The problem of distressed zip codes could be remediated by shipping large quantities of magic dirt ,from white and Asian "prosperous zip codes", to neglected distressed zip codes.
There is an interesting line of research in the UK with regard to people and places and outcomes. Not sure if they have the equivalent of a zip code in the UK, or how well delineated the geography units are. It also doesn't necessarily have the same racialized assumptions many researchers in America have or have to pay some level of deference to. Unless of course the Scots are a race, which is a view far closer in time than many people seem to realize.
"The phenomenon is defined as an "excess mortality in the West of Scotland (Glasgow) after controlling for deprivation." Although lower income levels are generally associated with poor health and a shorter lifespan, epidemiologists have argued that poverty alone does not appear to account for the disparity found in Glasgow. Equally deprived areas of the UK such as Liverpool and Manchester have higher life expectancies, and the wealthiest ten per cent of the Glasgow population have a lower life expectancy than the same group in other cities. One in four men in Glasgow will die before their sixty-fifth birthday."
I wasn’t sure what the point of the Kenan Fikri and Sarah Eckhardt piece was until I read Arnold’s comment on it. There are so many ways to gain more skills in America. One of the easiest is to go to the library and read. Another is to get a job that gives you an opportunity to learn.
People aren’t stuck are they? Okay, maybe they are so depressed they’re not functioning well enough to read or learn.
Anyway, I’m curious: what fraction of lower-income folks choose to stay in their current economic position because it fits them culturally? Can we please hear some complaints from these people so we can understand what problems they actually have?
And let’s not forget, we’re talking about some of the wealthiest poor people in the history of the world here. Or maybe I didn’t read carefully enough: perhaps the problem is that people are different and this leads to different outcomes? Could it be this simple?
Salzman's take is one-sided. He deprecates the "billionaire" investors who purchased depressed shares after the government takeover betting that this would eventually be reversed. However, they had no guarantee as to whether that would happen or when, and the sellers were people who chose to bet the other way, or simply people who wanted to get their money out even at a loss. Folks, that's how markets work. There were many investors not billionaires who also purchased the shares presumably for the same reasons. Salzman's reference to billionaires is obviously the usual leftist appeal to envy. That said, what is objectionable is not the privatization, but the maintenance of any implicit government guarantee. One wonders whether that will lead to a repeat of the reckless lending that led to the collapse.
I don’t usually agree with leftists, but in this case the private people betting with their money were betting on government doing a politically motivated deal. Which is not the same thing as private risk-taking
I agree with you that the biggest problem is the implicit government guarantee.
That said, if they reverted back to the “old days”, and the *only* thing they did was 30 year fixed loans with 20% down for mortgages no bigger than $750K, I could live with that. There is indeed some social value to having more homeowners, and with 20% down, the risks are minimal.
And if strictly limited to that, I’d be indifferent whether public or GSE quasi-private.
How would Ackman be making money from the taxpayers? His gain would be from the increase in Fannie, Freddie shares’ market value, not a transfer of value from taxpayers. His profit comes when others buy shares in the open market at a higher price — taxpayers lose nothing in those transactions. Ackman argues that taxpayers will gain by exercising their warrants for 79.9% of the companies’ shares and selling them: A win-win. BTW, mutual funds owned by retail investors own nearly as many shares as Ackman, so it is not just a hedge fund play.
Are you arguing that the taxpayers will lose dollars by not being properly compensated for taking on a credit guarantee for the companies? Leaving aside guarantee fees that currently generate $6 billion in revenue for the Treasury annually, Treasury exercising its warrants should provide $400 billion in capital to cover that guarantee in perpetuity.
