Friday, June 29, 2012

This Week in Bank Failures

Barclays will pay $500 million in fines to U.K. and U.S. regulators to settle its role in fixing base index rates. Barclays was found to have falsified and manipulated its reports to the Libor and Euribor base rates in order to profit on its short-term derivatives trades, and also to bolster its public image. The bank was also found to have lacked the necessary accounting controls to prevent mid-level managers from manipulating its reports to the base rates. Internal email messages showed that base rate manipulation was an everyday practice at the bank for a period of years, and the distortions went so far that the bank’s reports at times lost all connection to reality. In connection with the fines, Barclays’ CEO and three other executives been stripped of their bonuses for this year. Regulators say a dozen other banks may be equally culpable in the base rate scandal.

Discussions about winding down the least solvent giant banks picked up this week, with calls for perhaps 20 of Europe’s largest banks to be liquidated as part of one plan being floated to save the euro zone from collapse. Meanwhile in the United States, the five largest banks were putting the finishing touches on their self-liquidating plans, which are meant to serve as a guide for the FDIC and other regulators the next time those banks get into a financial squeeze.

Last night in Europe there were discussions about creating a new euro zone bank bailout authority. It could be operating by July 9, politicians said. The news lifted stock markets worldwide today. The new international source of bank bailout/takeover funds could ease the fiscal pressure on countries like Ireland and Spain, which are currently unable to borrow money internationally because of the high cost of previous banking-system actions.

Four large U.K. banks have agreed to a deal to remedy improper marketing and other failings in selling interest rate derivatives to small business. Under the vaguely worded terms of the deal, the banks will look through their books and issue refunds where they are warranted.

New estimates of the results of JPMorgan’s high-risk derivatives bets say the ultimate losses will be between $6 billion and $9 billion. These latest estimates are based on accounting studies and are much higher than the initial estimate of $2 billion. The bank is unwinding its most volatile positions faster than initially planned because of the risk that market losses could expand as time goes on. However, some of the bank’s positions are so large compared to the size of the total market that they cannot be liquidated in just a few months.

There will be relatively few bank failures in the United States for the next seven months as we enter the political season. Regulators will postpone actions of all kinds as they seek to keep the technical details of banking regulation out of the political spotlight.

Thursday, June 28, 2012

Individual Mandate As a Tax

While upholding the health care reform package today, the U.S. Supreme Court distanced itself from the thinking of most of the lower courts that had ruled on challenges to the law. Many of the legal arguments had focused on the question of whether the individual mandate provision was a regulation of commerce or a tax, and the consensus was that it fell under the regulation of commerce. The Supreme Court rejected that line of thinking, ruling that the provision went beyond Congress’s commerce authority. Therefore, to the Supreme Court, the individual mandate must be a tax.

This is exactly what the individual mandate is in economic terms anyway. Any money that a citizen is generally compelled to pay is a tax. This is true regardless of the purpose of the law in question or the nature of the benefits that result. It is still a tax regardless of who the money is paid to.

Viewed as a tax, of course, the individual mandate is certain to be unpopular. Its burden falls disproportionately on students, unemployed workers, disabled people, and poor people. It is hard enough to be a college student these days, as you can see from the enormous burden of student debt, and the individual mandate makes it that much harder.

There is another problem with the individual mandate when viewed as a tax. It will be almost impossible to collect. The people who owe this money to the government are, in general, people who have no money to begin with. It almost like creating a special real estate tax for homeless people on the theory that homelessness is a sneaky form of tax evasion. It cannot add much to the government coffers, but it adds tremendously to the political friction of society. There has to be a better answer.

Wednesday, June 27, 2012

Here Come the Bankrupt Cities

This morning’s news brings several reminders that, in many ways, the global financial situation is still getting worse. As I write this, CNBC’s front page is showing two front-page headlines that hint at giant bank failures. I have not seen that before. There are new questions about how long auto maker Opel can keep operating.

And then there is the announcement of a large municipal bankruptcy in Stockton, California. This bankruptcy filing may come tomorrow. Stockton is a city of 300,000, so its bankruptcy dwarfs the de facto bankruptcy of Harrisburg, Pennsylvania.

Harrisburg, for its part, has no money to pay its bondholders and cannot fully pay its suppliers. It is being temporarily kept out of bankruptcy only by a legal fiction enacted last year by the state, but that law may not survive a series of court challenges by creditors.

A much larger city, Detroit, appears to be headed down that same path, just two or three years behind Harrisburg.

June 30 is the end of the fiscal year for many government units, so it will be a surprise if there are not several additional municipal bankruptcies filed in the coming days. The trend of municipal bankruptcies will continue for the next several years, as there are no easy answers for economically hard-hit cities when the whole global economy is struggling.

