From the cloisters

So last night the Best Western Zinon. When I arrived that part of the city was consumed by something like a Sunday market, and it was pretty intense, thronged with people from different parts of the world. I got a room up on the 8th floor with a big balcony but no furniture on it, and across the way there was an old dude who had a bed set up out on his covered porch area, sitting on the side of the bed reading, partially obscured by his laundry hanging there. It was pretty good living, though this morning I saw his son and realized the al fresco sleeping may have been motivated by space constraints too.

After the crowds died back, the neighborhood was pretty cool, with a variety of restaurants and bars (including Kurdish, though they were out of everything good). Sick of grilled meat and tourist menus, I had Chinese, then I watched Inter play Milan through the window of a bar with 6 seats. There were cheap, old school internet cafes everywhere, where people from Africa and the Middle East were busy keeping in touch with home.

By now I have been transported to the five star Hotel Pentelikon in the leafy (but still chaotic) suburb of Kifasia, where I prepare for tomorrow's meeting while trying to ignore the chaos in the markets and the freakish escalation of histrionics from various representatives of the enraged masses, eager for the head of Henry Paulson and anyone else who would take their hard-earned dollars. I.e. the blogosphere and message boards which I shouldn't read, but which are nonetheless so interesting as a window into the abyss of the long-pampered American soul.

Athens, day 1

Most importantly, I got some sleep on the plane with some pharmacological help, which is a new one for me. That's how I've been able to survive the day.

Took the bus in from the airport and had a good look at how it unrolls. It's surprising to think that Athens and Greece have been populated continuously for millenia, because so very little looks like it's been planned. It has all just happened.

Once in my hotel I discovered that it is indeed in a touristy area but also that, in Greece, it's either touristy and cute or it ain't neither. At least from what I've seen thus far. What's touristy has reason to be. The Acropolis is an intensely commanding space. I hadn't picture it as being such a fortress, way up there on the fortifications. It's easy to imagine why they thought in terms of gods living up on the hills around here.

But the hotel, despite their having told me it was quiet when I called from the States, concerned that the hostel atmosphere might be a bit much, is anything but quiet. They have a big flat panel TV in the courtyard onto which my room faces playing music videos (songs from Grease, no pun intended) for the amusement of American 2osomethings (why aren't they in college). Amstel is sold from the drink machine in the courtyard, and there's a liquor store across the way, so the kids sit in there and drink and smoke. I am quickly being cured of nostalgia for the days of my youth. Tomorrow I move to the Best Western and get a AAA discount. And the early bird special, for good measure.

An allegory

Lets imagine that a water utility, as a cost-saving measure, shortened a water-filtering cycle and started pumping out water that was harmful to downstream users. At the same time, homebuilders and homeowners decided to build more cheaply and leave a filter out of household plumbing. People start getting sick. An uproar ensues.

What should be done? Is culpability the big question here? Government should move right in and assure that people have clean water, by assuming the expense of doing so and figuring out a way to get paid back. It's not a moral question, but a practical one.

People have been getting really worked up about the moral side of the current crisis. The investment banks are easy to point fingers at, because they're opaque and mysterious, but at the end of the day people are mad at them because they earn a bunch of money.

There's a fair amount of anti-Semitism mixed in here too, especially when you start talking about Goldman Sachs. How many messageboard references have I seen to "throwing out the moneylenders from the temple."

Anybody to took out an aggressive loan or did a cash-out refi and got in over their heads was playing the same game as the investment bankers. And/or maxed out credit card debt and snatched up an F150.

I have a 30-year fixed mortgage, and 1996 car with 175000 miles on it, and a portfolio all in registered product, hostage to ERISA. I'm getting raped in this deal, and I ain't bitching. It is what it is.

What have I done with my money through all of this? I put a roof on my house, donated to a soup kitchen, and am getting my windows painted, and I'm tired of listening to red state day traders whine about freedom and taxes.

I'm going to Greece.

When it rains pennies from heaven, it pours

This morning, for the first time, Graham wiped his own butt after taking a dump. And then he said to Mary: "Thank you for letting me ride the bus." How bout them apples.

Tomorrow I head off for Athens, Greece for a weekend of jet lag and dragging my sorry ass around a bunch of archaeological sites and purveyors of grilled lamb in preparation for a meeting on Tuesday. If all goes, well, I'll be returning to the Balkans for further reconnoitering.

For the first couple of nights (the ones on my nickel) I will be staying in this backpacker's dive and will resist the temptation to be lured back to the room of a pair Norwegian-Australian girls to smoke clove cigarettes and drink home-brewed Ouzo bought in a ditch on the south shore of Corfu.

I have sewed a Canadian flag on my bag as subterfuge.

A big day

This morning the school bus came and got Graham for the first time. He didn't freak out at all. He liked it. After school, the bus brought him home.

Also after school, Graham went to the allergist, where the doctor informed him and Mary that he was outgrowing his allergy to dairy, and faster than expected. This means we will be able to go to restaurants and travel like normal people. If we can force ourselves to spend the money, that is.

