nancynall.com » Simple, stupid.
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Simple, stupid.

This is some­thing I read in Sunday’s NYT mag­a­zine; the story was about Moody’s bond- and security-rating ser­vice:

To get why (Moody’s stratos­pheric growth) is impres­sive, you have to think about all that deter­mines whether a mort­gage is safe. Who owns the prop­erty? What is his or her income? Bun­dle hun­dreds of mort­gages into a sin­gle secu­rity and the ques­tions mul­ti­ply; no investor could begin to answer them. But sup­pose the secu­rity had a rat­ing. If it were rated triple-A by a firm like Moody’s, then the investor could for­get about the under­ly­ing mort­gages. He wouldn’t need to know what prop­er­ties were in the pool, only that the pool was triple-A — it was just as safe, in the­ory, as other triple-A secu­ri­ties.

Over the last decade, Moody’s and its two prin­ci­pal com­peti­tors, Stan­dard & Poor’s and Fitch, played this game to per­fec­tion — putting what amounted to gold seals on mort­gage secu­ri­ties that investors swept up with increas­ing élan. For the rat­ing agen­cies, this busi­ness was extremely lucra­tive. Their prof­its surged, Moody’s in par­tic­u­lar: it went pub­lic, saw its stock increase six­fold and its earn­ings grow by 900 per­cent.

By pro­vid­ing the mort­gage indus­try with an entree to Wall Street, the agen­cies also trans­formed what had been among the sleepi­est cor­ners of finance. No longer did mort­gage banks have to wait 10 or 20 or 30 years to get their money back from home­own­ers. Now they sold their loans into secu­ri­tized pools and — their cap­i­tal thus replen­ished — wrote new loans at a much quicker pace.

Mort­gage vol­ume surged; in 2006, it topped $2.5 tril­lion. Also, many more mort­gages were issued to risky sub­prime bor­row­ers. Almost all of those sub­prime loans ended up in secu­ri­tized pools; indeed, the rea­son banks were will­ing to issue so many risky loans is that they could fob them off on Wall Street.

But who was eval­u­at­ing these secu­ri­ties? Who was pass­ing judg­ment on the qual­ity of the mort­gages, on the equity behind them and on myr­iad other invest­ment con­sid­er­a­tions? Cer­tainly not the investors. They relied on a credit rat­ing.

You may have to read this a few times to absorb it. Go ahead. When you’re ready, come back and ask your­self how often you’ve heard some­one of late say, “The mort­gage mess is very sim­ple — peo­ple didn’t pay their mort­gages.” I think of this as the Stu­pid Sim­ple Meme. A SSM reduces a com­plex issue to some­thing that can be fit on a bumper sticker, and con­ve­niently trans­fers 100 per­cent of the blame to the most pow­er­less saps on the stage.

The bankers? They were just doing what comes nacherly — mak­ing money. How can we blame a busi­ness for mak­ing money? That’s what busi­nesses do! And if they did it by churn­ing fees, by ignor­ing the sim­plest due dili­gence in vet­ting loan appli­ca­tions, by mar­ket­ing through out­right lies? Details, details. The bad peo­ple are the ones who didn’t pay their mort­gages.

The dis­as­ter in New Orleans? It was the fault of the peo­ple who chose to live below sea level, and the deaths were a nat­ural result of peo­ple who sim­ply refused to leave. (Are you lis­ten­ing, the Nether­lands?) Granted, not every­one had Ash­ley Mor­ris yelling in their ear for the last three years, but I’m still amazed at how many peo­ple shrug their shoul­ders at what hap­pened there, who say it was sim­ply inevitable, an act of God, some­thing no levee could have held back.

(In case you think I’m only sin­gling out right-wing Sim­ple Stu­pids, the left has them, too: Remem­ber “the cure for home­less­ness is hous­ing”? Yeah, even 20 years ago it seemed a lit­tle pat.)

I have a new rule: When­ever any­one says, “It’s really very sim­ple…” about a com­pli­cated prob­lem, I stop lis­ten­ing.

Any­way, why bother? VRSA is going to get us all, and remem­ber, folks: It came…from…Michi­gan! Mm-ha-ha-ha-ha-ha-ha.

(What is VRSA, you ask? Why, it’s MRSA, only with a V, for Very Very Very Scary.)

