Bank “walkaways” from foreclosed homes are infuriating city leaders. Overconfidence is a deadly pill. So is drinking waaay too much with business colleagues at a karaoke bar. Those are some of the stories in today’s edition of Morning Reading:
The Cleveland Plain-Dealer highlights a disturbing trend in the city’s neighborhoods — banks are walking away from homes they’ve already foreclosed upon:
Lenders or mortgage companies decide they don’t want homes they have already foreclosed on, sometimes because the value has plummeted or they believe the homes could become costly liabilities if they are socked with housing code violations.
But without that sale, the property can languish abandoned and ripe for vandalism. As liens and liabilities mount — creating a so-called “toxic title” — it becomes even harder to transfer the property. Neighborhoods and local governments are left to deal with the mess.
“It’s a growing issue. It’s all over the state. It’s not just Cleveland,” said State Rep. Mike Foley. “That kind of lack of respect for communities that banks have made a ton of money off of in the past is infuriating.”
Malcolm Gladwell has a fantastic article titled “Cocksure” in The New Yorker. It’s about the extreme overconfidence that brought down the old Wall Street. He makes several interesting comparisons, one of them to bridge, the card game “mastered” by Bear Stearns CEO Jimmy Cayne:
(Bridge) has rules and boundaries and situations that repeat themselves and clear patterns that develop–and when a player makes a mistake of overconfidence he or she learns of the consequences of that mistake almost immediately. In other words, it’s a game. But running an investment bank is not, in this sense, a game: it is not a closed world with a limited set of possibilities. It is an open world where one day a calamity can happen that no one had dreamed could happen, and where you can make a mistake of overconfidence and not personally feel the consequences for years and years–if at all.
Perhaps this is part of why we play games: there is something intoxicating about pure expertise, and the real mastery we can attain around a card table or behind the wheel of a racecar emboldens us when we move into the more complex realms. “I’m good at that. I must be good at this, too,” we tell ourselves, forgetting that in wars and on Wall Street there is no such thing as absolute expertise, that every step taken toward mastery brings with it an increased risk of mastery’s curse.
Elsewhere, The Times of London says green shoots like the increased US personal savings rate are misleading:
The reason that the savings gauge has leapt is not that Americans are saving more, but only that they are paying off their past, huge borrowings because of financial distress…
… it suggests that immediate US recovery prospects may be even more frail than supposed, and than Mr Bernanke is liable to admit. With Americans now battling to pay down debt against a backdrop of still-plunging house prices and soaring unemployment, while shoring up spending power with cuts in their savings, the resurgence of consumer demand on which recovery hopes are pinned may well prove elusive. The position could grow worse still once the boost to US personal incomes from the Obama Administration’s fiscal giveaway also fades, as it soon will.
Speaking of Mr. Bernanke, John Tamny writes at Forbes that the Federal Reserve chairman should not be reappointed:
Bernanke’s past and present lust for the job of Fed Chairman signals an expansive vision about what the position entails, and this means he’s unfit for the role, which should have greatly diminished prestige. Indeed, the fact that he covets the position so much tells us all we need to know about his love of status and rank. As Bagehot observed, “such men are dangerous.”
Here’s something else that’s dangerous. A Chinese government official is dead and another one’s in a coma after a drinking binge. It’s is the second such incident in the past week. From AP:
The two cases highlight the heavy ritualized role drinking plays in business and government circles in China. Bai jiu, the potent rice liquor, is a permanent presence at elaborate banquets, where “Gan bei,” or “Bottoms up,” is the official toast.
“Drinking with official guests or other officials at alcohol-soaked events is considered part of the job,” Professor Li Changyan of Peking University was quoted as saying.
An official in Shandong was quoted as saying he would “lose face” if guests didn’t get drunk, the newspaper said.
Last year, a family planning official in central Hunan province died after drinking with fellow officials at a karaoke bar. He was posthumously awarded a merit award for dying “with honor.”
We’re here to help you navigate this changed world and economy.
Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.
In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.
Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.