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Nobody can keep track of all the big bank fraud cases #TBTF #OWS
If you’re anything like me, this week’s announcement that 5 banks – JP Morgan, Citigroup, Barclays, RBS, and UBS – have pleaded guilty to manipulating foreign exchange markets is both confusing and more than vaguely familiar.
It was a classic price fixing cartel, and it went along these lines: these big banks had all the business, being so big, and the traders got on a chat room and agreed to manipulate prices to make more money. The myth of the free market was suspended, and eventually they got caught, in large part because of leaving stupid messages like “If you aint cheating, you aint trying”.
But hold on, I could have sworn that these same banks, or a similar list of them, got in trouble for this already. Or was that LIBOR interest rate manipulation? Or was that for mortgage fraud? Or was that for robosigning?
Shit. I mean, here I am, someone who is actively taking an interest in financial reform, and I actually can’t remember all the fines, settlements, and fake guilty pleas to criminal charges.
I say “fake” because – yet again – nobody has gone to jail, and the banks found guilty have immediately been given waivers by the SEC to continue business as usual. According to this New York Times article, the Justice Department even delayed announcing the charges by a week so those waivers could be granted in time so that business wouldn’t even be disrupted. For fuck’s sake.
But again, same thing as all the other “big bank events” that we’ve grown tired of in the last few years. What it comes down to is fines, but then again, the continued quantitative easing has essentially been a gift of cash to those same banks, so I wouldn’t even count the fines as meaningful.
In fact I’d call this whole thing theater. And really repetitive, boring theater at that, where we all nod off because every scene is the same and they’ve turned up the heat too high.
The saddest part is that, given how very little we’ve improved about the integrity of the markets – I’d argue that we’ve actually gone backwards on incentives not to commit fraud, since now everything has been formalized as pathetic – we are bound to continue to see big banks committing fraud and then not getting any actual punishment. And we will all be so bored we won’t even keep track, because nobody can.
Occupy Summer School #OWS
I’m super excited to announce that the Alt Banking group is creating a summer school program, which we’re calling Occupy Summer School. The project has a webpage with more details, but briefly:
- It will last three weeks, taking place in a downtown Brooklyn high school.
- The first week we will bring in cool and inspiring organizers and activists who will hopefully connect with the kids
- The second week we will delve into topics and the kids will decide what they care about and, by the end of the week, what they will protest and how,
- The third week the students will plan the protest, including training on safe protesting techniques, they will stage it and write it up, and hopefully help the issue get media attention.
- So far we have ideas for the first week, including a few of our really interesting and thoughtful members going to facilitate conversations around what’s going on in Baltimore, and how to stage a creative protest, involving our very own Marni Halasa:
- We are starting to line up speakers for the second week, but we are waiting on a focus group to come back to us from the students to see what topics they get really excited about. We want them to more or less lead the way.
What an exciting project! I can’t wait for it to start.
The Police State is already here.
The thing that people like Snowden are worried about with respect to mass surveillance has already happened. It’s being carried out by police departments, though, not the NSA, and its targets are black men, not the general population.
Take a look at this incredible Guardian article written by Rose Hackman. Her title is, Is the online surveillance of black teenagers the new stop-and-frisk? but honestly that’s a pretty tame comparison if you think about the kinds of permanent electronic information that the police are collecting about black boys in Harlem as young as 10 years old.
Some facts about the program:
- 28,000 residents are being surveilled
- 300 “crews,” a designation that rises to “gangs” when there are arrests,
- Officers trawl Facebook, Instagram, Twitter, YouTube, and other social media for incriminating posts
- They pose as young women to gain access to “private” accounts
- Parents are not notified
- People never get off these surveillance lists
- In practice, half of court cases actually use social media data to put people away
- NYPD cameras are located all over Harlem as well
We need to limit the kind of information police can collect, and put limits on how discriminatory their collection practices are. As the article points out, white fraternity brothers two blocks away at Columbia University are not on the lists, even though there was a big drug bust in 2010.
For anyone who wonders what a truly scary police surveillance state looks like, they need look no further than what’s already happening for certain Harlem residents.
Driving While Black in the Bronx
This is the story of Q, a black man living in the Bronx, who kindly allowed me to interview him about his recent experience. The audio recording of my interview with him is available below as well.
Q was stopped in the Bronx driving a new car, the fourth time that week, by two rookie officers on foot. The officers told Q to “give me your fucking license,” and Q refused to produce his license, objecting to the tone of the officer’s request. When Q asked him why he was stopped, the officer told him that it was because of his tinted back windows, in spite of there being many other cars on the same block, and even next to him, with similarly tinted windows. Q decided to start recording the interaction on his phone after one of the cops used the n-word.