Or are you arguing that the taxpayers lose if Trump somehow waives the senior preferred shares or converts them to a “golden share” to unlock the value in the warrants? Remember, the senior preferreds crush the value of the warrants so it appears to be a case of six of one or a half-dozen of the other from the Treasury perspective. Philosophically, there is also a basic issue of liberty. The current terms of the senior preferred shares do not allow repayment of principal no matter how much is repaid. Those terms amount to peony, which runs against America’s principles. Personally, I would be happy if Treasury had the 2012-2025 repayments restated to reflect a principal pay-down from the networth sweep cash flow stream and the idea of debt bondage rejected.
Ackman’s “windfall” will have been created by the Treasury loan put in place by Hank Paulson that was designed to crush the value of the public shares. The losers would be the shareholders of 2008, not the taxpayers.
Per distressed zip codes... I managed to secure a career and eventual retirement by buying pieces of shit in those zip codes, living in them as I rehabilitated them, sold them, and haven't changed my pattern to this day. Find a crappy neighborhood...buy something...fix it...wait some number of years...sell it at good profit...repeat.
There's financial security in those neighborhoods if one is interested in thinking about it in a manner other than the dipsquat economists and bloggers.
I’m no real estate expert, but I would assume that this strategy only works in gentrifying or soon to be gentrifying neighborhoods. In other words, I’m not sure how you get cash flow + fixing up and then selling to poor people.
FWIW, I made most of my money through life insurance fraud. You can look me up if you don’t believe me.
It was curiosity and not disbelief that led me to Chat turning up "Robert Mulligan Life Insurance Fraud"....somewhere in South Carolina. Generally disinterested in such matters, and having satisfied my curiosity, I didn't read on. So, now it's Bobby.
Per gentrification...it's not a dirty word. I suppose one could call it that, but at the various times and places it was more pioneering into areas all my friends thought were crazy.
Just for the record, I never said that gentrification was a bad word. It actually seems like a win win to me otherwise the initial seller would not have sold. What I was suggesting is that you are not likely to fix up a home and also be in the black by selling that fixer upper to someone that previously lived in the neighborhood.
those distressed zipcodes come from a long line of down on their luck zipcodes, beginning with great grandpappy zipcode, who, legend has it, made off with a witch's brew at the county fair
All I want is the ability to turn off my USPS mail. Is that possible? I only visit the mailbox 1x per week and then immediately empty the contents it into the trash.
I love it when you’re trying to be responsible and enter your postal code with the four digit add-on, and the website is like what is that crap and won’t let you do it.
I love the talk of distressed zip codes without noting how those things are categorized. “We looked at a bunch of zip codes and categorized them based on income. We were shocked at how the category defined by having the lowest income had lower income than the highest! In other news, a new study found things people call cats are widely accepted as cats by people. Details at 11.”
"The median local household earns nearly $30,000 less annually than the median household nationally. One in seven homes is vacant or abandoned, one-third of prime age adults are not working"
So then do you dismiss the research that suggests statistically similar children do worse when they live in distressed neighborhoods?
Depends on what “statistically similar” actually means. I would not be surprised to find that moving from a decent neighborhood to a crime ridden ghetto is bad for kids all else equal. Most people do not just get randomly assigned to neighborhoods, however.
Unless the kid has been removed from his parents and handed to someone else, it isn't random for the kid. Nor the kid's parents, and the kid's parents had a great deal of influence on the kid.
Worrying about the influence of the neighborhood is taking the existence of the neighborhood as a primary fact, as opposed to it being driven by the natures of the inhabitants of the neighborhood. The quality of a neighborhood is not exogenous to the quality of its inhabitants.
And, if we did a wife swap kinda thing and let all of the poor people move to the nice neighborhoods and made all of the rich people move to the poor neighborhoods, I wonder how long it might take for the magic dirt to turn into toxic dirt.
With regard to selling off parts of the housing orgs, I predict that if Trump does it then, just like with tariffs, Democrats will grumble about it only because it's Trump, but then the next Democrat President will double down on the same thing as an irresistible source of new revenues to pay for the highest priority and highly expensive progressive social projects, in addition to repaying favors and re-funding their own client kickback network.
