Repo Man

You may have heard about some charges laid against Lehman Brothers, the first domino in the ongoing financial collapse. Those charges are starting to ripple out and hit others in the financial arena.

First, a primer on what they did. According to a bank examiner’s  2,000-plus page report, Lehman Brothers engaged in what is called repo transactions, repo being short for repurchase.

A parable: You are looking to get a second mortgage on your home. Problem is, your financial situation is not great. Chief among your problems is that you loaned $50,000 to your no-good Cousin Vinnie, and he isn’t making payments all that regularly. You realize that you will be lucky to get half the dough out of him.

You have a clever idea. You go to your rich Uncle Bob with a proposition. You will sell him Vinnie’s loan for $50,000 cash. Then, a month later, you’ll buy the loan back for $50,000 cash, plus a little for his trouble. Uncle Bob agrees and you deposit the $50,000. Then you apply for a loan with this big wad of cash in your account. The bank considers you a decent risk and gives you the loan. A few weeks later, Uncle Bob gets his $50k back and you are still stuck with Vinnie. The law has a word for this: Fraud.

Lehman Brothers did the exact same thing, substituting worthless bundled mortgages for Cousin Vinnie’s loan, other banks for Uncle Bob, and fifty billion, with a “b” for that fifty thousand. They temporarily ditched a mass of their CDOs when they were about to file quarterly reports and called it a permanent sale. Thus they managed to look good on paper at the moment that people, including regulators, were looking. Their CEO, Richard Fuld, and several top managers have been implicated, as well as Ernst & Young, the firm that audited them.

So far, no shocker. Big Wall Street firm gets in too deep and commits acts of fraud. But then there are the ripples. Timothy Geithner, once Chair of the New York Fed, now Treasury Secretary, is getting increasing criticism for his lack of oversight. He’s accused of cronyism and bad judgement. Geithner is widely considered to be the one who could have and should have acted earlier to end both the risky business and the fraud that covered it.

Over at Naked Capitalism there is a letter from an anonymous employee at a financial firm reporting multiple instances of non-Lehman repo transactions. Widespread repo fraud in the financial industry? Again, no shock, but a growing sense of unease. As rotten as it all looks on the surface, could it be even less resilient with the whitewash rinsed off?

Mike Konczal at New Deal 2.0 writes cogently about the problem of second liens, that is second mortgages and home equity loans. Apparently the big four of the banking industry, Citi, Bank of America, Wells Fargo, and JP Morgan, are holding just under half a trillion dollars in second liens. The problem with this is that a number of other banks are under pressure to devalue the first mortgages to be in line with actual house values. Since the second liens are second in line for payment, in that case that half a trillion dollars becomes, well, zero. The big four can fight to be first in line for repayment, but that leaves the homeowners under water and financially tapped out. This would mean that the other banks that hold the first mortgages end up with the big holes in their balance sheets. It’s like a twin-sized blanket on a king-sized bed; not everyone is going to be able to cover their asses.

When this deficit hits the mainstream consciousness we can expect a major loss of confidence and a problem for the Obama Administration. Do they pitch another few hundred billion down the fraud hole? Or do they stand by and watch the big four slowly topple? It’s both politically and financially wretched either way. It’s looking like a double dip recession, both in Washington and Wall Street.

Health Careless

“I don’t know what alarms me more, the state of our health care system or the fact that we accept it the way it is.” Thus spoke a friend of mine as we discussed the health problems of those dear to us. What follows is less of an essay and more of a series of vignettes that raised my blood pressure recently.

I was in the lobby of our local hospital recently, on my way to visit a friend who had broken his ankle rather badly. There was a large sign in the emergency room that said that the hospital is legally required to treat you even if you don’t have any money. There was another like it in the main lobby. This goes under the second clause of the initial quotation above. The fact that this isn’t simply understood by everyone tells a story about how hoodwinked people are about our basic human rights.

The friend who uttered the opening quotation also told me about an interview she heard on a British radio show. The guest was an American woman who had been diagnosed with cancer the day after her insurance had lapsed due to a clerical error by her employer. The woman spent a tense few weeks trying to rectify the situation, literally a life or death effort. Apparently the British interviewer had to keep reminding her to define her terms. “What is a co-payment? Our listeners wouldn’t know.”

Then there is the story of another friend who spends time in two different states, one in the east and one in the southwest. Her health insurance only works when she is in the eastern state. If she were to get sick in the southwest she would be on her own.