After a while seven cop cars came to the scene, and eventually a more polite policeman asked Q to produce his license, which he did. They brought him in, claiming they had a warrant for him. Q knew he didn’t actually have a warrant, but when he asked, they said it was a warrant for littering. It sounded like an excuse to arrest him because Q was arguing. He recorded them saying, “We should just lock this black guy up.”
They brought him to the precinct and Q asked him for a phone call. He needed to unlock his phone to get the phone number, and when he did, the policeman took his phone and ran out of the room. Q later found out his recordings had been deleted.
After a while he was assigned a legal aid lawyer, to go before a judge. Q asked the legal aid why he was locked up. She said there was no warrant on his record and that he’d been locked up for disorderly conduct. This was the third charge he’d heard about.
He had given up his car keys, his cell phone, his money, his watch and his house keys, all in different packages. When he went back to pick up his property while his white friend waited in the car, the people inside the office claimed they couldn’t find anything except his cell phone. They told him to come back at 9pm when the arresting officer would come in. Then Q’s white friend came in, and after Q explained the situation to him in front of the people working there, they suddenly found all of his possessions. Q thinks they assumed his friend was a lawyer because he was white and well dressed.
They took the starter plug out of his car as well, and he got his cell phone back with no videos. The ordeal lasted 12 hours altogether.
“The sad thing about it,” Q said, “is that it happens every single day. If you’re wearing a suit and tie it’s different, but when you’re wearing something fitted and some jeans, you’re treated as a criminal. It’s sad that people have to go through this on a daily basis, for what?”
Here’s the raw audio file of my interview with Q:
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Review: The New Prophets of Capital
Last night I finished reading Nicole Aschoff’s new book, The New Prophets of Capital, which was published as part of the Jacobin series of books. Here’s a description from their website of their book series:
The Jacobin series features short interrogations of politics, economics, and culture from a socialist perspective, as an avenue to radical political practice. The books offer critical analysis and engagement with the history and ideas of the Left in an accessible format.
And by the way, if you don’t know what Jacobin magazine is, you should take a look. I recently signed up to receive the paper versions of all of their magazines and books, which was my version of a donation to a good and very thoughtful cause.
Aschoff’s book explores the storytelling nature of modern capitalism and neoliberalism, and focuses on the underlying assumptions, as seen through four larger-than-life figures: Sheryl Sandberg, Whole Foods founder John Mackey, Oprah, and Bill (and Melinda) Gates.
She does a good job of explaining, in plain, non-academic English, what’s wrong with these people’s messages. If you’re wondering what exactly bothers you about the Lean In movement, for example, take a look at the chapter on Sandberg, the book is worth it just for that.
The book is short, only 6 chapters. The first chapter gives reasoning for the book, describing how storytelling matters when we think about how culture works, and then the heart of the book follows with a chapter on each person listed above – the “prophets” – with their particular flavor. There’s also a concluding chapter, which is the least convincing, as it was extremely condensed and left too much reasoning unexplained.
The unifying theme throughout the four chapters devoted to the prophets is how these four people manage to be both public critics and private protectors of the current economic system, with an emphasis on protection.
So when Sandberg tells us to lean in, she’s telling us to conform to the way things are, not to threaten it in any way. When Oprah tells us that we have it in ourselves to live fantabulous lives, she’s giving us personal responsibility to be happy and fulfilled, and structural inequality is not acknowledged or recognized. When John Mackey or Bill Gates sees a problem, they set up a “free market solution” to that problem, even though, by definition, poor people don’t have money to pay for what they need.
While none of the book’s material was entirely new to me, it was interesting to see the connections deliberately made between the prevalent high-level business mindset and the individual choices we make for ourselves based on how we imagine the world works. If I really believed the Sandberg line, I’d still be working at a hedge fund, doing my best to please my colleagues and ignore my kids. If I had bought into Oprah’s context-free attitude, I’d blame people for their poverty and think it amounts to bad decision making.
The book isn’t entirely consistent. It maintains both that Bill Gates believes entirely in a free market and that he undemocratically influences education reform in this country with his money. Maybe those are consistent claims but it’s not obvious to me (although I agree with the undemocratic nature of his mega-philanthropy).
It’s a good book. I’d like a bunch of people to read it so we can have a discussion group. I also get the impression that Aschoff could write one of these a year, and I plan to follow her work.