I like Trump over the alternatives but Trump's grifting and his love of Corporate profits and the Corporate class greatly turns me off. Trump is just another crony capitalist and he will damage the economy just like all the other cronies have done.
All of the GSEs profits since the GFC have gone straight to the treasury, reducing deficits. Unfortunately, none of the profits were used to rebuild reserves and capital against losses.
The Treasury would have a one-off gain from privatizing or part-privatizing the GSEs, but then the annual skim of their profits declines.
Thanks, I had forgotten that they had converted the sweep into an increase on the value of the Treasury’s preferred shares (plus allowing some reserves to be built up pre-dividend)
Compared to the market price for the kind of insurance the treasury implicitly provides them, the 'profits' handed over by the housing orgs still wouldn't cover the fair premiums. The GSE's have already been fully recapitalized with an extremely valuable asset, albeit one that does not appear on the books according to any mainstream accounting principles, specifically, the value of the option to exercise a too-big-to-fail bailout guarantee subsidy. Without that guarantee and the need to pay - get this - actual market interest rates for debt, then those profits would vanish. After all, if there were private profits available, one would expect the private lenders to scoop them up. The whole point of having alternatives to private lenders is that the government is trying to channel credit to riskier people and cheaper than they could otherwise obtain it. Providing subsidies usually means eating losses unless one believes in the magic of losing money on every sale but making it up on volume.
The government made a profit bailing out the GSEs. In fact the profit by most 2017 was $68 billion above the bailout cost and since then the treasury has received hundreds of billions additional in profits plus preferred stock valuation.
Of course, the Fed’s had to wipe out common (and other preferred) shareholders to make that happen.
Also, while the actual cost of the bailout was $168 billion on the books, MIT researchers estimated that the actual fair value of the bailout at the time (taking into account the potential for future losses) was $291 billion.
Even so, the government had made a substantial net profit since 2008 (plus all the pre-2008 profits). Are there enough reserves on the books now to cover the multi-trillion balance sheets of the GSEs today- no, but over a 25 years run that included the GFC and Covid, taxpayers made out OK.
"Singapore-style guest worker dormitories for the masses only appeals to destitute workers whose living conditions and opportunities motivate them to accept non-citizen work permits and then be forced to move on to the next place that needs labor once their permit expires.. Of course the ultimate goal of the US establishment is to reduce a majority of the population to such conditions"
I used to only read such crap on leftist websites. More and more I see it on righty ones. It's just not true, and doesn't help to actually understand what's going on. Please stop.
Perhaps it's some sort of reverse intention heuristic: "I think this is what the ultimate result will be, so I'll assume there are powerful people who want it."
Nothing in any of those articles is about how the "ultimate goal of the US establishment is to reduce a majority of the population to such conditions" [i.e., what foreign workers have to live in in Singapore]
The Noah Smith article is about using something like Singapore's Housing Development Boards to build housing and then sell it to Americans. There is nothing in it about size or quality of apartments. Indeed, implicit in it is that the housing built by the HDBs would be competitive with other housing Americans can buy.
The articles on Singapore say that the HDBs originally built pretty small apartments. Not surprising when Singapore was poor. But now the mix goes to bigger.
The later articles are about how people are willing to accept very small spaces to live in areas they consider desirable if they can't get anything else at a good price. And in some places, very small places are being built.
You have gone from "the ultimate goal of the US establishment" to what some YIMBYs want. As long as we realize that those YIMBYs are far from "the US establishment", I can agree with that.
The problem of distressed zip codes could be remediated by shipping large quantities of magic dirt ,from white and Asian "prosperous zip codes", to neglected distressed zip codes.
