Freddie Mac Follows My Advice

As I suggested more than two months ago, “Freddie Mac to let residents rent homes after foreclosure” (USA Today). I’d like to see the proposed Bad Bank do the same: Buy up the defaulting bundled mortgages (now scattered as collateralized debt obligations or CDOs), rent the homes to the current occupants at market prices, outsource management and maintenance to private contractors, hold the assets until this crisis is resolved — to keep the homes off the already overflowing real estate market — then auction them over a multi-year period to again avoid flooding the market. Someone could figure out a flat purchase rate. For example, we could offer to buy the mortgage assets for 35% of the CDO book (original) value. The homes have probably decreased 20% in value already and that should be low enough to make the investors feel that moral-hazard pain for their bad-investment decisions. After all, everyone else’s investments are down 20%-40% because, in part, of their indiscretions.

TARP #1 failed because it’s impossible to answer the question. “Who holds the mortgage on this home?” The mortgages have been bundled and re-split, so we can’t make this optional for the owners of CDOs. We’ve got to round up and buy all these splintered assets in order to actually get full title to the houses. This is what the proposed Bad Bank should do. Nationalize the CDOs, rent and manage the underlying assets for 2-5 years, then sell them over the following five years. The Band Bank goes out of business by the end of 2018.

If we take this action quickly, we can stop giving cash to the banks. Get these troubled assets off their books while sharing the pain with them, then let them sink or swim on their own. If they want to pay billions in bonuses, let their shareholders foot the bill.

It’s a Victory

Like many others, I’ve been remarkably emotional about the election of Barack Obama. It doesn’t take much to bring tears to my eyes as we approach the inauguration. Just show me another one of those stories of a three-generation African-American family making their way from New Orleans to D.C. for Tuesday, and I’m a wreck. Normally I’d (at best) ignore those human-interest stories, so why is this such a big deal for me, for America and for the whole world?

I’m a Baby Boomer, born in the late 1940s, and in my life I haven’t experienced the kinds of victory celebrations that my parents and their parents did after World Wars I and II. There was no celebration at the end of the Korean, Vietnam or Cold wars. They just sort of went away or didn’t. That’s left us to celebrate much lesser events like men walking on the moon, a World Series, playoff and Super Bowl victories, Olympic Men’s hockey and Women’s soccer gold medals, etc. But none of these victories came out of despair such as a prolonged war. Sure there are lots of things to celebrate all the time, even daily, but nothing like VE Day at the end of WWII.

I’ve lived through the election of 11 U.S. presidents, and while any election victory is always a cause célèbre for at least half the country, this one is clearly a much bigger deal than any of those previous. The most obvious difference is that it’s our first black president. But would this really have been such an event if it had happened in 2000/2001 after the Clinton presidency? For that matter, could Obama even have been elected in 2000? I don’t think so.

No, I think Obama’s win and the incredible sense of victory is just that. Like the end of a major war, we’re as much celebrating the end of something bad as we’re celebrating a new beginning. And what is it that’s ending? It’s primarily the Bush era. It’s Iraq, it’s the bungling of Katrina, it’s Abu Ghraib and Guantanamo, it’s being embarrassed to be an American while traveling abroad, it’s Enron and WorldCom, it’s having the whole rest of the world looking at us and wondering what went wrong with our great country. And now it’s an economy in shambles. That’s what ultimately clinched the election for Obama.

January 20, 2009 is the celebration of a victory. At the very least it’s a celebration of the end of the Bush era and all it represents. It’s a celebration that the civil-rights movement of the 1960s — one of the defining issues for baby boomers — has ultimately succeeded. Put it all together, and it’s the largest victory this country has seen in more than 65 years. And that’s why I, like hundreds of millions of people around the planet, are very emotional about Tuesday and what it means for our country and the world.

A Free Upgrade from Comcast

Two weeks ago I bought an HDTV and a Blu-Ray player for the living room and used that as an excused to replace the 20 year-old stereo with a nice 7.1 home-theatre receiver. Then I went to the local Comcast store to get one of their HD DVRs. The DVR had only a DVI or component-video output, no HDMI. To get Dolby Digital audio, I used a fiber-optic link. It all worked, but I had an awful lot of cables. After researching the issue online, I learned that Comcast does offer an HDMI cable box — you just have to ask for it.

So today I went back to Comcast with the DVR under my arm. With very little hesitation, the woman at the desk swapped it out for a brand new Motorla DCH3416. The advantages of the DCH include:

  • It’s based on CableCARD technology.
  • 160GB disk (as opposed to 120GB in the older box).
  • It looks much better (for those who care).
  • HDMI (one cable instead of four or five, depending on your previous audio config).

I *think* the 1080i video looks a bit better on my 1080p screen than the old box. In particular, I think the motion artifacts are somewhat less noticeable, but without the old one for an A/B comparison it’s hard to tell. Good tests tonight: ’24’ on Fox and ‘India’ on PBS.

Tax Cuts for Small Businesses?

Watching the Sunday-morning talk shows…

In order for Obama to sell his stimulus plan he’s considering extending tax breaks to small businesses. It’s a concession to Republicans who continue to hold onto the classic Regan-era trickle-down economic theory: Reduce the taxes on small businesses and they’ll hire more people.

