There are pigs, and then there are capitalist pigs.  And among the capitalist pigs, Maurice “Hank” Greenberg can rut like none other.

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As much as C.V. Starr deserves genuine credit for founding and developing AIG, his close friend Hank Greenberg is often thought of as the man who built AIG.  Greenberg has been on the sidelines, at least by his own standards, since he was ousted from AIG in 2005 over violations of accounting rules.  Since then, he has been battling AIG in court.  He was able (more…)

Tomorrow is the North Carolina literary festival.  In the spirit of that festival, or perhaps because the weekend is approaching, or perhaps because someone needs to say it…I propose a literary reference to our current regulatory regime in the financial markets.

As you may or may not know, many feel that our financial regulatory system was asleep at the wheel during the last decade.  Subprime mortgage lending grew rampantly, and even though there was plenty of data to demonstrate that it would lead to problems, very (more…)

Let’s put the people back in charge of our banking system.

I work with data about mortgage lending that the Federal Financial Institutions Examination Council provides through the Home Mortgage Disclosure Act.  Making this data better would help people in their efforts to seize control over their relationships with their local banks.

HMDA Data Needs to be Fixed

There are a few stories that I can tell with HMDA data.  Sometimes, its a story that seems to make no sense, with one data point contradicting the other.  Sometimes, each additional data point only tells the same story.  In that (more…)

As much as advocates, policy researchers, regulators, and bankers are sensitive to the perceived issues surrounding the ongoing investment in AIG, it probably understates the  public’s reaction to this issue.  Moreover, while their understanding is probably given nuance if they have an understanding of credit default swaps, this is largely limited to a small ecology (the “chattering classes” of like-minded people.

For a lot of regular people, though, it’s not that complicated.  It is just a confirmation of all that is wrong with our system, at least in the minds of people who don’t buy any derivatives and don’t get the welcome mat rolled out when they walk into their friendly banker.

Case in point, our office has an exterminator service. She comes about once a month.  Yes, that’s a lot, unless you live in the South, and then it is just appropriate and necessary.

Well, the AIG thing is on her mind today.

“They are just a bunch of crooks!” she says.

Her gloved hands swing up in the air.

“They just want to give their people more bonuses.  Let the xxxx people go,” she says, “and hire a bunch of people who are cheaper. ”

As she left, she shouted “they should go to prison!”

I want to ask her about the needs of all those counter parties.

It reminds me of another conversation I had about two years ago, about our political systems, in one of the more unexpected environs for such a conversation.

I was speaking with a man who was living out of an unheated mobile home, in an abandoned mobile home park in rural North Carolina.  He had to carry his water.  He was running a hot plate (and a tv to watch the Panthers) off of the battery on his Aerostar.

He was pretty aware of what economic class he belonged to.  Right away, this is unusual.  Studies show that most people place themselves above where they belong, out of optimism or pride.  Working class people identify as middle class, and middle class folks see themselves as “upper middle class.” This makes many of the ideas propagated by liberals fall on deaf ears.  Many of the very recipients who would benefit from less regressive taxes, for example, assume that they would not have anything to gain.

That was not true with him.

“Us people at the bottom,” he said, “we get nothing.  The politicians are so worried about the middle class.  They ain’t got nothing for people like me.”

I think that only a few issues are able to capture the ire of many non-political types. For many, I think that the basis for assessing our leaders is driven not by the wisdom of decision-making, but by the power of symbols. It is about the icebergs:  Enron, Willie Horton, and perhaps the Titanic of them all:  Watergate.  Bernie Madoff could be next.  How many people could tell you about John Kerry’s view on pay-go, compared to his arguable status as a flip-flopper?

I say non-political for a few reasons:  Newspaper readership is highest among people with college degrees, or older folks.  The man in North Carolina that I spoke with did not believe in voting. Actually, in my tours around mobile home parks, not voting is a constant characteristic.

Only a relative few events resonate.  More significantly, they are not easily forgotten.  AIG is one of them.  So, if you have mixed feelings about AIG (and you are reading this finance-related blog) then rest assured that many others are even more irritated.

