Posted by nithi.vivatrat on August 25, 2009
Bloomberg reports that the Federal Reserve, losing a federal lawsuit yesterday, must identify the financial firms that received special emergency loans. You may remember that the Fed refused to disclose any details of these loan programs, arguing that the knowledge that a specific firm received emergency loan would undermine its competitiveness or even spark a run on that bank — so of course, it would be safer to keep that knowledge solely in the Fed’s wise hands. The details withheld by the Fed included the names of the firms, the loan amounts, and the assets put up for collateral.
Fortunately, Manhattan Chief U.S. District Judge Loretta Preska rejected this speculation: “Conjecture, without evidence of imminent harm, simply fails to meet the Board’s burden” of proof.
I agree. As taxpayers, we became — like it or not — lenders to and investors in these firms. We should have the right to see what’s in our portfolio. I for one look forward to seeing these details come out — Judge Preska gave the Fed five days to comply.
Posted by nithi.vivatrat on August 24, 2009
In an opinion piece in yesterday’s Financial Times, NYU economics professor Nouriel Roubini took issue with the mainstream speculation of an imminent economic recovery, arguing that the recovery will be “U-shaped, anaemic and below trend for at least a couple of years, after a couple of quarters of rapid growth driven by the restocking of inventories and a recovery of production from near Depression levels.” He goes on to list seven systemic economic conditions dragging out a recovery.
Further, Roubini contends that, in fact, we could be facing a W-shaped, double-dip recession, caused by the Catch-22 of ending government bailout/stimulus programs (undermine recovery if they end, drive inflation risk and then interest rates if they don’t) as well as speculation on commodities.
Well-articulated, sobering analysis — must read for anyone seriously interested in planning for what’s ahead.
Posted by nithi.vivatrat on June 24, 2009
Kris Berg, a very successful real estate agent in San Diego and frequent contributor to Inman News, posted this wonderfully written commentary about the flaws of stimulus programs relating to easing the turmoil in the housing markets. This is the lead-in:
Dear lawmakers:
I am writing to thank you for everything you have done over the past year to suture our economic wounds and stimulate our housing market. It has been very helpful. Now, please stop.
What I loved about her article was how her anecdotes put a human face on real, unintended consequences of these programs. An informative and persuasive read — I’d comment more, but I urge you to just read it.
Posted by nithi.vivatrat on May 11, 2009
My apologies for my hiatus — lots of activity at SmithAdams keeping me busy, but I hope to get back on the blogging horse starting now.
I hope everyone had a wonderful Mother’s Day weekend. You might have missed Kenneth Harney’s Post article titled “Challenging Brokers’ Add-On Fees.” In it, Mr. Harney explains how U.S. District Judge Virginia Emerson Hopkins ruled against RealtySouth for charging clients an “administrative brokerage commission” (or an “ABC” fee). The court found no evidence that the consumer received any additional service for the fee beyond that which was already covered by the regular commission, violating a federal real estate settlement statutory ban against “unearned” fees.
This is good news for those of us advocating greater transparency and choice for consumers in real estate. Extra fees should not be surreptitiously slipped into an already complicated process. At SmithAdams, we believe that consumers should have total control over what services they choose and pay for. This ruling reinforces that competition, consumer choice, and the laws of supply and demand should determine pricing — not unilateral action by the provider of the service. Hooray!
Posted by nithi.vivatrat on April 8, 2009
When it comes to designing compensation programs, my good friend and experienced HR executive repeats this mantra: “compensation drives behavior.” As I talk to people about the incentives created by the traditional commission fee structure in real estate, this refrain often comes to mind. I thought of it again as I read the April 1 Washington Post article “Four Banks Are First to Return U.S. Aid,” discussing that, while returning taxpayer money would typically be viewed as a good thing, in this case it threatens to undermine the goal of increasing lending (so much irony here).
The primary reason these banks are rushing to repay this money?
“Banks seeking permission to repay the Treasury, however, argue that compensation restrictions are the real threat to lending. Neil M. Barofsky, the special inspector general who oversees the investment program, testified before Congress yesterday that a survey of nearly 400 aid recipients found widespread concern that limits on pay will hamper retention of top employees, putting aid recipients at a competitive disadvantage.”
It should not be surprising that executives at banks receiving TARP money, especially those that were not in bad shape, would prefer not to have constraints on their pay. Indeed, that same day, the House of Representatives approved the Pay for Performance Act of 2009 that prohibits “unreasonable or excessive” compensation or bonus payments that are “not directly based on performance-based measures” (it’s important for the Members to show the appropriate outrage to their constituents).
To recap: we got into this mess partly because certain people were getting highly compensated for making loans they shouldn’t have been making; now that we need lending to increase to stimulate the economy, we’re going to implement curbs on compensation to the executives at the banks that take federal funds intended to spur that lending. Anyone else confused/frustrated/angry?
In conclusion: never underestimate the unintended behaviors and outcomes that compensation methods can create.
Posted by nithi.vivatrat on March 31, 2009
Columbia University’s Edmund Phelps was on American Public Media’s Marketplace last week contending that we rethink our national obsession with home ownership.
I listened to this after having recently read David Kamp’s fascinating piece in April’s Vanity Fair titled “Rethinking the American Dream.”
Both pieces are very thought-provoking. I do think there is something disconcerting about the American Dream somehow becoming synonymous with home ownership (it wasn’t always like that), and I do have concerns about the many aspects of our government policy that encourage this mindset. To me, it is undeniable that the mortgage interest deduction played at least some role in the housing bubble run-up.
While I do believe that home ownership and renting should be theoretically economically equivalent over the long run, there are some intangible attributes to home ownership (pride of ownership and emotional investment to neighborhood development and care among them) that cannot be ignored. Anyway, the spirited back-and-forth in the comment section of the Marketplace piece is as interesting as the Phelps interview itself. Hope you find this interesting as well.