Actu­ally, that story is worth read­ing, if only for yet another fas­ci­nat­ing Detroit fac­toid:

Metro Detroit has a his­tory of antibi­otic resis­tance. Ille­gal drug users 20 to 30 years ago injected antibi­otics with heroin in a mis­guided effort to avoid get­ting con­t­a­m­i­nated by dirty nee­dles. As a result, many local bac­te­ria devel­oped resis­tance to peni­cillin and its rel­a­tives, such as methi­cillin.

Can you tell it’s Grumpy Mon­day around these parts? The weather has turned — and just as the red­buds were emerg­ing, dammit — and we’re promised two-thirds of a week when we’ll be lucky to see 50 degrees, joy oh joy. We spent the last day of mild tem­per­a­tures open­ing the cot­tage, which was both unevent­ful (no squir­rels came down the chim­ney and decom­posed under the pil­low, like last year). Unfor­tu­nately, the shared dock has become a real prob­lem. What was orig­i­nally agreed upon as a sen­si­ble pol­icy — two boats per cot­tage, back when a boat was an out­board with a 10-horse motor on the back — is now ridicu­lous. When did a recre­at­ing fam­ily of four come to need a ski boat, a pon­toon and two Jet-Skis? A pox on all their houses; when gas goes to $5 a gal­lon maybe we can have a lit­tle water to actu­ally swim in. I kept my head down, raked leaves and scrubbed things. There’s some­thing about clean­ing that emp­ties the head and calms the spirit. Add a leaf fire, and things get just about per­fect.

Blog­gage? Oh, a lit­tle:

A few weeks ago I won­dered what would hap­pen to a news­pa­per if you took away paper, ink, trucks, Team­sters and the like. Answer: The Cap­i­tal Times of Madi­son, Wis., which becomes an online-only paper very soon. Future: Very very murky. (This was the plan for my alma mater, derailed when Knight Rid­der derailed itself. Never hap­pened, but I will still watch this trans­for­ma­tion with inter­est and, i fear, dread.)

The photo with this story kind of star­tled me, because as soon as I looked at it, before I even reg­is­tered who was in it, I said, “Oh, huh. Indi­ana.” It has to do with the color and height of the cloud ceil­ing, some­thing about that color of brown, I dunno. For a sec­ond I even thought it was Fort Wayne, and if pressed, I’d have said it was on Pon­tiac Street, beside the old Rialto the­ater. No, it was Ander­son, but still: Indi­ana. Weird.

Not much, I know, but hey — it’s Mon­day. Give me some time to get rolling.

Posted on Monday, April 28th, 2008 at 9:57 am in Current events, Media, Same ol' same ol'. Responses are currently closed, but you can trackback from your own site.


22 responses to
“Simple, stupid.”

  1. John said on April 28th, 2008 at 10:50 am

    Add a leaf fire

    I’m jeal­ous, I haven’t been able to burn leaves in 40 years!

  2. alex said on April 28th, 2008 at 11:24 am

    This securities-ratings mess is not unlike what hap­pened with stocks in the ’90s. With the dereg­u­la­tion of the finan­cial ser­vices indus­try, sud­denly the stock bro­ker­ages were owned by the banks. And instead of rat­ing stocks objec­tively as they were sup­posed to do, they took their march­ing orders from the banks and gave the high­est rat­ings to the stocks of upstart com­pa­nies that had no assets and weren’t mak­ing any money. This was the scam that made Elliot Spitzer a hero and ulti­mately got him elected gov­er­nor of New York.

    ***

    So which Sat­urn did Bossy bring to the D? Has she done her stint in the Skye yet? That car’s the twin to my Sol­stice, and very painful on the butt mus­cles with pro­longed dri­ving as I learned this week­end going to Indy. Really, two hours sit­ting will make your ass more sore than four on a Stair­Mas­ter.

  3. WhiteBeard said on April 28th, 2008 at 11:57 am

    I loved my week in a Sol­stice and my after­noon in a Skye, it reminded me of a British sports car. Of course, I have built-in extra rear cush­ion­ing so that helps con­sid­er­ably.
    As for banks and rat­ing com­pa­nies and “invest­ing” on Wall Street gen­er­ally; in any other world it would be called gam­bling with other people’s money and the dealer or house always takes its cut “com­mis­sions” first. Then if a Bear Stearns gets in trou­ble there is a gov­ern­ment bailout of bil­lions and bil­lions of tax­pa­per money.
    But no one really helps the poor guy who is threat­ened with fore­clo­sure and the fore­clo­sure arrangers are mean­while mak­ing a mint. Don’t get me started, please, I anger eas­ily when I hear of fat cats get­ting fat­ter.