Affordable Housing Needs a Reset #OWS
I’m super proud of the latest Huffington Post piece that Alt Banking put out entitled Affordable Housing Needs a Reset. Here’s an excerpt:
We’ve been hearing a lot lately from New York Mayor de Blasio on his affordable housing plan. He says he will “build or preserve” 200,000 housing units, but the plan would only build 8,000 units a year. Unless it is radically changed, the mayor’s plan will squander public assets, enrich real estate developers, but do very little for the record number of people living in the shelter system or at risk of landing there.
Let’s first talk about how the term “affordable housing” is defined and whether it jives with our concept of the kinds of places New Yorkers can actually afford to live in. The mayor’s plan defines an apartment renting for $41,500 a year as affordable because a family of four with $138,435 in income can afford it ― even though that is more than twice the actual New York City median 4-person household income of $63,000. That is, most New Yorkers cannot afford an “affordable apartment” by the mayor’s standards.
The mayor’s plan tracks the pattern New York City has religiously followed for quite some time of trying to “incentivize” private development. The city effectively pays a fortune to private developers to build this kind of stuff. Here is a frightening statistic from the Association for Neighborhood and Housing Development: in 2013, New York City gave private developers a pass on $1.2 billion in taxes in order to stimulate the building of 153,000 units of housing ― just 12,000 of which met the messed-up definition of affordability. Hard to believe we couldn’t have done a lot better by simply collecting those taxes.
Read the rest of the essay here.
Mortgage tax deductions and gentrification
Yesterday we had a tax expert come talk to us at the Alternative Banking group. We mostly focused on the mortgage tax deduction, whereby people don’t have to pay taxes on their mortgage. It’s the single biggest tax deduction in America for individuals.
At first blush, this doesn’t seem all that interesting, even if it’s strange. Whether people are benefitting directly from this, or through their rent being lower because their landlord benefits, it’s a fact of life for Americans. Whoopdedoo.
Generally speaking other countries don’t have a mortgage tax deduction, so we can judge whether it leads to overall more homeownership, which was presumably what it was intended for, and the data seems to suggest the answer there is no.
We can also imagine removing the mortgage tax deduction, and we quickly realize that such a move would seriously impair lots of people’s financial planning, so we’d have to do it very slowly if at all.
But before we imagine removing it, is it even a problem?
Well, yes, actually. Let’s think about it a little bit more, and for the sake of this discussion we will model the tax system very simply as progressive: the more income you collect yearly, the more taxes you pay. Also, there is a $1.1 million (or so) cap on the mortgage tax deduction, so it doesn’t apply to uber wealthy borrowers with huge houses. But for the rest of us it does apply.
OK now let’s think a little harder about what happens in the housing market when the government offers a tax deduction. Namely, the prices go up to compensate. It’s kind of like a rebate: this house is $100K with no deduction, but with a $20K deduction I can charge $120K for it.
But it’s a little more complicated than that, since people’s different income levels correspond to different deductions. So a lower middle class neighborhood’s houses will be inflated by less than an upper middle class neighborhood’s houses.
At first blush, this seems ok too: so richer people’s houses are inflated slightly more. It means it’s slightly harder for them to get in on the home ownership game, but it also means that, come time to sell, their house is worth more. For them, a $400K house is inflated not by 20% but by 35%, or whatever their tax bracket is.
So far so good? Now let’s add one more layer of complexity, namely that, actually, neighborhoods are not statically “upper middle class” or “lower middle class.” As a group neighborhoods, and their associated classes, represent a dynamical system, where certain kinds of neighborhoods expand or contract. Colloquially we refer to this as gentrification or going to hell, depending on which direction it is. Let’s explore the effect of the mortgage tax deduction on how that dynamical system operates.
Imagine a house which is exactly on the border between a middle class neighborhood and an upper-middle class neighborhood. If we imagine that it’s a middle class home, the price of it has only been inflated by a middle-class income tax bracket, so 20% for the sake of argument. But if we instead imagine it is in the upper-middle class neighborhood, it should really be inflated by 35%.
In other words, it’s under-priced from the perspective of the richer neighborhood. They will have an easier time affording it. The overall effect is that it is easier for someone from the richer neighborhood to snatch up that house, thereby extending their neighborhood a bit. Gentrification modeled.
Put it another way, the same house at the same price is more expensive for a poorer person because the mortgage tax deduction doesn’t affect everyone equally.
Another related point: if I’m a home builder, I will want to build homes with a maximal mark-up, a maximal inflation level. That will be for the richest people who haven’t actually exceeded the $1.1 million cap.
Conclusion: the mortgage tax deduction has an overall negative effect, encouraging gentrification, unfair competition, and too many homes for the wealthy. We should phase it out slowly, and also slowly lower the cap. At the very very least we should not let the cap rise, which will mean it effectively goes down over time as inflation does its thing.