Getting back to the friend with the broken ankle, I was recently looking into bone growth stimulators. There is a class of devices that emit low intensity ultrasound directly into the affected place and stimulate bone growth. These are especially useful in cases where bones fail to heal rapidly.

I found one made by a company called Smith and Nephew. The Exogen 4000 appears to be a standard electronics box about 3” by 4” with an LCD screen and a cord leading to the small cylinder that emits the ultrasound. Apparently it retails for something between hundreds and thousands of dollars, depending on the source. This price spread is weird in itself. The real outrage, though, is how they power the thing. It has a non-rechargable, non-replaceable battery. The purchaser gets about 350-400 uses out of it and then it is junk. Used devices show up on eBay, with the sellers noting how many times it has been used and how many cycles should be left. It’s akin to buying a disposable laptop computer. It’s obvious that the device could be rechargeable or have a replaceable battery, or could even be plugged into the wall. However, Smith and Nephew, in its corporate greed, decided that profits should win out over affordability, effectively denying the use of their device to a class of uninsured. No way are these things going to be passed on from patient to patient indefinitely. It makes perfect sense financially, and it is a perfect crime against society.

Meanwhile, on the Vermont end of things, we put the call out through the neighborhood for various necessities for someone with a bum ankle, including a walker. Emails and calls came in and we found a couple who runs a free medical appliance exchange out of their garage. These good people spend their spare time maintaining and distributing walkers, wheelchairs, crutches, and the like. We all pitch in around here.

It’s a bright spot in the gloom, but not a solution. It looks as if the nation’s bought and sold “representatives” in Washington will do the bidding of the insurance and drug industries. Vermont will have to navigate its own path to a rational health care system and let the rest of the country follow along.

In the meantime, try not to get too sick, ok?

Update: Just when my blood pressure was returning to normal, I read about another symptom of the recession. Some companies are cancelling their employee's health insurance plans without telling them. The first that people know about it is when they present their insurance card to the nurse and it gets handed right back.

Wind Turbine Opposition Syndrome

One of the arrows in the quiver of those who oppose the siting of wind farms in their area is an affliction called “Wind Turbine Syndrome.” It has an assortment of symptoms such as headaches, disturbed sleep, blurred vision, dizziness, and digestive troubles. The theory is that there are health effects caused by the sound of wind turbines, especially low frequencies, plus vibrations transmitted through the ground. The primary proponent of this syndrome, at least in terms of actual research, is Dr. Nina Pierpont, M.D., PhD, a pediatrician living in Malone, NY. She performed a case study on a group of families living near a wind farm in upstate New York.

As you can imagine, wind power advocates didn’t let this stand. The American and Canadian Wind Energy Associations assembled a panel of scientists and had them study the problem. The panel looked at European studies of the effects of wind farms and reviewed the science on the relationship between acoustics and human health. They released a report in December of 2009.

I recently read the report from executive summary to appendices. The report is thorough and coherent. The panel’s reasoning makes sense to me in terms of fundamental physics and biology.

I’ll get right to the meat of their conclusions and then dig a bit deeper.

“In the area of wind turbine health effects, no case-control or cohort studies have been conducted as of this date. Accordingly, allegations of adverse health effects from wind turbines are as yet unproven. Panel members agree that the number and uncontrolled nature of existing case reports of adverse health effects alleged to be associated with wind turbines are insufficient to advocate for funding further studies.

In conclusion:
1. Sound from wind turbines does not pose a risk of hearing loss or any other adverse health effect in humans.
2. Subaudible, low frequency sound and infrasound from wind turbines do not present a risk to human health.
3. Some people may be annoyed at the presence of sound from wind turbines. Annoyance is not a pathological entity.
4. A major cause of concern about wind turbine sound is its fluctuating nature. Some may find this sound annoying, a reaction that depends primarily on personal characteristics as opposed to the intensity of the sound level.”

In addition, from the executive summary:

* "The sounds emitted by wind turbines are not unique. There is no reason to believe, based on the levels and frequencies of the sounds, that they could plausibly have direct adverse physiological effects."
    * If sound levels from wind turbines were harmful, it would be impossible to live in a city given the sound levels normally present in urban environments.

There are some telling results from previous European studies, as follows:

“A strong correlation was also noted between noise annoyance and negative opinion of the impact of wind turbines on the landscape, a finding in earlier studies as well.”

“Approximately 10 percent of over 1000 people surveyed via a questionnaire reported being very annoyed at sound levels of 40 dB and greater. Attitude toward the visual impact of the wind turbines had the same effect on annoyance.”