  4. Terry WAlter said on April 28th, 2008 at 12:51 pm

    The whole finan­cial industry/big com­pany scene is quite dis­gust­ing. The glob­al­ists on Wall Street & in the board rooms & Wash­ing­ton don’t give a rats azz about the aver­age schmuck. They’re all scratch­ing each oth­ers’ back and lin­ing each oth­ers pockets.Like the exec­u­tive pay scam, where they always vote yes for the pay/option pack­ages for their bud­dies, so that the favor is returned when the direc­tors board is vot­ing for their raise. Then you hear the defen­sive whin­ing that they HAVE to pay $10 mil­lion a year to get/keep good peo­ple. Mean­while, Joe Blow gets 0-3% & is told to be thank­ful for that (what­samat­ter with your atti­tude?). Bush thinks his tax cuts are a cure-all. While they help, when you have mil­lions of jobs leav­ing the country,they don’t quite get the job done. Laura (let them eat cake) Bush thought pissed off Repub­li­cans were a fig­ment of some­bodys’ imagination.After the last elec­tion, think maybe she got the hint? Hard to say, after all, George is telling us it’s just a slowdown,not a reces­sion. Those of us in Indi­ana & Michi­gan would beg (lit­er­ally) to dif­fer.

  5. Peter said on April 28th, 2008 at 1:20 pm

    Nancy, I agree with your sen­ti­ment on sim­ple state­ments.

    The Kat­rina ones really got to me. When I argued about it, I was told that I’m hyp­o­crit­i­cal, since I crit­i­cize devel­op­ment in open lands and flood plains, and what is New Orleans if not a flood plain. I always answered that there’s a big dif­fer­ence between liv­ing for decades in a flood plain that is SUPPOSED to be pro­tected by the feds, ver­sus build­ing for the first time in an area that you KNOW is going to cause prob­lems. Really, what were con­cerned peo­ple in New Orleans sup­posed to do? Fix up a chunk of levee on their own? Sell and move? Good luck with that.

  6. Andrea said on April 28th, 2008 at 3:18 pm

    Off topic, but related to Nancy’s com­ment a cou­ple of Fri­days ago about “MILF” in the news­pa­per. I found this in an arti­cle about the Face­book pages of young teach­ers in today’s WaPo:

    “But the page fea­tures mul­ti­ple “bumper stick­ers,” includ­ing one that uses a crude acronym for attrac­tive moth­ers…”

    http://www.washingtonpost.com/wp-dyn/content/article/2008/04/27/AR2008042702213.html?nav%3Dhcmodule&sub=AR

  7. Hattie said on April 28th, 2008 at 10:31 pm

    Not the Cap­i­tal Times. I had a nos­tal­gia attack, think­ing about the good old days in Madi­son in the 60′s . Man this Cal­for­nia girl got cold out there. But it tough­ened me up going through all that in those times.

  8. brian stouder said on April 28th, 2008 at 10:56 pm

    That Obama pic­ture DID look like Pon­tiac street in Fort Wayne.

    Leav­ing aside Indiana’s sud­denly con­se­quen­tial, tightly con­tested, rapidly approach­ing and high-stakes pri­mary elec­tion, I watched Rev Wright’s entire speech (live on CNN) before the NAACP from the proprietress’s city of Detroit, and thought it was pretty funny.

    The guy has a George Carlin-like enun­ci­a­tion, when he immi­tates the way white peo­ple speak, and he can def­i­nitely make peo­ple laugh when he wants to.

    I think the real effect of the rant­i­ngs and rav­ings (and the occa­sion­ally thought-provoking reflec­tions) of the attention-craving Wright is – he gives waver­ing Obama sup­port­ers a chance to fall away.

    Just as the pro­pri­etress of this place says she’s tempted to view Michigan’s sud­den descent into polit­i­cal insignif­i­cance and farce, and Indiana’s con­cur­rent ascen­dancy to the pin­na­cle of national polit­i­cal rel­e­vance – as a pox specif­i­cally aimed at her; so, too, might some of us hoosiers be tempted to view this unfold­ing elec­tion as a direct chal­lenge to us; wherein we actu­ally have to approach our vot­ing booths and really, truly cast a con­se­quen­tial vote.

    I, for one, have voted for plenty of ‘D’s in Novem­ber elec­tions over the years, but I’ve never had to declare as a ‘D’ in May before. Truth be told, if Obama had KO’d Hillary before now, then I might have stayed on cruise con­trol next week, and waited ’till Novem­ber to give Barack my vote.