Natalie, for her part, went with Vivian to the shelter to help her pick out a cat. Two cats.

And Natalie's Iowa test scores came back, and they were better than I am prepared to admit here on the blog. She is rather clever, it would seem.

Somebody help me out here

The Housing and Economic Recovery Act of 2008, signed into law in July, which authorized the recent takeover of Fannie and Freddy, also provided for the merger of the Office of Federal Housing Enterprise Oversight (OFHEO) with the Federal Housing Finance Board (FHFB) to join a new Federal Housing Finance Authority (FHFA). The new organization will have oversight over the 14 GSEs, which is to say F & F and the twelve Federal Home Loan Banks (FHLBs).

The FHFA will be run by the former head of OFHEO, which used to supervise F & F, during the period in which they brought lots of crap onto their balance sheets and ran themselves into the ground in an effort not to cede market share to the investment banks in the exciting new frontiers of mortgage risk.

The FHFB, chartered in 1989 during the S & L party as a successor to the Federal Home Loan Bank Board, formerly oversaw the FHLBs, which have remained a crucial lifeline of liquidity to mortgage lenders throughout the crisis.

In short, the reorg of regulatory agencies gives empowers management of the agency that failed at the expense of the one that succeeded.

What's all the fuss about?

Paulson and Bernanke are of one mind that they need $700 bln NOW. Like they'll be positioned to use it once they've got it. Dodd and the rest of the Main St. advocates hem and haw and burnish their populist credentials (Christopher Dodd? Trying to cleanse himself from the perceived taint of Arthur Anderson and Enron?) while providing some reasonable due diligence.

But we know we're gonna give Hank'n'Ben something, and it won't be less than $450-500 bln. Why not $150-200 bln up front to get RTC2 up and running while the rest of the package gets hammered out?

Where's Stan O'Neal?

The connection between Obama and Franklin Gaines ex-of Fannie imputed by the McCain ad below is thinly veiled racism, an unironic riff on the sensibility parodied by this Spring's New Yorker cover: If Obama's in the White House -- we are told between the lines -- black people will stick together, and who knows what they do when we pale folk are not around. They could get.... uppity! It could be the inverse of the classic Eddy Murphy sketch from SNL where he puts on whiteface and finds out what life amidst whitey is all about: free no-doc loans, cocktail parties on public buses. So I'm waiting for a round of ads showing Obama with Stan O'Neal or Richard Parsons. But not Morgan Freeman, as that would imply divine sanction.

Main St and Wall St

Main St is having a lot of trouble coming to terms with Paulson's package, thinking that it constitutes a big giveaway to the evildoers who put us into this mess. But lets put aside the moral questions, because right now it's not a moral question, but a practical one. Main St needs to ask itself who financed its construction? More often than not street construction is funded by bond issuance, and to do that you need working capital markets.

So the question is, how can we have sufficiently responsive and innovative capital markets to motivate a bunch of really smart people to work insane work weeks year in year out, without creating a race of arrogant, entitled, overpaid and sometimes downright evil investment bankers? Therein lies the rub.

Part of it is that a class of 27-year olds needs to get back to thinking that $300,000 is a lot of money.

Natalie in NY

On Saturday and I Natalie and I headed off alone into Manhattan while Mary and Graham headed over to Sadie's birthday party theatrical performance. Natalie had declared a need to go to FAO Schwarz, which I understand all too well, having a memory from childhood of a magical visit to the store in which it had all kinds of crazy over the top shit, gokarts and what not.

For starters, it was immensely gratifying that she held my hand very intently as we walked from the Public Library, where I showed her the main reading room (which I think impressed her a little). So we headed up 5th Avenue, hand in hand, past all manner of crap including the new Prada store, and I couldn't help musing to myself about what it might look like in two years -- H & M, Barnes and Noble and TGI Fridays might be the only things left in their current forms -- but mostly I just revelled in the fact that my independent and at times defiant 8-year old really wanted to hold my hand... in front of all these people. Even if our palms were getting sweaty so we had to switch sides.

FAO Schwarz, it would seem, has morphed from being a place of great magic to being just a really good toy store. Really, a toy department store, which is to say a glorified mall. Has this been the influence of its acquisition by DE Shaw in 2004, I dunno.

But Natalie was more than adequately entranced, especially by the Harry Potter store. And she didn't even beg for anything big, accepting a small treat and the idea of inventorying for the Xmas list.

Afterwards, I took her to Central Park, including a trip to the disco rollerskating area by Sheep's Meadow, but she declared the skaters to be "weird," and it's hard to argue with that, really.

The eternal perils of translation

This is from the Serbian Chamber of Commerce:

Thorny path through transition
Tue, 22 Jul 2008 13:29:01 GMT Rasina region once was the biggest exporter of baby-beef meat, but now this sector has the share of 20 percent. It has been said at the meeting of the directors of SCC Representative Offices abroad and business people from Krusevac...

...The Director of SCC Representative Office in Moscow Sasa Gmijovic talked to business people interested to launch their products on the Russian market and exhibition that is to be held in Krasnodar. He also said that Russian market is very demanding and that friendly relations of the two countries will not contribute to selling of bad quality goods.