If this has been tested or observed with data, please send me references.
A Call For Justice #OccupyCitibank
In the beautiful words of Cleveland Browns wide receiver Andrew Hawkins:
I was taught that justice is a right that every American should have. Also justice should be the goal of every American. I think that’s what makes this country. To me, justice means the innocent should be found innocent. It means that those who do wrong should get their due punishment. Ultimately, it means fair treatment. So a call for justice shouldn’t offend or disrespect anybody. A call for justice shouldn’t warrant an apology.
…
Those who support me, I appreciate your support. But at the same time, support the causes and the people and the injustices that you feel strongly about. Stand up for them. Speak up for them. No matter what it is because that’s what America’s about and that’s what this country was founded on.
I think I will take him up on that suggestion, this morning at Citigroup Headquarters, 399 Park Avenue (near 54th Street) at 10:30am, in part inspired by Liz Warren’s speech from last week. See you there!
Join Occupy the SEC in Pushing Congress to Reject Dodd-Frank Deregulation
There’s some tricky business going on right now in politics, with a bunch of ridiculous last-minute negotiations to roll back elements of Dodd-Frank and aid Wall Street banks in the current budget deal. Hell, it’s the end of the year, and people are distracted, so the public won’t mind if the banks get formal government backing for their risky trades, right?
Occupy the SEC has a petition you can sign, located here, which is opposed to these changes. You might remember Occupy the SEC for their incredible work in public comments on the Dodd-Frank bill in the first place. I urge you to go take a look at their petition and, if you agree with them, sign it.
After you sign the petition, feel free to treat yourself to some holiday satire and cheer, namely The 2014 Haters Guide To The Williams-Sonoma Catalog.
Video cameras won’t solve the #EricGarner situation, but they will help
As many thoughtful people have pointed out already, Eric Garner’s case proves that video evidence is not a magic bullet to combat and punish undue police brutality. The Grand Jury deemed such evidence insufficient for an indictment, even if the average person watching the video cannot understand that point of view.
Even so, it would be a mistake to dismiss video cameras on police as entirely a bad idea. We shouldn’t assume no progress could be made simply because there’s an example which lets us down. I am no data evangelist, but neither am I someone who dismisses data. It can be powerful and we should use its power when we can.
And before I try to make the general case for video cameras on cops, let me make one other point. The Eric Garner video has already made progress in one arena, namely public opinion. Without the video, we wouldn’t be seeing nationwide marches protesting the outrageous police conduct.
A few of my data nerd thoughts:
- If cops were required to wear cameras, we’d have more data. We should think of that as building evidence, with the potential to use it to sway grand juries, criminal juries, judges, or public opinion.
- One thing I said time after time to my students this summer at the data journalism program I directed is the following: a number by itself is usually meaningless. What we need is to compare that number to a baseline. The baseline could be the average number for a population, or the median, or some range of 5th to 95th percentiles, or how it’s changed over time, or whatnot. But in order to gauge any baseline you need data.
- So in the case of police videotapes, we’d need to see how cops usually handle a situation, or how cops from other precincts handle similar situations, or the extremes of procedures in such situations, or how police have changed their procedures over time. And if we think the entire approach is heavy handed, we can also compare the data to the police manual, or to other countries, or what have you. More data is better for understanding aggregate approaches, and aggregate understanding makes it easier to fit a given situation into context.
- Finally, the cameras might also change their behavior when they are policing, knowing they are being taped. That’s believable but we shouldn’t depend on it.
- And also, we have to be super careful about how we use video evidence, and make sure it isn’t incredibly biased due to careful and unfair selectivity by the police. So, some cops are getting in trouble for turning off their cameras at critical moments, or not turning them on ever.
Let’s take a step back and think about how large-scale data collection and mining works, for example in online advertising. A marketer collects a bunch of data. And knowing a lot about one person doesn’t necessarily help them, but if they know a lot about most people, it statistically speaking does help them sell stuff. A given person might not be in the mood to buy, or might be broke, but if you dangle desirable good in front of a whole slew of people, you make sales. It’s a statistical play which, generally speaking, works.
In this case, we are the marketer, and the police are the customers. We want a lot of information about how they do their job so when the time comes we have some sense of “normal police behavior” and something to compare a given incident to or a given cop to. We want to see how they do or don’t try to negotiate peace, and with whom. We want to see the many examples of good and great policing as well as the few examples of terrible, escalating policing.
Taking another step back, if the above analogy seems weird, there’s a reason for that. In general data is being collected on the powerless, on the consumers, on the citizens, or the job applicants, and we should be pushing for more and better data to be collected instead on the powerful, on the police, on the corporations, and on the politicians. There’s a reason there is a burgeoning privacy industry for rich and powerful people.