There is an interesting line of research in the UK with regard to people and places and outcomes. Not sure if they have the equivalent of a zip code in the UK, or how well delineated the geography units are. It also doesn't necessarily have the same racialized assumptions many researchers in America have or have to pay some level of deference to. Unless of course the Scots are a race, which is a view far closer in time than many people seem to realize.
https://en.wikipedia.org/wiki/Glasgow_effect
"The phenomenon is defined as an "excess mortality in the West of Scotland (Glasgow) after controlling for deprivation." Although lower income levels are generally associated with poor health and a shorter lifespan, epidemiologists have argued that poverty alone does not appear to account for the disparity found in Glasgow. Equally deprived areas of the UK such as Liverpool and Manchester have higher life expectancies, and the wealthiest ten per cent of the Glasgow population have a lower life expectancy than the same group in other cities. One in four men in Glasgow will die before their sixty-fifth birthday."
I wasn’t sure what the point of the Kenan Fikri and Sarah Eckhardt piece was until I read Arnold’s comment on it. There are so many ways to gain more skills in America. One of the easiest is to go to the library and read. Another is to get a job that gives you an opportunity to learn.
People aren’t stuck are they? Okay, maybe they are so depressed they’re not functioning well enough to read or learn.
Anyway, I’m curious: what fraction of lower-income folks choose to stay in their current economic position because it fits them culturally? Can we please hear some complaints from these people so we can understand what problems they actually have?
And let’s not forget, we’re talking about some of the wealthiest poor people in the history of the world here. Or maybe I didn’t read carefully enough: perhaps the problem is that people are different and this leads to different outcomes? Could it be this simple?
Salzman's take is one-sided. He deprecates the "billionaire" investors who purchased depressed shares after the government takeover betting that this would eventually be reversed. However, they had no guarantee as to whether that would happen or when, and the sellers were people who chose to bet the other way, or simply people who wanted to get their money out even at a loss. Folks, that's how markets work. There were many investors not billionaires who also purchased the shares presumably for the same reasons. Salzman's reference to billionaires is obviously the usual leftist appeal to envy. That said, what is objectionable is not the privatization, but the maintenance of any implicit government guarantee. One wonders whether that will lead to a repeat of the reckless lending that led to the collapse.
I don’t usually agree with leftists, but in this case the private people betting with their money were betting on government doing a politically motivated deal. Which is not the same thing as private risk-taking
I agree with you that the biggest problem is the implicit government guarantee.
That said, if they reverted back to the “old days”, and the *only* thing they did was 30 year fixed loans with 20% down for mortgages no bigger than $750K, I could live with that. There is indeed some social value to having more homeowners, and with 20% down, the risks are minimal.
And if strictly limited to that, I’d be indifferent whether public or GSE quasi-private.
How would Ackman be making money from the taxpayers? His gain would be from the increase in Fannie, Freddie shares’ market value, not a transfer of value from taxpayers. His profit comes when others buy shares in the open market at a higher price — taxpayers lose nothing in those transactions. Ackman argues that taxpayers will gain by exercising their warrants for 79.9% of the companies’ shares and selling them: A win-win. BTW, mutual funds owned by retail investors own nearly as many shares as Ackman, so it is not just a hedge fund play.
Are you arguing that the taxpayers will lose dollars by not being properly compensated for taking on a credit guarantee for the companies? Leaving aside guarantee fees that currently generate $6 billion in revenue for the Treasury annually, Treasury exercising its warrants should provide $400 billion in capital to cover that guarantee in perpetuity.
Or are you arguing that the taxpayers lose if Trump somehow waives the senior preferred shares or converts them to a “golden share” to unlock the value in the warrants? Remember, the senior preferreds crush the value of the warrants so it appears to be a case of six of one or a half-dozen of the other from the Treasury perspective. Philosophically, there is also a basic issue of liberty. The current terms of the senior preferred shares do not allow repayment of principal no matter how much is repaid. Those terms amount to peony, which runs against America’s principles. Personally, I would be happy if Treasury had the 2012-2025 repayments restated to reflect a principal pay-down from the networth sweep cash flow stream and the idea of debt bondage rejected.
Ackman’s “windfall” will have been created by the Treasury loan put in place by Hank Paulson that was designed to crush the value of the public shares. The losers would be the shareholders of 2008, not the taxpayers.