It's good to know there are standards in place around the world.

Cult of personality

A lot of Democrats are issuing a call for Obama to keep Paulson on as Treasury Secretary, should our candidate find a way to keep it together (like put a muzzle on Biden about the freakin Buckeyes) and win. Although there are good Democratic candidates, I also think it's a bad time to change horses, at least in that stable. Chris Cox we can waterboard.

But there is a danger of a cult of personality emerging around Paulson, just like it did around Greenspan. By now, everybody's ready to kick the dapper little positivist gremlin and blame him for everything, but that is a mistake. Greenspan was empowered by our awe and reverence, and when he told us asset-price bubbles didn't require pricking, we believed him because we really wanted to believe and had become accustomed to doing so, despite the tech stock thing.

Paulson, we must remember, is one big tough dude and he's doing as good a job as could be hoped, but he's one guy. Bernanke, as we have said, is a shrinking violet, and maybe that's restoring the Fed to its place. In any case, Paulson needs to find a lieutenant, elevate him and share the lectern with him to build up cred, so that he won't have to do every press conference and be the sole voice of wisdom.

We know for damn sure the Bush holds no weight.

Bring back Moral Hazard

Since the big general bailout basically gives all banks and borrowers a free pass to be reckless, there should be some measure to assure that people worry. The government organ, whatever it is, should refuse to buy the crappy assets of roughly (randomized) every 5th bank, but should purchase from the unlucky banks' counterparties any toxic paper they have issued (or perhaps excluding every third counterparty to keep them on their toes). As long as the selection is random -- and administered by an external CPA -- banks will need to stay on their toes.

More rumblings

When I wrote the first "rumbling in markets' tummy" post back in March, it was kind of funny. Today, when a however much liquidity was injected today was injected (it all starts to run together), the markets went up, but have come back down by lunchtime, hungering for more. I think a deal (Morgan Stanley/Somebody, Wamu/Somebody, Berkshire Hathaway picking from the carcass of AIG, Steven Schwartzman on a black horse) might sate the markets for half an hour or so. But then that gnawing hunger will return, and the markets will poke at the little red spot on Paulson's beak like baby gulls begging mama for regurgitated goodness.

The other interesting thing is that, back in March, Bernanke was still a player, but now it's the Hank show all the time. Was Bernanke cast aside as too bookish? Perhaps he's holed up in the bunker with Cheney alternately playing poker and conferring with the Trilateral Commission, the Council on Foreign Relations, and the Elders of Zion.

Birthday!

Today was Graham's fifth birthday, and both kids have been bouncing off walls since 7am. Cupcakes. Presents. Party to follow over the weekend. Textbook. What's striking is how stoked Natalie is.

The buzzards of Bentonville

Might this be the moment when Walmart could be allowed entry into banking as such? Bank lobbyists have fought it because they fear the big retailer, but now they're kind of hurting.

Like the Chinese Treasury, they have money. I'm no balance sheet wizard, so I can't really assess Walmart's financial condition, and I'm no M & A person, so I don't know synergies, but they could probably swoop in and snap up WaMu. Just getting the licenses and the franchise would be good, no? They could unwind the real estate portfolio over time and fall back to an in-store model.

Rumors are flying

Apparently Sarah Palin has flown to Washington work with her lobbyists towards some "earmarks" to purchase Lehman Brothers for the town of Wasilla, along with the proceeds of a bond issuance to be underwritten by the crack Lehman team. We will post further updates as they become available. She was quoted as saying: "The East Coast elite doesn't think towns like Wasilla really merit an investment bank of their own, but we're shaking up their whole way of thinking. We've really come together as community on this one."

Hope things eternal

In the course of a day's work, stopped by the OFHEO website and saw that they have a house price calculator. Took it for a test drive. Input quarter of purchase and state and quarter of valuation, and it told me that since 2Q '03 my house has appreciated 49%.

Well, we haven't done badly here in Princeton, but that's hyper-optimistic, a legacy of the boo-ya days. You would think the organization charged with overseeing the terrible twins Fannie and Freddy might be more careful. Perhaps the calculator was coproduced with the NAR.

Two ways in which it doesn't feel like a recession

1. Supermarkets have not cut back on giving samples
2. Cable operators do not appear to need to source ad revenue from local advertisers. I.e. national accounts are holding up, even with all those channels

Both of these are -- anecdotally at least -- dramatically different from the last recession.

Joe Biden's hair

If the upcoming vice-presidential debates were conducted on the basis of hair, Sarah Palin would surely win. What's up with Biden's do? It can only be termed a patrician mullet. I've seen this hair on the heads of Wall St eminence grises before. What it means is: "I'm old, rich, and powerful and I can wear whatever hairstyle I like." Much like not matching shirts and ties, the wearer is above fashion. If Biden really wanted to play up his man of the people credentials, he would have to commit to a much more drastic, purer mullet. Personally I think he should get a short haircut like a normal person. Otherwise people throughout this great land of ours will keep looking at him and thinking subconsciously: where is this guy from?