    But, no, not this year; it won’t be that easy. Indiana’s essen­tially fore­gone Novem­ber bal­lot­ing has been superceded by this exquis­itely intense pri­mary elec­tion – and we hoosiers, stum­bling and squint­ing under the klieg lights (much as we did when we got pulled into Day­light Sav­ings Time!) have been knocked right out of Cruise Con­trol!

    I say we catch a gear and see what this baby can do!

  9. grapeshot said on April 28th, 2008 at 11:22 pm

    As an ex-Michigander and now Cheese­head, I read your blog every day with great inter­est.

    I fol­lowed that link you posted about the Cap­i­tal Times and read the arti­cle. I know that The Cap­i­tal Times was a great news­pa­per, but from the thor­ough­ness of the linked arti­cle, I’d have to say that the Isth­mus (which is where the link took me) doesn’t seem like a shabby news orga­ni­za­tion, either.

    Unfor­tu­nately, nei­ther The Cap­i­tal Times nor Isth­mus speak all that clearly to the rest of us out­side of Madi­son. Nonethe­less, like you, I’ll be watch­ing this with inter­est and some trep­i­da­tion.

  10. Jolene said on April 28th, 2008 at 11:37 pm

    Have fun w/ your new­found place in the elec­toral lime­light, Brian. I’ve some­times teased an Ohio friend about whether can­di­dates come by and offer to rake her leaves in Novem­ber. Keep us posted about fas­ci­nat­ing can­di­date sight­ings and other such events. Our pri­mary in VA seemed to be over before it began. There wasn’t really a huge amount of cam­paign­ing here.

    On the last Friday’s PBS New­sHour, David Brooks said that he didn’t think these cam­paigns were hav­ing any effect–that demo­graph­ics were deter­min­ing every­thing. That is, Hillary has her vot­ers, Barack has his, and the out­come is deter­mined by how many peo­ple in par­tic­u­lar cat­e­gories there are in a given state. Not sure he’s absolutely right, but it’s cer­tainly a plau­si­ble argu­ment.

    Re Wright: Parts of the NAACP speech were, indeed, enter­tain­ing, but I could only watch in hor­ror dur­ing the Q&A ses­sion after this morning’s speech at the National Press Club. The guy has taken a hard hit to his gigan­tic ego. Now he’s hit­ting back, and he doesn’t seem to care too much who he hurts.

    I can never tell how much dif­fer­ence these things make. On cable TV, every­thing is HUGE. It’s nice to hear from ami­able peo­ple like you, who seem to take the “sta­tic” in stride.

  11. Danny said on April 29th, 2008 at 12:34 am

    … It’s nice to hear from ami­able peo­ple like you, who seem to take the “sta­tic” in stride.

    …And then there is me. Snicker.

    My wife said she might vote for Obama tonight. After jok­ing about where she might be sleep­ing, I told her I might vote for him too. We’ll see come Novem­ber. Lots of action left before then.

  12. basset said on April 29th, 2008 at 12:51 am

    Here in Nashville we have two dailies – the Ten­nessean, which was an out­stand­ing paper before Gan­nett got hold of it, and the City Paper, an eight-year-old week­day tabloid startup aimed inside the city lim­its.

    The City Paper went pretty close to all-online this week – paper edi­tions on Mon­day (busi­ness) and Fri­day (week­end events), electronic-only the rest of the time. some decent online video too, I was sur­prised… nashvil​lecity​pa​per​.com.

    The Ten­nessean… well, it doesn’t have any police or gov­ern­ment beat reporters as far as I can tell, but the “moms blog” and “shop­ping diva” are right out there where you can see ‘em.

  13. Dexter said on April 29th, 2008 at 3:09 am

    THREE O’CLOCK and ALL’s WELL!
    As a night owl, I thought I would assure you of that.
    Obama ‘s cur­rent alba­tross is Preacher Wright, as David Axel­rod cringes as Wright gets more and more pub­lic­ity.
    Also, keep­ing his promise to intro­duce race-discussion to TV , Don Imus had the won­der­ful Dick Gre­gory on his show Mon­day. Even as Imus signed on with WABC and began prais­ing Lim­baugh and Han­nity and Hume, he has indeed given us some insight­ful African Amer­i­can com­men­ta­tors on his show.

  14. alex said on April 29th, 2008 at 7:44 am

    Not sure what all the fuss is about. Wright doesn’t bother me in the least, and I’m sure that any­one who claims to be both­ered wasn’t plan­ning on vot­ing for Obama any­way.