For example, we want to know how many people have been killed by the police, but even a statistic that important is incredibly hard to come by (see this and this for more on that issue). However, it’s never been easier for the police to collect data on us and act on suspicions of troublemakers, however that is defined.
Another example – possibly the most extreme example of all – comes this very week from the reports on the CIA and torture. That is data and evidence we should have gotten much earlier, and as the New York Times demands, we should be able to watch videos of waterboarding and decide for ourselves whether it constitutes torture.
So yes, let’s have video cameras on every cop. It is not a panacea, and we should not expect it to solve our problems over night. In fact video evidence, by itself, will not solve any problem. We should think it as a mere evidence collecting device, and use it in the public discussion of how the most powerful among us treat the least powerful. But more evidence is better.
Finally, there’s the very real question of who will have access to the video footage, and whether the public will be allowed to see it at all. It’s a tough question, which will take a while to sort out (FOIL requests!), but until then, everyone should know that it is perfectly legal to videotape police in every place in this country. So go ahead and make a video with your camera when you suspect weird behavior.
FATML and next Saturday’s Eric Garner protest
At the end of this week I’ll be heading up to Montreal to attend and participate in a one-day workshop called Fairness, Accountability, and Transparency in Machine Learning (FATML), as part of a larger machine learning conference called NIPS. It’s being organized by Solon Barocas and Moritz Hardt, who kindly put me on the closing panel of the day with Rayid Ghani, who among other things runs the Data Science for Social Good Summer Fellowship out of the University of Chicago, and Foster Provost, an NYU professor of Computer Science and the Stern School of Business.
On the panel, we will be discussing examples of data driven projects and decisions where fairness, accountability, and transparency came into play, or should have. I’ve got lots!
When I get back from Montreal, late on Saturday morning, I’m hoping to have the chance to make my way over to Washington Square Park at 2pm to catch a large Eric Garner protest. It’s actually a satellite protest from Washington D.C. called for by Rev. Al Sharpton and described as “National March Against Police Violence”. Here’s what I grabbed off twitter:
White progress
It’s pretty hard to find solace in the Eric Garner situation, but since I have been thinking almost exclusively about this stuff, and since by nature I don’t like to be consistently hopeless (it’s too exhausting), I have come up with some positive thinking around it.
Namely, basically what Chris Rock has been saying: it’s exposing white progress, and it’s been a long time coming. The number of Facebook friends I have, who are very comfortably upper middle class and white, and who are outspoken, ashamed, and disgraced by the Eric Garner decision is meaningful. The protests are widespread and are multiracial. It is not a black person’s problem anymore.
In my Occupy group, which meets weekly on Sunday afternoons, we’ve been talking a lot about white privilege, and whether that phrase is appropriate, and whether we can come up with a better one. Because for the most part, “white privilege” really refers to the rights white people have, which everyone should have, but which not everyone has.
For example, it is my white privilege not to worry about my three sons getting shot by the police. But that’s not a privilege, it’s a right. I’m entitled to that security. Everyone is, but not everyone gets to have it. Maybe we should call it “white entitlement.”
[There’s a problem with that name too, of course, which is that the Republicans stole the word “entitlement” away from us and made it a dirty word. So, Social Security is an “entitlement”, for example, which we should maybe be ashamed of. But not really, since we pay for it. So we should take that word back anyway, so let’s just kill two birds with one stone.]
But every now and then “privilege” is exactly appropriate, and no better examples exist than what we are now seeing on Twitter under the hashtag #crimingwhilewhite, which was also covered in the Times. Examples:
So yeah, white progress. I’m looking for a way to be proud to live in this country, and white progress might be the way I can do it.
The re-emergence of debtors’ prisons
Yesterday at my weekly Occupy meeting we watched videos called To Prison For Poverty by Brave New Films (Part I and Part II) before discussing them. Take a look, they are well done:
It’s not the first time this issue has come up recently; the NPR investigations into court fees from last May, called Guilty and Charged, led to a bunch of reports on issues similar to this. Probably the closest is the one entitled Unpaid Court Fees Land The Poor In 21st Century Debtors’ Prisons.
A few comments:
- Ferguson is now famous for having a basically white police force patrolling a basically black populace. But it also has this fines-and-fees-and-jails problem: fines and fees associated to mostly traffic violations accounted for 21% of the city’s budget in 2013. And there were more arrest warrants than people in Ferguson last year, mostly for non-violent offenses.