I don’t buy it. I’ve owned and helped manage a number of small and medium-sized businesses over the last 30 years, which gives me at least some real-world credibility in that domain. So what would I do if my company received a tax break from the federal government? In this economy, hiring new employees would be one of the last things on my list. At the top of that list would be (a) keeping the cash to strengthen my balance sheet in order to be better prepared for worse times ahead, and (b) taking the money out of the company to replace lost personal income and savings from the 40% drop in the financial markets. If my business is dropping off like everyone else’s, I certainly don’t want to increase my payroll with people who won’t have anything to do.

When times are good, all business (large and small) will expand in advance of demand. You see the potential (where that hockey puck is going to be) and you build towards it. But when the future looks bleak, you turn to survival. You cut back. You hoard cash. You wait for signs of increased demand, and only then do you invest in the growth of your business. In particular, no matter how much extra cash you may have, you never increase capacity when the volume of sales is forecast to drop.

Look at the auto industry. Detroit is in trouble, and they ask the feds for loans. But there are acres and acres of car lots with unsold inventory and the manufacturers are shutting down factories and laying off workers, trying to scale back to match the lack of demand for their products. What will the automakers do with additional cash? They certainly won’t hire more people. Why would they want to build even more cars when they can’t sell the ones they’re already making? Do we want the government to subsidize the building of cars that no one wants in the same way as we subsidize farmers to grow crops that have no buyers? (Don’t get me started on that one!)

In good times all businesses, large and small, will invest in their future opportunities. But in times like these the only thing that will causes business to expand and therefore hire, is more orders and more customers. And that, by definition, is a bottom-up process. I understand that Obama may need to include tax breaks for small businesses to appease the conservatives (as much as $200 billion, I’ve head), but I’m sorry to see it.

SpokenWord.org Logo Contest Winner

Getting a logo for SpokenWord.org via a contest on 99designs.com was quite an interesting experience. We offered a prize of $275 and received well over 100 proposed designs from perhaps 20-30 designers. The quality was better than I expected, and the choice was difficult. To make my life easier (or so I thought!) I posted a short questionnaire on SurveyMonkey.com and invited members of our team as well as all of The Conversations Network’s registered members for their opinions. It was on short (24hrs) notice, but we got more than 100 survey responses.

My first surprise was that the opinions were all over map. There was virtually no consistency. Maybe one or two designs were disliked by all, but the respondents’ first, second and third choices were evenly distributed across the others.

The second surprise was the number of angry messages (some *very* angry) about the whole idea of holding a contest at all. Little did I know what a can of worms I had opened. The gist of the complaints is that designers should not be asked to submit designs on spec; that any good designer should be paid for their work. One email referred to a web site that specifically trashed 99designs.com. One one hand, I see their point. OTOH, there are many professions in which ‘spec’ creations are the norm. Consider musicians and fine artists, for example. Or real estate developers. Hey — entrepreneurship and the entire venture-backed world is all about speculation and taking risks. Yes, there are commissioned-work oppotunities for artists and some houses are built-to-order, but they’re the exception in those businesses. I could have tracked down a designer and reviewed their portfolios. In fact, most of the previous logos for The Conversations Network were created by Dorothy Yamamoto, who is now retired. But I decided to give the 99designs.com site a try this time, and I’m glad I did.

The winning designer (‘mithrill’ — I don’t know if he wants his real identity to be published) got in touch immediately after the contest. We communicated via IM and we collaborated on a few minor adjustments. Within two hours after the contest, he had sent me the files, palettes, etc. Very professional. Next step is to integrate his logo and the color palette into the SpokenWord.org alpha site. Then onto a complete site design for the public beta launch for which I intend to return to 99designs.com. My flak jacket straps are cinched. I’m ready for the attack.

LibriVox.org

In about an hour from now the SpokenWord.org servers will have ingested 37,897 new programs from 2,011 RSS feeds. They’re all from LibriVox.org, an awesome and fast-growing collection of volunteer-read public-domain books. More than 2,000 of them! Special thanks to Huch McGuire and Chris Goringe for their help with this wholesale addition to our database and for creating and operating LibriVox.org.

Importing LibriVox.org is a great pre-beta test of the scalability of many components of SpokenWord.org. There’s one peculiar MySQL oddity that has already been triggered by this process. I used MySQL’s fulltext search to search programs by iTunes category. All of the LibriVox.org programs are in the category Arts:Literature. As of fifteen minutes ago — the ingestion is still running — the LibrVox.org programs exceeded 50% of all programs in our database. The quirk is that MySQL can’t find any words if more than half of the rows in the table contain that word. That’s why the top-level category Arts currently shows (0) programs. Ih fact, there are nearly 40,000. I’ve got a kludgy workaround in mind that I may implement until such time as LibriVox.org once again accounts for less than half of the programs in the system. That’s going to take a while since there are new chapters being added to LibriVox.org every day.

DIY Facial Recognition as Authentication

If I understand Scott Loftesness’ post, here’s an interesting idea. Some web sites (eg, Bank of America) use an image as part of their authentication scheme. Suppose instead they showed you an image of someone you know and asked you that person’s name? Okay, so maybe it’s not so great given that it’s not impossible to submit an image to a search engine. But still, I wonder if there’s a good idea in there trying to get out. Somehow using an image of someone as “something you know” seems appealing. Same, as Scott says, for “places you’ve been.” Hmmm…somthing there?

OTOH, maybe the facial thing isn’t so good for people like me. I have a mild (and self-diagnosed) case of prosopagnosia, so unless I’ve met you many times, I probably can’t recognize you. I can’t recognize any of those famous movie stars until I’ve seen them in lots of films, and I’m more easily fooled than most people by changes in hair and makeup.