Category Archives: Econ & Money

I found this story buried deep, deep, inside the New York Times's business section to be Really Odd.

4 Major Banks Tap Fed for Financing: The country’s four biggest banks announced yesterday that they had each borrowed $500 million from the Federal Reserve, taking an unusual step to ease the credit squeeze that has been rattling the financial system for weeks.

The banks — Citigroup, Bank of America, JPMorgan and Wachovia — said that they had tapped the so-called discount window of the Federal Reserve Bank of New York, five days after the central bank lowered the rate and loosened its collateral standards in an effort to inject more money into the credit markets.

The coordinated moves were seen as largely symbolic, aimed at removing the stigma of borrowing from the discount window, which is regarded as a last resort for financial institutions. All four banks can borrow money more cheaply elsewhere, and all said they had “substantial liquidity.”

For starters, where is this cheaper money that's available on demand? I'm assuming it's the LIBOR rates, which are in fact showing a declining yield curve, running from from 5.5% for one month to 5.07% for one year.

More to the point, will anyone be impressed by this behavior?

I had the same cynical reaction as Charles R. Geisst, a financial historian at Manhattan College whom the Times quotes as saying, “The banks are circling the wagons. Somebody’s got a problem.”

Should that headline above have been, “Banks Engage in Economically Irrational Behavior in Order to Remove Rational Prejudices Held by Rational Bankers?”

Redfin is another example of the Internet's destructive effect on low-value intermediation. It's an online brokerage service that kicks back 2/3 of the agent's 3% commission to the seller. (I suppose the buyer's agent still gets the usual 3%? Why?)

[[Update: There's a much different and no doubt better explanation of how this works in the first comment below.]]

So far Redfin is only available in Baltimore, Boston, Los Angeles, Orange County, San Diego, San Francisco, Seattle, and Washington DC, but unless some states have Realtor-protective legislation banning kickbacks like this I think things like this should be everywhere soon.

Of course, it wouldn't shock me to learn we had a Realtor-protective law here in Florida, given the power of the Realtors. An example of their power is that the newspapers capitalize the “R”. They don't do that for “lawyers” or “attorneys”.

This is very funny. And it isn't.

The Laboratorium: Today's Telemarketing Fun

Can I speak to Mr. and Mrs. Grimmelmann?

Speaking …

I'm calling from the [name omitted] Sweepstakes, and you've been entered in a drawing to win $25,000 or a trip to Hawaii. The sweepstakes is also available to cardholders with a Visa, Mastercard, or American Express. Do you have one of those?

Yes. When did you say the trip to Hawaii is?

The winners will be announced August 31.

Oh, I'm sorry. August 31 isn't good for us. Is there another time we could take the trip?

No, you'll find out on August 31 whether you've won.

Okay, then. We'll take the money instead. Now, you'll put that directly on the credit card, right?

I tell you what. We'll get in touch with you if you win, okay?

James ends by commenting, “I’m getting better at this.”.

Now I certainly emitted a number of evil chuckles at this one. And a chunk of me wishes I had the reflexes to do something like this in real time.

But the problem is, that horrible person on the other end of the phone is a wage slave. They are only a tiny bit responsible for the call; the whole thing is orchestrated by someone better paid. Maybe they could find something else to do, but maybe they can't.And I remember the time that phone sales was the only summer job I could find with my newly minted high school diploma. That would be shortly before I discovered people would pay you money to do programming even if you had no formal training. I found something else to do. I am lucky.

So I laughed. Then I felt guilty.

Speaker Pelosi's blog carries a bit of news designed to shock us about the terrible management over at NASA. It seems they've lost $94,000,000 in stuff.

But read on to the end please before you get all worked up about this one.

First, here's what the Speaker's office, echoing the GAO, had to say:

This week, the General Accountability Office (GAO) released a report requested by Science Committee Chairman Bart Gordon on the National Aeronautics and Space Administration’s (NASA) lack of monitoring and control over their $35 billion of property, plant, and equipment. NASA has reported a loss of over $94 million in equipment in the last ten years.

The GAO noted that they have reported on NASA’s lack of property control “for years” and that NASA themselves undertook an internal study but “instead of tightening controls, as recommended by the agency’s 2002 equipment loss study, when faced with equipment losses, NASA raised its threshold for tracking and controlling nonsensitive equipment items from $1,000 to $5,000. This essentially eliminated control over all nonsensitive equipment costing less than $5,000.”

And here are the two worst examples they found, both involving lost laptops:

• “My wife needed a computer at home to perform her work as a real estate broker so I checked one out from the surplus stock available. I turned the computer back in when she was done using it but never received a receipt.”
• “This computer, although assigned to me, was being used on board the International Space Station. I was informed that it was tossed overboard to be burned up in the atmosphere when it failed.”

Now, I'll grant you that the first is a bit suspicious, and the second not real credible (but who knows?).

Even so, I just can't get real worked up about this particular example of governmental waste, fraud and abuse for the following reasons:

1) It confuses stock and flow. NASA has a stock of $35 bn in equipment; it loses $94m over ten years (flow).

2) So in a single year, on average, out of $35,000,000,000 of stuff, NASA loses/misplaces $9,400,000 worth.

3) Let's do the math: 9,400,000 / 35,000,000,000 = 0.000268571429 or if you prefer 0.0268571429 %

Yes that's right: less than .03 % (three one-hundredths of 1 percent) of lost stuff per year.

Is that so terrible? I bet few corporations do so well. Sure, there's some petty theft, and there shouldn't be, but even so…

I am sure there is a great deal to pick on at NASA, but this doesn't cut it for me.

Stuff like this can have profound (and unhealthy!) effects on the shape of a market.

Joho the Blog: Laminated lock in and lock out. Verizon (according to the AP) has been removing the copper lines from the houses to which it is attaching fiber lines. This means you will have difficulty going back from FIOS, the Verizon fiber product. Also, Verizon is not required to provide other phone companies with access to its fiber lines, the way they are for copper lines. Verizon thus at once accomplishes a laminated lock in and lock out.

Crooks and Liars reports SiCKO has Blue Cross Scrambling… and prints the text of a secret internal memo from Blue Cross in which they try to hone a counter-message.