Becoming a bank

Following Amex's surprise news today, I've decided to become a bank too. I think it's probably simplest in the long run, and I'm looking forward to the kind of financial protection the FED can offer me.

Portland Marathon 2008

After a week of feeling under the weather, I elected to ignore the Dr. and head to Portland anyway. Beautiful city, but definitely felt like an early night after the long drive and comatose inducing (but most excellent!) pasta from Ristorante Roma, which was fortunately jut a few blocks from the hotel. Woke early and joined the crush for the start, and at 7am we were off.
Highlights for me:

• Inspiring to see the wheelchair racers.
• Managed just over a 2hr half-marathon time, despite the weather which started raining.
• Saw Dave on the back-stretch around the mile 8/10 mark - hope you had a good run Dave!
• The bad weather meant that the awe inspiring view of St. Johns Bridge, and the long haul uphill to see it was pretty masked - probably a good thing!
• My pace slowed down a lot in the second half, but I managed to keep going the entire way, despite the best attempts of runners who real need turn signals and brake lights, and the muppets who decided that handing out beer was a good idea. Any other time guys...
• Great to run to music!

Not super happy with the 4:25 finish time, but given how under the weather I was feeling in the run up, it's all good.

Special thanks to Mr. Mercury, Mr. Van Halen, Mr. Jagger and many others who provided inspiration along the way.

IANAE

OK, so I'm not an economist, so please bear with me while I walk through this.

The story so far...
Poor loans were given to a number of potentially bad lenders, based on inadequate (earnings, credit-worthiness) or false assumptions (house prices will always increase). Mortgage brokers were compensated for loan origination. Bankers received their fees upfront. Mortgages were packaged into a variety of instruments (SIVs, CDOs etc) and resold (at some profit each time).
Now the foreclosures are hitting and the repayments aren't being made, the value of these instruments is falling and the current holders (large investment banks) are in trouble.

Rather than try and understand the scope of what's happening, and getting into the honest truth, the financial markets are 'on the run' responding to 'sentiment and belief' with events unfolding in 'real-time' and bank's values (as determined by share price) fluctuating wildly. This is viewed as a Bad Thing(tm) undermining the viability of the market.

Well I'm sorry, but it doesn't seem that the market has done much to be transparent or align incentives to be trusted in. I look a lot at alignment of incentives in my work, and I can't see how the current proposed $700b bailout, or anything else the Fed is doing, is creating any sort of alignment.

Given $700b to play with to solve the liquidity crisis (that's the real problem, right? That's what we should learn from Japan in the '90s that if we just fix the banks with money, they'll keep it) I'd rather the government set up another state sponsored Fannie/Freddie-alike (call it the Realitie) which underwrites reasonable loans. Reasonable equals fully disclosed, low risk etc. Something that won't break and is visible to the public so it won't be corrupted. So if you've actually kept up with your starter mortgage payments and now are getting squeezed by triple rates, you can re-mortgage. Or if you never should have had a mortgage in the first place, and still can't find those W-2s, you're out of luck.

Regardless of how this settles out, can we have some accountability? Can we have mortgage brokers receiving a small slice of each payment, not upfront fees? Can we have those responsible for this mess held accountable, rather than the taxpayers? Can we have full declaration of the riskiness of each mortgage, with legal action possible for misrepresentation?

Sorry, shouldn't speak for legal action. After all, IANAL either.

Hot Train of Thought

After reading Brent's blog on a recent cycle ride, my eye was caught by another blog post of his.

Which then got me to more thinking and conducting an experiment. Google's spelling correction/suggestion function ("Did you mean?...) is often really handy, but it seems to tragically lack a sense of humour. Apart from (what used to appear for) "French Military Victories" that is. Anyway, doing a Google search for "Hot Grill on Grill Action" (Snorg t's have this marvelous shirt, you see), produces an odd suggestion. Remove the word "Hot" and you get an entirely different suggestion. Windows Live is (fortunately) without additional commentary.

Who knew hotness was so important?

Perceptions of Trust

It's so easy to see trust as being a very clear issue. Either you're trusted, or your not; you're worthy of trust, or your not. However a couple of articles read just today (I'm on UK time for a day or so, so 'today' is a relative term :- ), put an interesting perspective on "Trust" (with a capital "T") around privacy.

First up is the UK's Sunday Telegraph, in which news of Google's Street View vans taking pictures have Jenny McCartney up in arms. Interestingly, Jenny takes the tack less focused on invasion of physical privacy (those street view chaps do some wonderful things with obscuring license plates and faces, even with groupies) and more focused on fundamental questions of Google and privacy around actions (tracking and so forth).

Next is the Washington Post with an article on the Viacom suit against Google, essentially attempting to assert that, even though Viacom has demanded something that many agree oversteps the mark, the concern is with Google giving up this information.

The thing about privacy and trust is that they don't exist in a technical vacuum. I understand (probaby better than most) the lengths that most internet companies go to to protect their customers privacy, and live up to the spirit and letter of their customer privacy agreements. From logs anonymization, to internal processes to safeguard data management and visibility, it's a complex world. In addition to the technical challenges though, there's social and economic challenges too. For many years, Apple Macs and Windows PC were technical very similar when it came to their exposure to viruses. From browsers that allowed access to all forms of internet contnet, to running code from various sources, they both did basically the same thing, but the Mac was perceived as being more trustworthy, as there were far fewer viruses (if any) hitting it. *Could* more viruses have hit the Mac? Absolutely. It was just a lesser target having lower market share in the marketplace, as well as having fewer malicious code writers who actually *wanted* to attack it - unlike Microsoft who's managed to create both a large market and significant animosity.

I think it's useful to track these sort of discussions, as often (as has been shown recently in financial regulation) situations can change without really anything different happening 'under the covers'.

Talk to me...

Those clever chaps over in Google Talk land have created the Google chatback - a way to chat with people who aren't in your buddy list. It's pretty nifty - I've added one for me below. See what you think!




Mike