Month: September 2009

Tips for Reading The Anabasis

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Tigris River
Tigris River

[Jonathan adds: A larger version of this image is below the “Read the rest” link.]

The opening phase of this discussion of Greek soldier, historian Xenophon’s account of the expedition to unseat Artaxerxes King of Persia by his brother Cyrus, has touched on several important elements. First, most important to any great undertaking was logistics, aptly covered in the first post by Fringe. Next, Steven Pressfield introduced the route and how it influenced Alexander the Great, who used the Anabasis of Cyrus as a guidebook in his conquest of Persia decades later. Lexington Green then offered up an overview of the each chapter, laying out the story line in concise detail. Most recently, Joseph Fouche took pen to point out important distinctions between Xenophon’s writing style and that of Herodotus.

The book that most of us have chosen to base our discussion is the translation by Wayne Ambler. In the introduction, Eric Buzzetti writes, “The Anabasis has the makings of a great Hollywood movie.” This statement along should stimulate the most benign reader to pursue the book further. Inside, they will not be disappointed; the story unfolds like a travel log detailing distance traveled, people encountered, battles fought and the unfolding loose republican democracy that formed after the death of their generals at the hand of Artaxerxes. Then becomes what could be described as the one of the great epics combining battles with political intrigue and lessons in leadership.

Anyone who sets out to read this book would do well to prepare themselves by carefully reading the introduction. Then turn to the back and make one’s self familiar with the Historical notes and the Glossary where they will find not only a definition of terms, but an explanation of the scale of measurements which is elementary to follow the journey up country and the escape to safety.

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The FHA and Impact on Real Estate Values

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Today the FHA, the Federal Housing Administration, is a gigantic player in the residential mortgage business. The FHA guarantees mortgages against default, and allows purchases of homes with only a 3.5% down payment, and provides a rock bottom interest rate of near 5%. These lenient terms apply to virtually everyone, even those with poor credit scores and little equity in the home, which are highly correlated with default. This is in addition to the $8000 tax credit the US Government is issuing to first time buyers, which is boosting demand for these sorts of loans.

This article describes the measures that the agency is taking to reduce the odds of a bailout, but they don’t hit on the core issues of low down payments and not adjusting the interest rates to better reflect the risks on lower credit quality mortgages. These half-hearted measures require a tiny base of assets for mortgage originations (up to $1m from $250,000) and some changes to appraisals… the core issue here is that there were massive amounts of fraudulent mortgages that flooded into the system during the boom and when they went awry the brokers that backed them vanished into the night.

Many have pointed out that the FHA looms as a likely candidate for government bailout, such as this article from the Washington Post, titled “FHA’s Refusal to Seek Bailout Met With Skepticism”

FHA Commissioner David H. Stevens said Friday that the surplus fund set aside to cover unexpected losses on mortgages backed by the agency will fall below the 2 percent threshold required by Congress when the next fiscal year starts in October.

Although the reserves had remained well above the minimum required level during the housing boom, the audit last year showed they had shrunk to 3 percent as of Sept. 30, compared with 6.4 percent a year earlier. The fund’s value was estimated at $12.9 billion, down from $21.2 billion the previous year.

Many stories note that most of the loans that are being done today are backed by the FHA. From this article in the Wall Street Journal titled “No Easy Exit for Government as Housing Market’s Savior”

The Denver home lender sees every day how dependent the housing market has become on the government. At the height of the boom, just 20% of Universal’s mortgages were backed by the Federal Housing Administration, an arm of the government that guarantees loans to borrowers who can’t afford big down payments. Today, the FHA accounts for more than 80% of his business.

Also note that the US Government is buying most of the securities that are backed by the FHA. Private banks are not interested in purchasing securities with low returns and thus the government secures the loan on the front end, and then repurchases the securities on the other end.

At the Fed, the question of whether to start dismantling the scaffolding is a dominant one. Since the beginning of the year, the Fed has purchased $836 billion of mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae, the federal body that securitizes FHA loans. The purchases have helped push down interest rates on mortgages guaranteed by the firms from more than 6.5% last October to 5.15% today, according to HSH Associates, which tracks the mortgage market.

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One (Small) Good Item Out of the Health Care “Debate”

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I try to stay away from the non-fact maelstrom that is our current, utterly dysfunctional “debate” on health care reform (I put that in parenthesis because I don’t even know what the latest, half-baked plan du jour even is without an up to the minute scorecard).

However – the health care publicity did bring to light and start to quantify one item that could be useful in the future when this all dies down (and hopefully goes nowhere) – the high cost of health care for our governmental employees.

This article discusses “gold plated” health care plans and their cost, and the fact that under some proposals these plans would be subject to an excise tax. From the article:

“We don’t have Cadillac salaries”, said Robert Corner, a 63-year old who works for Nebraska’s department of roads in Lincoln and earns just over $50,000 a year. His parent union, the American Federation of State, County and Municipal Employees, estimates that it’s average health plan in Nebraska will be worth $31,000 in 2013, the year the new tax thresholds would take effect.

But Mr. Corner – you DO have a Cadillac salary when you take into account the health plan that taxpayers have given you, one likely with small co-pays and very few restrictions. Many of the union plans here in Illinois involve the workers paying almost NOTHING towards their care, and rumbles of a strike whenever they are asked to contribute a dime.

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Irving Kristol, 1920-2009

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Irving Kristol

Irving Kristol was a CCNY Boy, not a Chicago Boy.

Kristol was a Neoconservative when the “neo” part meant something. It started out as an insult, by former liberal friends, who derided Kristol and others for going where the evidence took them, and turning against their former views and former colleagues. The Neoconservatives were the people associated with The Public Interest magazine in the 1960s, mostly Jews from New York. The leading figures were Irving Kristol, Norman Podhoretz, Nathan Glazer and their circle. These guys followed a half-century course from Left to Right. They started out as Trotskyists at City College in New York in the ’30s and ’40s. Kristol describes that period here. They were anti-communist Social Democrats associated with Irving Howe and Sidney Hook in the 1950s. As the Democrat party undertook to build the Great Society in the 1960s, they became social planners. As that program failed, and Vietnam failed, and the McGovernite New Left began to take over the party, they became Scoop Jackson liberal hawks who were increasingly dubious about government social programs as well as staying hawkish on defense issues. As Jimmy Carter attempted to go beyond detente to something like appeasement, some switched parties and became Republicans. They were hawkish on defense and unideological and undogmatic critics of social programs that did not work. Kristol was the main figure in this intellectual odyssey. He and his colleagues added a critical infusion of intelligence and policy expertise to the conservative coalition that elected Ronald Reagan in 1980.

Perhaps Kristol’s most important contribution was his editorship of The Public Interest, which he described here. Recently, the complete archives of the Public Interest became available online.

Rest in peace.

UPDATE: Helen weighs in, with many good links.