    Totally off topic, I have mal­lards nest­ing up against my house! A few weeks ago I saw the male stand­ing on my dri­ve­way as if he owned it. Sub­se­quently I saw the female mul­ti­ple times wad­dling around in my flowerbeds. I fig­ured they must have a nest down by the water some­where, prob­a­bly not even in my yard. Then last night I dis­cov­ered they’re liv­ing in a bed of pachysan­dra and juniper right out­side my TV room. This should make for some great pix/video when they start teach­ing their babies to swim.

  15. John said on April 29th, 2008 at 7:45 am

    Jolene, I can’t remem­ber which sec­tion of the state you live in, but I hope all is well at your home. Those storms were a shocker to see on the tube.

  16. Dorothy said on April 29th, 2008 at 8:47 am

    John my copy edi­tor daugh­ter is in Nor­folk, and I wor­ried about her for awhile, but I talked to her at 9:15 PM and she was fine. Their web­site is still mov­ing very slowly this morn­ing. I could not even get it to load last night.

  17. John c said on April 29th, 2008 at 8:55 am

    I hap­pen to be a non-business type who is friends with lots of busi­ness types, includ­ing folks who have risen to very high lev­els. Noth­ing frosts me more than when I won­der how some new fan­gled high-finance trend works, and that it sure as heck seems like a lousy idea, and they give me that patron­iz­ing look and say: “You just don’t under­stand.”
    What I have learned is that there are plenty of fancy schmancy busi­ness things that make per­fectly good sense and smart peo­ple can explain them to me. Then there are the ones that don’t make sense and are prob­a­bly scams thought up by the smartest of the smart, who pawn them off on the not quite smartest of the smarts, who can’t explain them to peo­ple like me and are too embar­rassed to say they don’t really under­stand them them­selves and all they know is the stock price keeps going up. These are the folks who thought Enron was the great­est thing since sliced bread, and laughed when I won­dered how the bleep AOL could be worth more than Gen­eral Motors, let alone Time Inc. Bot­tom line, I used to thing they were right and I was wrong. Not any­more. If no one can explain it to me, it’s a crock.

  18. John said on April 29th, 2008 at 8:58 am

    Dorothy, I for­got all about your lovely daugh­ter. I am glad she is okay.

  19. Jolene said on April 29th, 2008 at 9:11 am

    Thanks for your thoughts, John. I’m in Alexan­dria, a long way from where the tor­na­does hit. You’re right about the pic­tures, though. They’re really shock­ing.

  20. Jolene said on April 29th, 2008 at 9:18 am

    Good posi­tion on explain­ing com­plex­ity, John c. I’ve spent a lot of my life edit­ing aca­d­e­mic prose and, over and over, I’ve found that, when peo­ple can’t explain what they’re talk­ing about clearly, it’s usu­ally because they don’t know.

  21. nancy said on April 29th, 2008 at 11:18 am

    Actu­ally, Jolene, that rule of edit­ing applies to all sorts of text. If you can’t explain it, you don’t under­stand it. And if you don’t under­stand it, you’ll never make oth­ers do it. I’m a big fan of the “tell me in one sen­tence” rule. “But that’s over­sim­pli­fy­ing!” writ­ers some­times say. OK. Then over­sim­plify it into one sen­tence, but if you can’t boil it down to that nugget, then you don’t have a nugget. It’s that (over)simple.

    And John’s right — if the peo­ple deal­ing this crap don’t get it, it’s not safe.

  22. Nancy said on April 29th, 2008 at 8:53 pm

    Actu­ally there is a sim­ple answer to what is called the “sub­prime prob­lem” (although it is much more com­plex than that). The answer is greed. Greed so over­whelm­ing that every­one rushed into the act. The rat­ings agen­cies dis­cov­ered that if they gave good rat­ings to tranches, that they could make more money. (Rat­ings agen­cies give rat­ings only when they are paid to give a rat­ing). Banks and mort­gage com­pa­nies dis­cov­ered that by shov­el­ing the bad loans onto some­one else, they could make more money. Mort­gage bro­kers found that the more loans they arranged, the more money they got. In some cases com­pa­nies even adver­tised “we don’t get paid until we say ‘yes’.” And home buy­ers saw that prices were ris­ing so fast they were about to be cut out of the mar­ket, or they were told that they could lever­age their house into a for­tune.
    It’s like the story of the lit­tle boy who held back the waters by hold­ing his fin­ger in the dike. The moment he could no longer hold on, the waters burst through.

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