Per distressed zip codes... I managed to secure a career and eventual retirement by buying pieces of shit in those zip codes, living in them as I rehabilitated them, sold them, and haven't changed my pattern to this day. Find a crappy neighborhood...buy something...fix it...wait some number of years...sell it at good profit...repeat.
There's financial security in those neighborhoods if one is interested in thinking about it in a manner other than the dipsquat economists and bloggers.
I’m no real estate expert, but I would assume that this strategy only works in gentrifying or soon to be gentrifying neighborhoods. In other words, I’m not sure how you get cash flow + fixing up and then selling to poor people.
FWIW, I made most of my money through life insurance fraud. You can look me up if you don’t believe me.
It was curiosity and not disbelief that led me to Chat turning up "Robert Mulligan Life Insurance Fraud"....somewhere in South Carolina. Generally disinterested in such matters, and having satisfied my curiosity, I didn't read on. So, now it's Bobby.
Per gentrification...it's not a dirty word. I suppose one could call it that, but at the various times and places it was more pioneering into areas all my friends thought were crazy.
Just for the record, I never said that gentrification was a bad word. It actually seems like a win win to me otherwise the initial seller would not have sold. What I was suggesting is that you are not likely to fix up a home and also be in the black by selling that fixer upper to someone that previously lived in the neighborhood.
Virginia 1983.
https://youtu.be/RkqwuQ7-vUo?si=XPjk8VAVInlqCb18
those distressed zipcodes come from a long line of down on their luck zipcodes, beginning with great grandpappy zipcode, who, legend has it, made off with a witch's brew at the county fair
The obvious and final solution is to get rid of zip codes entirely. One people, one government, one postal code.
All I want is the ability to turn off my USPS mail. Is that possible? I only visit the mailbox 1x per week and then immediately empty the contents it into the trash.
Or maybe each American needs his/her very own postal code. Let a million postal codes bloom.
No no no no no!
Postal codes must be socialized, not individualized!
I love it when you’re trying to be responsible and enter your postal code with the four digit add-on, and the website is like what is that crap and won’t let you do it.
I got about 1/3 thru this and I had this exact thought...and then it appeared!
"With the Trump Administration, the handful of investors are getting their wish, making a fortune at the expense of the American taxpayer."
I love the talk of distressed zip codes without noting how those things are categorized. “We looked at a bunch of zip codes and categorized them based on income. We were shocked at how the category defined by having the lowest income had lower income than the highest! In other news, a new study found things people call cats are widely accepted as cats by people. Details at 11.”
"The median local household earns nearly $30,000 less annually than the median household nationally. One in seven homes is vacant or abandoned, one-third of prime age adults are not working"
So then do you dismiss the research that suggests statistically similar children do worse when they live in distressed neighborhoods?
Depends on what “statistically similar” actually means. I would not be surprised to find that moving from a decent neighborhood to a crime ridden ghetto is bad for kids all else equal. Most people do not just get randomly assigned to neighborhoods, however.
One could argue that for a kid it is random. Probably not completely true though.
Regardless, understanding the influence of neighborhood on outcomes seems like it might be important to understand better.
Unless the kid has been removed from his parents and handed to someone else, it isn't random for the kid. Nor the kid's parents, and the kid's parents had a great deal of influence on the kid.
Worrying about the influence of the neighborhood is taking the existence of the neighborhood as a primary fact, as opposed to it being driven by the natures of the inhabitants of the neighborhood. The quality of a neighborhood is not exogenous to the quality of its inhabitants.
The Ol' Raj Chetty Blunder.
:-)
Steve Sailer calls the latter the Magic Dirt Hypothesis.
And, if we did a wife swap kinda thing and let all of the poor people move to the nice neighborhoods and made all of the rich people move to the poor neighborhoods, I wonder how long it might take for the magic dirt to turn into toxic dirt.