“Annoyance was correlated with sound level and also with negative attitude toward the visual impact of the wind turbines.”

The researchers also note that Dr. Pierpont misinterprets a study on the effect of subsonic vibrations on the human body, much to the advantage of her thesis. It has to do with the threshold level at which humans sense vibrations through bone as compared to air. You can read the details in the report itself at the link above.

The panel’s rejection of Dr. Pierpont’s study rests partly on its contradiction of well-established science on acoustics and biology. It also has to do with the fact that Dr. Pierpont performed her case series study on self-selected individuals. Dr. Pierpont advertised for people living near a wind farm who thought they were experiencing symptoms due to noise. She interviewed 38 people from 10 families, but didn’t compare their experience to anyone else near the wind farm. That is what the panel meant by the reference to the absence of case-control or cohort studies in the excerpt above. A case –control study would compare a group of individuals near wind farms to another group of demographically similar people who do not live near wind farms. A cohort study is similar in that it reviews the histories of people who are alike in most ways but differ in one significant aspect. Asking people with grievances to come forward isn’t conclusive science.

The panel also explored the so-called nocebo effect. We are all familiar with the placebo effect, where people experience real relief due to their expectations about a fake drug. The nocebo effect is the mirror of this, when people experience symptoms of illness due to their expectation that a particular event or treatment should cause such symptoms. This is common in drug trials, where test subjects experience nausea, dizziness, headaches, or even rashes after downing an empty capsule. The panel concludes that the symptoms of the families in question are either irrelevant to their proximity to wind turbines or the product of negative expectations.

The report categorically rebuts the concept of wind turbine syndrome, and does it without breaking a sweat, scientifically speaking. In 2006 the UK Department of Trade and Industry published a study that came to the same conclusions. The UK National health Service also critiqued Pierpont’s study as weak in design and proving nothing. Also in 2006, Canadian Acoustics magazine published an article by Geoff Leventhall, a noise and vibration consultant, that explored the fallacies of wind turbine infrasound.

Setting aside the idea of acoustically induced symptoms, annoyance is a real issue. Designers need to take this into account when planning and developing wind installations. It is important, however, to deal with this issue as what it truly is – an emotionally driven value judgment – and not a health effect. That places it in the arena of debatable community-wide values. If annoyance became an unstoppable basis for law, we’d all spend our lives in court.

A Civil Conservative

I met Henry Palmer when my parents took their lawn mower to him for repair. Henry was a real Yankee mechanic who could build just about anything out of metal or wood and fix just about anything this side of complex electronics. If he had lived long enough he probably would have taught himself that as well. He was a blacksmith, a gunsmith, a machinist, and a passable fiddle player, despite an incomplete set of fingers. He had left school in eighth grade to support his family after his father died, and had made a habit of teaching himself some new skill every year.

Somehow I ended up spending a lot of time at his shop, across the driveway from the old farmhouse where he and his wife Bea lived, on a back road in Cornwall, Vermont. Despite the fact that I was in junior high and he was in his seventies, and despite our disparate backgrounds, we became friends.

If you have read many of my essays you have a reasonable idea of my political tendencies. Ultra-conservative does not leap to mind. Ultra-conservative was Henry’s description of himself. He didn’t believe in the minimum wage or “coddling the homeless.” Don’t even start on gun control. And yet, we did discuss that. I won’t say we argued, because that implies some level of anger. We debated. In between machining something on his lathe or hammering out a knife on his anvil we discussed the problems of the state, the nation, and the world. We mostly disagreed.

Henry had sixty years on me and much more confidence, but he never tried to bully me. He questioned my facts and my reasoning, but never my intelligence, my sanity, or my morality. He never raised his voice to me. When I discussed this with my father, he said, “Henry is a gentleman of the old school.” Henry was a gentleman of firm convictions, and he showed me that two good people could completely disagree on a subject and remain friends.

I should note, just to flesh out Henry’s political character, that he was perplexed by the opposition to the Equal Rights Amendment. I can remember him saying, “I always thought women were equal. I don’t know what all the fuss is about.”

Watching the culture wars of our time, the health care mobs and the tea party protests, I wonder what Henry would think. Ideologically, he would have approved of many of the positions held by the far-right activists of today. Behaviorally, he was a different species. The screaming, the insults, and the posturing on the edge of violence would have completely alienated him.

Where are the Henry Palmer conservatives of today? Have they been pushed aside by the theatrics required for media attention? Has our objection to incivility been blunted by repetition? Is it just a case of the screaming wheel getting the oil?