- But the debtors’ prison problem isn’t just a racial issue. The people profiled in the above video were white, which could have been a documentarian’s decision, but in any case is a fact: the poverty-to-prison system is screwing all poor people, not just minorities. This is in spite of the fact that the Supreme Court found it unconstitutional in the landmark 1983 case, Bearden v. Georgia.
- This sense that “everyone is screwed” creates solidarity among poor whites and poor blacks, and especially young people. The Ferguson protests have been multi-racial, for example. And if you’ve read The New Jim Crow by Michelle Alexander, you’ll recognize a historical pattern whereby political change happens when poor whites and poor blacks start working together.
- One interesting and scary question to emerge from the above stories is, how did so many fees and fines get attached to low-level misdemeanors in the first place? It seems like privatized probation and prison companies have a lot to do with it.
- In some cases, they are putting people in jail for days and weeks, which costs the government hundreds of dollars, in order to capture a small fee. That makes no sense.
- In other cases, the fees accumulate so fast that the poor person who committed the misdemeanor ends up being responsible for an outrageous amount of money, far surpassing the scale of the original misdeed, and all because they are poor. That also makes no sense.
- It’s not just for prisons either; all sorts of functions that we consider governmental functions have been privatized, like health and human services: child welfare services, homeless services, half-way houses, and more.
- In the worst cases, the original intent of the agency (“putting people on probation so they don’t have to be in jail”) has been perverted into an entirely different beast (“putting them in jail because they can’t pay their daily $35 probation fees”). The question we’d like to investigate further is, how did that happen and why?
How to ignore your family on Thanksgiving
There has been lots of advice lately on how to have a civil conversation at Thanksgiving – NPR ran a piece yesterday on “topics both Democrats and Republicans enjoy”, for example, which made me slightly annoyed and amused – perhaps because I am neither – and inspired this somewhat alternative list of ways to enjoy or otherwise ignore your family today.
- Football, obviously. Few people actually know the rules of this game, never mind the names of the various positions of the players on the field. I personally have been watching football for more than 20 years and I still really don’t know what a tackle or a tight end is, nor exactly how to recognize a blitz. No matter, that’s not the point. The point is to choose a team and root for them blindly. Ignore the long-term brain damage.
- If you don’t like football, may I suggest An Idiot Abroad, a ridiculous travel show from Britain created by Ricky Gervais. It’s embarrassing and awkward, obv, so relative to those situations dinner with your family will seem seamless and well-meaning. I say this even though The Office, also developed by Ricky Gervais, was on NPR’s list. Also, having a The Office marathon is really not a bad idea either.
- Drinking. Adults can go for beer and spiked eggnog, but kids can get totally spaced out with just the normal eggnog. I’ve seen it before, it has a crazy high, especially if you add nutmeg. Buy tons.
- The above suggestions should keep you busy up to and including the beginning of dinner. Be sure you don’t actually talk before dinner, because then you’d run out of things to say during the eating part.
- For the actual dinner conversation, may I suggest keeping things light. For example, I plan to provoke a fun-loving conversation on who thinks the Ferguson grand jury’s lack of indictment serves justice and who thinks it exposes a broken system. It comes down to who trusts the system and who the system works for.
- If that seems awkward, move on to white privilege in general. If there’s a denier at the table, throw out some data: black teenagers are 21 times more likely to be killed by a cop than white teenagers, for example, or if that seems hyperbolic, move on to the social mobility matrices for blacks versus whites in Figures 8 and 9 of the appendix of this paper. Nice and aggregate. I plan to use a projector.
- Hahaha, just kidding! We don’t want to scare the kids. Instead, we’ll stick to the usual, where we enormously overconsume and simultaneously discuss upcoming diet plans, and/or vivaciously and competitively plan our impending holiday shopping whilst worrying about money.
- For a nice surprise, sign up your whole family for spots on the bus to participate in a Black Friday Walmart protest tomorrow morning in North Bergen, New Jersey. Bus leaves at 8am. Come one, come all!
Alt Banking in Huffington Post #OWS
Great news! The Alt Banking group had a piece published today in the Huffington Post entitled With Economic Justice For All, about our hopes for the next Attorney General.
For the sake of the essay, we coined the term “marble columns” to mean the opposite of “broken windows.” Instead of getting arrested for nothing, you never get arrested, as long as you work at a company with marble columns. For more, take a look at the whole piece!
Also, my good friend and bandmate Tom Adams (our band, the Tomtown Ramblers, is named after him) will be covering for me on mathbabe for the next few days while I’m away in Haiti. Please make him feel welcome!
Bitcoin provocations
Yesterday at the Alt Banking meeting we had a special speaker and member, Josh Snodgrass (not his real name), come talk to us about Bitcoin, the alternative “cryptocurrency”. I’ll just throw together some fun and provocative observations that came from the meeting.
