My connection with the events depicted in The Big Short is that I worked in the information technology department of a mortgage bank in the run-up to the 2007 implosion of the subprime mortgage market. Many of the big players in that market, like New Century and Countrywide, were based here in my backyard — in Orange County and Pasadena. Given that it was fairly evident at the time that complicated financial instruments were being dreamed up for the sole purpose of lending money to people who could never repay it, it’s remarkable that very few people foresaw the catastrophe and that even fewer actually had the nerve to bet on it to happen. Long story short, the major rating agencies — Standard and Poor’s and Moody’s — were incompetent in their rating of subprime mortgage bonds, giving investment-grade and, in some cases, triple-A ratings to high-risk instruments. A lot… Read more →
EppsNet Archive: Bankruptcy
Accountability Without Consequences
‘I was too ambitious’: Spotify CEO announces layoffs among 6% of employees as tech job cuts continue — msn.com Spotify CEO Daniel Ek said that the decision to restructure Spotify is an “effort to drive more efficiency, control costs, and speed up decision-making,” adding that he takes “full accountability for the moves that got us here today.” I love it — and when I say I love it, I mean I don’t love it — when someone says they take “full accountability” for some disaster, knowing perfectly well that there won’t be any personal consequences. There’s no accountability without consequences. Had he said “I’m forfeiting my salary for the year and donating it to the employees who lost their jobs,” now that’s something I could respect. Popular Bookstores, Including Barnes & Noble, Are Closing Locations, Starting Feb. 11 — bestlifeonline.com JCPenney Is Closing Even More Locations, Starting Next Month —… Read more →
EppsNet Book Reviews: Mindset by Carol S. Dweck, Ph.D.
Carol Dweck’s research is part of a tradition in psychology that shows the power of people’s beliefs. These may be beliefs that we’re aware of or unaware of but they strongly affect what we want and whether we succeed in getting it. This tradition also shows how changing people’s beliefs can have profound effects. Dweck’s insight into fixed mindset (bad) vs. growth mindset (good) is powerful but there’s really not enough to it to sustain a book-length exposition without a lot of repetition and illustrational anecdotes, the problem with which is 1) they tend to be overly simple tales of triumph and failure with clearly identified causes; and 2) they ignore the inevitability of regression. For example, two of the people Dweck identifies as exemplars of the growth mindset are Tiger Woods and Alex Rodriguez. Mindset was published in 2006, after which Woods’s career imploded in the wake of extramarital… Read more →
Get Rich Making Dumb Decisions
The people on the short side of the subprime mortgage market had gambled with the odds in their favor. The people on the other side — the entire financial system, essentially — had gambled with the odds against them. Up to this point, the story of the big short could not be simpler. What’s strange and complicated about it, however, is that pretty much all the important people on both sides of the gamble left the table rich. . . . The CEOs of every major Wall Street firm were also on the wrong end of the gamble. All of them, without exception, either ran their public corporations into bankruptcy or were saved from bankruptcy by the United States government. They all got rich, too. What are the odds that people will make smart decisions about money if they don’t need to make smart decisions — if they can get… Read more →
I See a City That’s Coming Back
We are one nation. We are one people. We will rise and we will fall together. Anyone who doesn’t believe it should come here to Detroit. It’s like the commercial says: This is a city that’s been to heck and back. And while there are still a lot of challenges here, I see a city that’s coming back. — Barack Obama, Sept. 5, 2011 Read more →
But I Didn’t Mean It
POTUS: “When the auto industry was on the brink of collapse and Gov. Romney said, ‘Let Detroit go bankrupt,' I said no.” — Barack Obama (@BarackObama) July 16, 2012 Read more →
Here is Your Wakeup Call, America: Detroit Just Went Bankrupt
Detroit used to be known as “the Paris of the midwest” – a city of wide streets, imposing buildings, and home to the great US auto industry. In 1960, it had the highest per capita income in the nation. But decades of decline, racial tension and corruption have brought the motor city to its knees. — The Guardian Highest per capita income in the nation! I did not know that. Anyway, Detroit filed for bankruptcy last week with debts of more than $18 billion. The city’s population has dropped from 2 million in 1950 to 700,000 today, as Detroiters have become fed up with decades of mismanagement and rising crime and poverty. Detroit’s murder rate is at a 40-year high, only a third of its ambulances are in working order, and nearly half its streetlights are broken. Citizens wait 58 minutes for the police to respond to calls, compared to… Read more →
A Long and Short Explanation of Why Borders Books Went Out of Business
Borders, unable to find a buyer willing to get it out of bankruptcy, plans to close its remaining 399 stores and go out of business by the end of September. — msnbc.com “When Borders started up 40 years ago,” I explain to my son, “there was a certain percentage of the American public that bought books and read them. “It wasn’t nearly as large as the percentage who preferred to sit on their fat asses and watch television but it was there. There was a profit to be made from it. “Today, if I tell someone about a book I’m reading, they look at me like I’m confessing a perversion. Reading a book?! “Not only does no one read books but if anyone does get a notion in their head to read one, they’re likely to buy it online and/or download it onto a device. “The market for people who… Read more →