The mortgage crisis dominates headlines these days.  It is the main focuses of these entries.  That said, there is another problematic trend that is somewhat related to poor lending decisions.

I am talking about newspapers.  For years, people have been expecting print to succumb to the advantages of electronic news delivery. The differences are dramatic.  Newsrooms are probably guilty of not changing with the times.  They are somewhat insulated, and their lack of new readers reflects that.  Newspaper readership is getting older and older.  The obituaries and stock quote listings remain popular for a reason.  Circulation reflects the loss of relevance, or the loss of content. Oh, and craigslist didn’t help.

Content is a problem, too.  Young people find fewer and fewer reasons to subscribe to a paper.  A few years back, when I returned to graduate school, I remember realizing that I was the only person in our cohort who subscribed to a paper.  Twenty years ago,  a group of late 20 early 30-year olds with a college education and an interest in civic life would have had a different reaction.  Most would probably have a paper, some, perhaps two subscriptions.  So, the papers weren’t cultivating new readers.  Simultaneously, job cuts meant that papers were getting thinner and thinner.

Less content means less readership means less revenue means less content….

Our local paper was sold in 2005.  It had been a family operation.  Now, it is owned by Paxton.  Paxton immediately cut about 15 positions.  There is less coverage, less news, less content.  They do not have a business reporter on staff.  This is always a nail in the coffin.  People won’t pay for a product that keeps getting weaker.

Finance has a role in the downfall, nonetheless.  A few years back, the newspapers suddenly seized on the idea that they could enhance profitability by achieving new scale, particularly in back office functions.  The idea was that circulation could work out of one office, for readers in say, Dayton and Atlanta.  Or for readers in Sacramento and Raleigh, I suppose.   Except that this was way off the mark.  It turned out that newspapers were fundamentally a local enterprise.  Surprise!  Local reporting, local readers, service from another state.  What’s incongruent here?  Imagine calling a phone bank in India to put a vacation hold on your paper.  Well, that’s sort of what they envisioned.

With the vision of new profits, banks went on a buying spree.  You will remember that Knight Ridder was purchased by McClatchy.  Times Mirror was purchased by Tribune.  Tribune later sold Newsday, acquired in that deal, for $650 million, to Cablevision.  Thomson shed its newspapers, selling them to Cox.  Lee Enterprises bought Howard.  Lee bought Pulitzer.  In a smaller deal, Ottaway (since 1970 a part of Dow Jones) sold four papers to Community Newspaper Holdings.  The rest of Ottaway became part of  News Corp , when in 2007, News Corp bought Dow Jones.

At the time, the public was less concerned about the impact this would have about the ongoing viability of the model.  Some did complain about the lack of diversity of opinion.  The people at the FCC appeared to have no problem with it.  So, there is another similiarity – regulators put their faith in markets, in spite of citizen protest.

These turned out to be awful deals.  Tribune, having paid $8 billion for Times Mirror, recently wrote down the value of its acquisition by approximately $3.8 billion. It has filed for bankruptcy protection.  Cablevision wrote down about more than half ($402 million) of the value of Newsday.  Lee is almost bankrupt as well. In 2008, it took write-downs of $1.4 billion on its recent spending spree, and another $180 million at the end of this year. The list goes on and on.

Where is all of this heading?  Well, our civic life is going to suffer.  Citizen blogging may have its place, but it is hard to imagine that it will be the same.  Where will the revenue streams appear to support the number of reporters (skilled) that print once employed?

Like a lot of Americans, these papers have more debt than they can handle.  Many newspapers never should have gotten the financing for these acquisitions.  Lee is a classic example – they are still witnessing an operating profit, but debt service is killing them.  KPMG may not be willing to certify them as an ongoing concern.  We’d still have our papers.

There isn’t going to be a TARP for newspapers, though. They are going to pass on.  Non-profits might emerge.  Certainly, Poyntner has done a great job in St. Petersburg. We’ll see.