- First, Josh demonstrated how quickly you can price alternative currencies, by giving out a few of our Alt Banking “52 Shades of Greed” cards and stipulating that the jacks (I had a jack) were worth 1 “occudollar” but the 2’s (I also had a 2) were worthy 1,000,000,000 occudollars. Then he paid me $1 for my jack, which made me a billionaire. After thinking for a minute, I paid him $5 to get my jack back, which made me a multibillionaire. Come to think of it I don’t think I got that $5 back after the meeting.
- There’s a place you can have lunch in the city that accepts Bitcoin. I think it’s called Pita City.
- The idea behind Bitcoin is that you don’t have to have a trustworthy middleman in order to buy stuff with it. But in fact, the “bitcoin wallet” companies are increasingly playing the role of the trusted middlemen, especially considering it takes on average 10 minutes, but sometimes up to 40 minutes, of computing time to finish a transaction. If you want to leave the lunch place after lunch, you’d better have a middleman that the shop owner trusts or you could be sitting there for a while.
- People compare bitcoin to other alternative currencies like the Ithaca Hours, but there are two very important differences.
- First, Ithaca Hours, and other local currencies, are explicitly intended to promote local businesses: you pay for your bread with them, and the bread company you give money to buys ingredients with them, and they need to buy from someone who accepts them, which is by construction a local business.
- Second, local currencies like the Madison East Side Babysitting Coop’s “popsicle currency” are very low tech, used my middle class people to represent labor, whereas Bitcoin is highly technical and used primarily by technologists and other fancy people.
- There is class divide and a sophistication divide here, in other words.
- Speaking of sophistication, we had an interesting discussion about whether it would ever make sense to have bitcoin banks and – yes – fractional reserve bitcoin banking. On the one hand, since there’s a limit to the number of overall bitcoins, you can’t have everyone pretending they can pay a positive interest rate on all the bitcoin every year, but on the other hand a given individual can always write a contract saying they’d accept 100 bitcoins now and pay back 103 in a year, because it might just be a bet on the dollar value of bitcoins in a year. And in the meantime that person can lend out bitcoins to people, knowing full well they won’t all be spent at once. Altogether that looks a lot like fractional reserve bitcoin banking, which would effectively increase the number of bitcoins in circulation.
- Also, what about derivatives based on bitcoins? Do they already exist?
- Remaining question: will bitcoins ever actually be usable and trustworthy for people to send money to their families across the world below the current cost? And below the cost of whatever disruptions are being formulated in the money business by Paypal and Google and whoever else?
Update: there will be a Bitcoin Hackathon at NYU next weekend (hat tip Chris Wiggins). More info here.
Bad Paper by Jake Halpern
Yesterday I finished Jake Halpern’s new book, Bad Paper: Chasing Debt From Wall Street To The Underground.
It’s an interesting series of close-up descriptions of the people who have been buying and selling revolving debt since the credit crisis, as well as the actual business of debt collecting. He talks about the very real problem, for debt collectors, of having no proof of debt, of having other people who have stolen on your debt trying to collect on it at the same time, and of course the fact that some debt collectors resort to illegal threats and misleading statements to get debtors – or possibly ex-debtors, it’s never entirely clear – to pay up or suffer the consequences. An arms race of quasi-legal and illegal cultural practices.
Halpern does a good job explaining the plight of the debt collectors, including the people hired for the call centers. It’s the poor pitted against the poorer here, a dirty fight where information asymmetry is absolutely essential to the profit margin of any given tier of the system.
Halpern outlines those tiers well, as well as the interesting lingo created by this subculture centered, at least until recently, in Buffalo, New York. People at the top are credit card companies themselves or hedge fund buyers from credit card companies; in other words, people who get “fresh debt” lists in the form of excel spreadsheets, where the people listed have recently stopped paying and might have some resources to pull. Then there are people who deal in older debt, which is harder to collect on. After that are people who have yet older debt which may or may not be stolen, so other collectors might simultaneously be picking over the carcasses. At the very bottom of the pile, from Halpern’s perspective, come the lawyers. They bring debtors to court and try to garnish wages.
Somewhat buried at very end of Halpern’s book is some quite useful information for the debtors. So for example, if you ever get dragged to court by a debt collection lawyer,
- definitely show up (or else they will just garnish your wages)
- ask for proof that they own the debt and how you spent it. They will likely not have such documentation and will dismiss your case.
Overall Bad Paper is a good book, and it explains a lot of interesting and useful information, but from my perspective, being firmly on the side of (most of) the debtors, everyone who gets a copy of the book should also get a copy of Strike Debt’s Debt Resistors’ Operation Manual, which has way more useful information, and even form letters, for the debtor.