As Town Meeting Day approaches here in Vermont, I think about the way we deal with anger in political debates. Some towns (which will remain nameless, but you know who you are) have a reputation for verbal brawling at town meeting. However, restraint is the norm. At my own town meeting I have seen accusatory fingers pointed and voices raised, but this is met with disapproval by the crowd and pacification efforts by the moderator. I remember a woman standing up after a contentious debate and sincerely thanking those who had held the minority opinion. She described their opposition as necessary for good political thinking. We haven’t seen that on the national stage.

I’ll speculate that a lot of the problem is narcissism. As a culture we have become focused on the continual satisfaction of the individual. The finely adjusted balance between the individual and society has had a lead ingot dropped on the side of the individual. We want the benefits of a community without the sacrifice and self-effacement required to be a functional member of a community.

It’s a mindset promoted by modern rootlessness, where one can injure some anonymous neighbor and then leave. It’s a mindset of willful blindness to the networks of trust, cooperation, and interdependence that support us as individuals every moment of the day. It is a mindset that lacks historical perspective. People need to be reminded that this is not an overwhelmingly special year in human history, that they are not members of a singularly important generation, and that their favorite political issue of the moment is just one of many that people have contested through the ages. This is not as satisfying as an end-time mythology, religious or political. The benefit is that it frees people from a false urgency so that they can promulgate their opinions without slashing and burning like a horde of Mongols.

Henry Palmer understood that friendship was more important than winning an argument, even with a naive 14 year-old. Living in small-town Vermont, he learned that you can’t walk away from your neighbors. I doubt that we can transfer this ethic directly to the winner-take-all battles at the national level. Perhaps we can promote this civil attitude at the local level and let it percolate up over time.




Personalities and Structures

I get these political emails. I suppose we all do. Most of them are somewhere between mildly funny and moderately offensive. They skewer famous politicians. Sarah Palin, Barack Obama, Nancy Pelosi, George Bush, Dick Cheney, and the late Ted Kennedy have all been popular targets.

Back during the 2004 campaign season, scientists at Emory University put some political partisans in a functional Magnetic Resonance Imaging device to see what parts of their brains lit up when their favorite candidates were criticized. The researchers presented the subjects with information showing their favorite candidate caught in the act of self contradiction. The lead researcher, Drew Westen, summed it up this way: "None of the circuits involved in conscious reasoning were particularly engaged," "Essentially, it appears as if partisans twirl the cognitive kaleidoscope until they get the conclusions they want, and then they get massively reinforced for it, with the elimination of negative emotional states and activation of positive ones."

It’s about loyalty to an individual, and it was a key survival trait for most of human history. Group cohesion and strong, unified threat response was vital when we lived in small kinship and tribal units. This social functionality trumped a more nuanced analysis of justice or long term benefit. After all, for much of human existence there was no “long term” for an individual to look forward to. Teenage pregnancy wasn’t a problem, it was a necessity.

The flip side of this loyalty is a hostility and suspicion of those outside one’s group, however that group is identified.

This was very useful for the hundreds of thousands of years we spent roaming around in small bands. It is a serious handicap when we live in societies of millions. Personalities don’t matter at this scale.

Although all labels are inaccurate, you could call me progressive or left wing. Nevertheless, I don’t care if people attack Pelosi or Obama or even Bernie Sanders personally. I am exasperated by people who consider this or that politician a savior. Sure, I was pleased when Obama was elected. I didn’t expect some huge shift in direction, but the eventual cessation of the most destructive policies then in place. As I have written elsewhere, I regarded him as a tourniquet, not a cure. (I see now that I was optimistic even in my limited expectations.) I recognized that he was put in place by the same political mechanism that installed George W. Bush, Bill Clinton, George H. W. Bush, and Ronald Reagan.  

I care about structures. Show me the political structure, the means of selecting the decision-maker, and I will tell you what decision will get made. The personality of the person selected, at least the important core of that personality, is dependent upon the methodology of selection. Our present money-soaked campaign system, dependent upon corporate media, corporate PACs, and millionaires with open checkbooks, dictates particular policy outcomes. As we know from experience, few of these outcomes have long-term benefits for the average schmo.

So don’t hail the new savior, whatever political persuasion that savior may be. For that matter, don’t waste your time reviling the new devil. That person is just acting out a predefined role on the public stage. Examine how these people get to where they are and work on that process. I realize that this is difficult. It goes against how our species has behaved for the past couple of million years. It will be vital if we are to survive another hundred.