Tuesday, June 26, 2012

Close to the Edge With Credit Card Security Lapses

Criminals keep getting their hands on credit card data, but the three data breaches mentioned in the Federal Trade Commission (FTC) complaint against Wyndham Hotels (which includes Days Inn) are something different. In this case, it is the authorities who seem to be know everything about the data breaches, while the business that is at fault is relatively clueless.

For example, the FTC estimates that Wyndham customers’ credit card accounts were used for $10 million in fraudulent purchases, but a Wyndham executive said they had no knowledge of any customer losses from its data breaches.

Criminals obtained probably less than one million credit card account profiles, but more than half a million, in at least three separate breaches at Wyndham. This is small compared to other recent breaches, but not small in terms of the potential for financial damage. The FTC is reluctant to pursue these cases through the courts, so one has to wonder whether this case is meant to embarrass the hotel operator into taking steps to effectively secure its network. Perhaps the FTC is hoping to obtain a court order to that effect.

Security flaws will likely destroy the credit card business in the end, and the industry knows this, so it’s easy to imagine that everyone is doing everything they can to make credit cards secure. But there are still businesses that aren’t taking the threats so seriously, and today’s FTC filing is a reminder of that.

It is hard to understand a hotel operator putting itself this close to the edge. If there were to be further and escalating lapses, in the worst case, regulators or the credit card transaction networks could tell it to stop processing card transactions. That’s an order that would effectively turn out the lights at a hotel.

Monday, June 25, 2012

The Early Cherry Pies

At last weekend’s Veggie Fest in West Chester, Pennsylvania, everyone was talking about the cherry pie — not just because it was delicious, but because no one expected to see pies made from fresh local cherries this early in the season. It is the earliest beginning of the cherry harvest season anyone around here can remember.

This should not have been such a surprise after the Summer in March weather pattern of late winter and early spring brought out the earliest cherry blossoms we had ever seen. It’s no secret: plants respond to the weather.

And it is not just the cherry trees. This year’s harvest work will start a few days or a few weeks early in most of the United States because of the unusually warm early spring. For most of us, what this means is that we shouldn’t wait till August to start looking for fresh local produce. Fresh local produce is some of the most nutritious and least expensive food you can get, and this is the time of year to get it. In Pennsylvania, the harvest season is already underway.

Friday, June 22, 2012

This Week in Bank Failures

Political insiders in Greece are expressing confidence that the new coalition government will be able to forge a new strategy that will avert a currency crisis. So far there is no word on whether this will include a local currency.

Moody’s today announced downgrades for 15 giant banks worldwide, particularly Bank of America, Citigroup, Morgan Stanley, and Royal Bank of Scotland, which it said have higher operating risks because of a heavy reliance on borrowing. The downgrades had been hinted at in February. The lowered ratings increase the costs of operating the large high-risk banks by telling investors to expect higher interest rates than on loans to safer banks. More downgrades based on this kind of distinction are likely before the year is over.

It is becoming clear that mortgage risk is not limited to loans made in the high-risk years of 2003–2007. Banks that took the downturn as an opportunity to expand their mortgage lending between 2007 and the present may be at the greatest risk from future economic turmoil. Home values have not rebounded in the way that most observers expected (and many continue to expect), and the decline in real estate values adds to the risk of banks’ loan portfolios. Banks with large mortgage portfolios also get squeezed if interest rates rise while their assets are locked in portfolios of low-interest mortgage loans, a likely occurrence at some point in the future when the economy improves. Banks that are heavily exposed to current mortgage debt have a chance to make a profit if the economy remains relatively stable and sluggish, but could record huge losses if the economy turns upward or downward.

The Fed is resuming its market actions to lower long-term interest rates. This “twist” strategy effectively subsidizes bond investors in the hope that this will encourage banks to lend more. That, in turn, is supposed to reduce the risk of a prolonged recession — an increasing worry now that the euro zone does not seem to be seeing a route out of its current slump. This Fed announcement comes a week after a similar move by the Bank of England.

Thursday, June 21, 2012

Chilling Effects From Student Loans

Student loan debt is about to become a crisis. At the end of the month, subsidies for federal student loans are scheduled to expire. The formerly subsidized loans will be at an interest rate that is higher than a home mortgage interest rate.

The interest rate spike will suck money out of the economy at a particularly bad time. At a time when the Fed is looking for new ways to lend money to banks at near-zero interest rates, it will be particularly shocking for the interest rates that college students pay to suddenly double.

The most troubling part of this shift in policy is the message it sends to students: if you trust in the system, someday it will turn on you. That message too can only have a chilling effect on an already struggling economy.