As far as real solutions, we see the usual problems: underfunded and impotent regulators in the FTC, the CFPB, and the Attorney General’s office, as well as ridiculously small fines when actually caught that amount to fractions of the profit already made by illegal tactics. Everyone is feasting, even when they don’t find much meat on the bones.
Given how big a problem this is, and how many people are being pursued by debt collectors, you’d think they might set up a system of incentives so lawyers can make money by nailing illegal actions instead of just leveraging outdated information and trying to squeeze poor people out of their paychecks.
The bigger problem, once again, is that so many people are flat broke and largely go into debt for things like emergency expenses. And yes, of course there are people who buy a bunch of things they don’t need and then refuse to pay off their debts – Halpern profiles one such person – but the vast majority of the people we’re talking about are the struggling poor. It would be nice to see our country become a place where we don’t need so much damn debt in the first place, then the scavengers wouldn’t have so many rubbish piles to live off of.
Detroit’s water problem and the Koch brothers
Yesterday at the Alt Banking group we discussed the recent Koch brothers article from Rolling Stone Magazine, written by Tim Dickinson. You should read it now if you haven’t already.
There are tons of issues that came up, but one of them in particular was the control of information that the Koch brothers maintain over their activities. If you read the article, you realize that the brothers are die-hard libertarians but at some point realized that saying out loud that they are die-hard libertarians was working against them, specifically in terms of getting into trouble for polluting the environment with their chemical factories, so instead they started talking about how much they love the environment and work to protect it.
It’s not that they stopped polluting, it’s that their rhetoric changed. In fact there’s no reason to think they stopped polluting, since they still had plenty of regulators going after them for various violations. Since their apparent change of heart they’ve also decided to be publicly philanthropic, giving money to hospitals, and Lincoln Center, and even PBS (see how that worked out on Stephen Colbert).
The problem with all this window dressing is that people are actually starting to think the Koch brothers may be good guys after all, and what with the fancy lawyers that the Koch brothers hire to control information about them, the public view is very skewed.
For example, how many economists have they bought and inserted into universities nationwide? We will never really know. There’s no way we can keep a score sheet with “good deeds” on one side and “shitty deeds” on the other. We don’t have enough information for the second side.
The exception to this information control is when they get in trouble with regulators and it becomes a matter of public record. And thank goodness those court documents exist, and thank goodness investigative journalist Tim Dickinson did all the work he did to explain it to us.
A couple of conclusions. First, we complain a lot about the bank settlements for the misdeeds of the big banks. Nobody went to jail, and the system is just as likely to repeat this kind of thing again as it was in 2005. But another problem with this out-of-court settlement process, we now realize, is that we actually don’t know what happened except in big, vague terms. There will be no Tim Dickinson reporting on big banks.
Second, the connection to Detroit. Right now there are 15,000 residents of Detroit whose water has been shut down, basically so they can privatize the water system with the best deal from Wall Street. They owe less than $10 million, on average a measly $540. The United Nations has called this water shutoff a violation of the human rights of the people of Detroit.
If you feel bad about that, you can donate to someone’s water bill directly, which is kind of neat.
Or is it? Shouldn’t Obama be declaring Detroit a state of emergency? Wouldn’t we be doing that in another city that had 15,000 residents without water? Why is this an exception to that rule? Because the victims are poor? Don’t we recognize Detroit as a place where it’s unusually difficult to find work? Are we going to allow people to shut off heat as well, once winter comes?
Once you think about it, the idea of a “private solution” to the Detroit water emergency seems wrong. In fact, you can almost imagine David Koch coming to the rescue here, as part of his “positive optics” campaign, and bailing out the Detroit citizens and then, for good measure, buying up the water system altogether. A hero!
And if you’re in that mode, you can think about the asymptotic limit of that approach, whereby a few very rich people gradually take control of resources, and then there are intermittent famines of various types in different cities, and the rich people swoop in and heroically save the day whilst scooping up even more ownership of what used to be public infrastructure. And we might thank them every time, because it was a dire situation and they didn’t really need to do that with all their money.
It’s frustrating to live in a country that has so many resources but which can’t seem to get it together to meet the basic human needs of its citizens. We need a basic income, at least for the people in Detroit, at least right now.
Climate Convergence march on Sunday
This Sunday there’ll be a huge march to raise awareness about climate change. It’s called the Climate Convergence, and the Alternative Banking group is going to be there.
If you want to join us, come to 79th and Central Park West at 11am, in front of the Natural History Museum. We will have signs and a banner. See you there, I hope!
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