With regard to selling off parts of the housing orgs, I predict that if Trump does it then, just like with tariffs, Democrats will grumble about it only because it's Trump, but then the next Democrat President will double down on the same thing as an irresistible source of new revenues to pay for the highest priority and highly expensive progressive social projects, in addition to repaying favors and re-funding their own client kickback network.
I like Trump over the alternatives but Trump's grifting and his love of Corporate profits and the Corporate class greatly turns me off. Trump is just another crony capitalist and he will damage the economy just like all the other cronies have done.
All of the GSEs profits since the GFC have gone straight to the treasury, reducing deficits. Unfortunately, none of the profits were used to rebuild reserves and capital against losses.
The Treasury would have a one-off gain from privatizing or part-privatizing the GSEs, but then the annual skim of their profits declines.
FNMA and FMCC ceased sending their profits to the Treasury in 2019.
Thanks, I had forgotten that they had converted the sweep into an increase on the value of the Treasury’s preferred shares (plus allowing some reserves to be built up pre-dividend)
https://www.valuewalk.com/gse-scam-net-worth-sweep/
Compared to the market price for the kind of insurance the treasury implicitly provides them, the 'profits' handed over by the housing orgs still wouldn't cover the fair premiums. The GSE's have already been fully recapitalized with an extremely valuable asset, albeit one that does not appear on the books according to any mainstream accounting principles, specifically, the value of the option to exercise a too-big-to-fail bailout guarantee subsidy. Without that guarantee and the need to pay - get this - actual market interest rates for debt, then those profits would vanish. After all, if there were private profits available, one would expect the private lenders to scoop them up. The whole point of having alternatives to private lenders is that the government is trying to channel credit to riskier people and cheaper than they could otherwise obtain it. Providing subsidies usually means eating losses unless one believes in the magic of losing money on every sale but making it up on volume.
The government made a profit bailing out the GSEs. In fact the profit by most 2017 was $68 billion above the bailout cost and since then the treasury has received hundreds of billions additional in profits plus preferred stock valuation.
Of course, the Fed’s had to wipe out common (and other preferred) shareholders to make that happen.
Also, while the actual cost of the bailout was $168 billion on the books, MIT researchers estimated that the actual fair value of the bailout at the time (taking into account the potential for future losses) was $291 billion.
Even so, the government had made a substantial net profit since 2008 (plus all the pre-2008 profits). Are there enough reserves on the books now to cover the multi-trillion balance sheets of the GSEs today- no, but over a 25 years run that included the GFC and Covid, taxpayers made out OK.
"Singapore-style guest worker dormitories for the masses only appeals to destitute workers whose living conditions and opportunities motivate them to accept non-citizen work permits and then be forced to move on to the next place that needs labor once their permit expires.. Of course the ultimate goal of the US establishment is to reduce a majority of the population to such conditions"
I used to only read such crap on leftist websites. More and more I see it on righty ones. It's just not true, and doesn't help to actually understand what's going on. Please stop.
Perhaps it's some sort of reverse intention heuristic: "I think this is what the ultimate result will be, so I'll assume there are powerful people who want it."
Nothing in any of those articles is about how the "ultimate goal of the US establishment is to reduce a majority of the population to such conditions" [i.e., what foreign workers have to live in in Singapore]
The Noah Smith article is about using something like Singapore's Housing Development Boards to build housing and then sell it to Americans. There is nothing in it about size or quality of apartments. Indeed, implicit in it is that the housing built by the HDBs would be competitive with other housing Americans can buy.
The articles on Singapore say that the HDBs originally built pretty small apartments. Not surprising when Singapore was poor. But now the mix goes to bigger.
The later articles are about how people are willing to accept very small spaces to live in areas they consider desirable if they can't get anything else at a good price. And in some places, very small places are being built.
You have gone from "the ultimate goal of the US establishment" to what some YIMBYs want. As long as we realize that those YIMBYs are far from "the US establishment", I can agree with that.