicates of previous notices. The number of pending foreclosures has dropped, as Bank of America cancelled numerous foreclosures after acquiring Countrywide. 3,516 foreclosures were cancelled in October, about double September's rate.

At the end of October, there were 27,874 pending foreclosures in Maricopa County. (Back in the summer of 2005, the total inventory of homes for sale was around 5,000. Today it's around 50,000 34,000, which obviously has the potential to go much higher.)

Trustee's sales hit 4,587 in October, up from 4,378 in September.

(Via azcentral.com.)

UPDATE (November 26, 2008): Updated the inventory number to October 21, 2008, which is down from a peak of over 50,000, but which has been climbing back up from a recent low of just under 26,000 at the beginning of August 2008.

The financial crisis via charts and graphs

Colorado College political science professor David Hendrickson has put together a nice resource at his new "Cause for Depression" blog:

Think of it as a cartoon guide to the ongoing earthquake in the world of high finance. Through pictures, we will try to understand the dimensions of the current financial crisis--its origins and causes, its likely consequences, its potential remedies.

The "Labels" in Blogspot allow us to construct a chapter organization that the reader should approach as she would a book. By hitting on the topics under "Labels," the presentation will appear in an orderly fashion.

Blogspot is not made for blogbooks, though it is easily adaptable to that purpose. Ordering within each of the chapters depends on time of posting, so my time stamps are not necessarily indicative of the actual time the material was posted. I have altered them to allow for an orderly presentation. If it seems to matter, I will post the date of composition and updates in the entry. The initial foray of posts was made in mid-October 2008.

In seeking to understand the crisis, we need to begin with the credit mechanism. We are living through the bust of one of the greatest credit cycles of all financial history. In order get a handle on the seriousness of the bust, we must register the mania that fed the boom.

We’ll first look at some measures indicative of the financial turmoil. Then we examine general conditioning circumstances: the role of the housing boom and bust, the general growth of credit market debt, the explosion in derivatives, all of which are relevant in considering how much insolvency exists within the financial system. That question--are our financial institutions insolvent?--in turn is vital in assessing the wisdom of various bailouts and rescues, the opportunity costs associated with the government-mandated maintenance of the "FIRE" sector (Financials, Insurance, Real Estate), and how the global imbalances that have marked the last fifteen years are likely to change. I conclude with some lessons. The final entry is a collection of paper topics for interested students to consider.

Where possible, I’ve tried to indicate where readers can find updated sources of information for the material presented here. Given my harsh view of "derivatives," I'm obliged to say that this compendium is almost entirely derivative. I’m deeply indebted to my blogroll for ideas, inspiration, and many of the charts contained herein.

So, if you've read thus far, go now to "Financial Stress" in the "Labels" section.

(Via Financial Armageddon.)

The amount of public and non-public U.S. debt will inevitably come back down, one way or another. I just hope we don't end up as a third-world nation (or worse yet, multiple third world nations) in the process.