Wednesday, June 20, 2012

Peak Solar Day

We have reached the summer solstice in the north. The vagaries of cloud cover aside, this is the peak day for solar power, when the sun shines the longest on the greatest number of solar panels. If the weather elsewhere is anything like what I am seeing where I am, we will see a new record for solar electricity in a day.

But if so, it is a record that won’t mean much. With the world adding more solar capacity every day, every summer has plenty of chances to break that particular record. It is the long-term trends that matter: more solar capacity, decreasing prices for solar installations, and a bigger share of electricity generated without any particular effort or fuss.

Tuesday, June 19, 2012

A Sigh of Relief, and Layoffs

The Greek election results were as inconclusive as observers and polls had predicted. The new Greek government will be forced to seek a compromise, maintaining the country’s connection to the euro zone while somehow relying less on that connection. That is not an easy answer to find. Given the difficulties, the enthusiastic response of the stock markets and, especially, the rally in oil prices might well confuse people. How can something so indefinite be such a favorable sign?

It is worth remembering that this is not exactly a jubilant time on Wall Street and around the world of high finance. Layoffs continue on a large scale this summer, and as time passes, the large intermediaries are slowly losing touch with their customers. But even when the world is turning in another direction, the relief at learning that it is not moving so quickly as it appeared the day before can still be an occasion for a market rally.

Monday, June 18, 2012

Invasion of the Good Vibrations

There were tanks in the square all last week.

This scene was not the show of force that it might have been in another place and time. Rather, it was the U.S. Marine Corps with a show of community involvement. In keeping with that objective, the Marines in the square were no ordinary Marines. You would not see them smoking cigarettes and speaking in interjections. They were, if I may be excused for putting it this way, the public relations Marines. It was easy to see that they had been specially trained in the kind of good vibes that help a person get along with anyone who happens by.

Their comic-book superhero manners aside, you could tell that this was not an invading force that had just come ashore by the fact that they had police protection. A few of the city police had the unenviable task of directing rush-hour traffic around the military display that occupied the center of the square.

They took on this job with surprisingly consistent good humor. It was the kind of smiling, good-natured persistence you would expect to see in the parking lot at Disneyland, but it was surprising to see here given the degree of difficulty and the usual strained mood of the city police. And this was seen not just at the square, but among all the police within several blocks, and also in varying degrees among the people passing by, many of whom had the inconvenience of having to walk an extra minute or two because of the rearranged square.

The only explanation for this is that the professional good vibes of the Marines rubbed off on the police and everyone else in the immediate area.

Granted, this is not an effect you ordinarily expect to see: a police force, or anyone at all for that matter, having their mood uplifted by a military unit that is passing through town. Even on Star Trek that is a scene you rarely see. But it is clearly what happened in this case. I don’t often see pedestrians thanking police officers at an intersection, but those were the kind of elevated manners I saw regularly in the square last week.

It is the best example I have seen lately of the reach that personal energy can have. The number of Marines was tiny compared to the thousands of people affected by the new energy in the square. And you can be sure that some of that improved energy will stick to that area for the next few weeks, if not longer, after the Marines’ visit itself is mostly forgotten.

It doesn’t take as much as you might think to change the energy of a place — in fact, it is something we all do every day. It is something we can learn to do well. We can have a useful impact on the energy of strangers even in situations when no one expects it. That’s what I saw last week when there were tanks in the square.

Friday, June 15, 2012

This Week in Bank Failures

Spain is now seeing the consequences of propping up its banking giants. This month’s discussions of a new €40 billion bank bailout fund, or was that €100 billion, have seen Spain’s credit rating fall to just a short distance above junk-bond status. Without some new drastic intervention, the lower credit rating and higher interest rates for borrowing would lead in short order to a sovereign default, with Spain unable to borrow enough money to meet all its obligations.

New European help for Spain seems likely enough, but it will not be enough for Spain to carry on in its present economic form. In a country where only 1 in 2 workers has a regular full-time job, more austerity is not a viable answer either. Even the International Monetary Fund (IMF), rarely a supporter of deficit spending of any kind, said today that Spain’s austerity budgets may have gone too far too fast. To keep going, Spain will need some kind of economic reordering that has more of its workers working.

Greece holds new elections on Sunday and the best guess is that the results will not be much more conclusive than the country’s last attempt. The election could signal a Greek withdrawal from the euro, though, and if that happens, no one is sure how well prepared banks around the world are.

In a widely criticized action, Wells Fargo has frozen the bank account of a blog site where two posts had been critical of the bank’s actions in a fraudulent foreclosure.

Allen Stanford, convicted of running a $7 billion Ponzi scheme based on a bank in Antigua, was sentenced to 110 years in prison.

In the United States, three small banks failed tonight, each with about $150 million in deposits.

  • Northeast Florida: Putnam State Bank, 3 branches. Harbor Community Bank is assuming the deposits and purchasing the assets.
  • Tennessee: Farmers Bank of Lynchburg, which also operated two branches as Oakland Deposit Bank and one in Chapel Hill as First State Bank. Clayton Bank and Trust is assuming the deposits, paying a 0.1 percent premium, and purchasing the assets.
  • Atlanta metro area: Security Exchange Bank, 2 branches in Marietta, Georgia. It was still collecting payments on only half of its outstanding loans. Atlanta-based Fidelity Bank is assuming the deposits and purchasing the assets. With the acquisition, Fidelity Bank expands its Atlanta-area footprint to 30 branches.

Thursday, June 14, 2012

Saab As an Electric-Car Startup

All the stories I read about Saab carry a tone of surprise. No one expected the Swedish automaker to emerge from bankruptcy as an electric car startup. I am not sure how many expected it to emerge from bankruptcy at all.

Purchased at auction by investment funds based in Hong Kong and Japan, the new Saab will initially make an electric version of the Saab 9-3. It will go on from there, it says, to produce an all-new car with a mostly Japanese design. It will start out with 200 employees, 1/20 of what Saab was a few years ago, but that is better than just shutting down.

Saab says it may be able to sell its first electric car in about one year, and perhaps that is not as unrealistic as it sounds. It has, after all, an assembly plant that was making cars just one year ago, and it says it has a supplier (in Japan) for the batteries and electrical components and designs it will need.

The radical new plan for Saab was perhaps the inevitable result of its arrangements with an earlier owner, General Motors. Saab’s other recent car designs had to be excluded from the bankruptcy sale because General Motors held some rights in the designs. Without the rest of its product line, though, Saab could scarcely go back to doing what it did before. But in trying to limit competition in the market for current-generation cars, General Motors may have unwittingly ensured that there will be one more company that has a head start on it when it comes to the next generation of cars.

Wednesday, June 13, 2012

If I Had to Testify About a Bank’s Multi-Billion Dollar Trading Losses

Trading gains and losses go together. All of us who hold stocks, derivatives, and other securities know about this. It is the nature of the risk of these investments. They go up, they go down. We employ whatever strategies and precautions we know to make it more likely that we have gains and less likely that we have losses, and for the most part, the gains exceed the losses, but this cannot always be the case. On some days, and perhaps in some years, there are large losses, out of proportion to the gains we were seeking.

Trading losses are a part of banking as it is currently organized. The banking giants that hold most of the deposits in the United States and in many other countries are too large to compete efficiently. Their operating costs are higher when compared to the amount of service they are able to provide to their customers. They are naturally driven to take greater risks to make up for their operating inefficiencies.

These greater risks run counter to the conventional public policy goal of a stable, sober, and reliable banking system. How much risk should banks be permitted to take? To what extent should policies tolerate or encourage banks to operate on a scale so large that they are forced to take disproportionate risks? These are policy questions. They cannot merely be left for the market to decide.

Tuesday, June 12, 2012

Personal Mapping

Maps got just a brief mention in Apple’s presentation yesterday, but it was enough to plant the idea of personal mapping.

We’ve had the ability to mark and search maps for many years, and that leads naturally enough to contextual advertising placement on maps, but why was that the obvious advancement in mapping? If maps can tell you about a business’s marketing plans, couldn’t they highlight the details of your own life just as easily?

It is, at least, an interesting idea, and one that I imagine we will come to take for granted by this time next year. When we look back, it will be easy to forget that personal mapping is an idea that hadn’t crossed most people’s minds until now.

Monday, June 11, 2012

Beer and Coffee

Over the weekend I heard another story of people buying locally roasted coffee. The reason I heard the story, of course, was that these were coffee beans that came with a story: where they came from, how they were selected, where they were roasted.

It sounded almost like the micro-brew stories I started to hear around 1996. “You can actually see beer being brewed!” I remember looking through a glass window at an impressively clean room in which, I was assured, all the equipment contained the various early stages of beer.

It struck me a useful gimmick to make a restaurant more interesting. But then, people who drink beer assured me that microbrewed beer was invariably better than factory-brewed beer. It was not just that it was more fresh. It also tasted cleaner. It fit the story, that the local pub didn’t know about all the shortcuts that the big factories used.

In 1996 the beer business was dominated by a few dozen national brands. Within ten years that had changed. People were drinking local beer when they could get it. And, drinking better beer, they weren’t drinking quite as much of it.

It is a similar setup currently in the coffee business. The market is dominated by a few national brands, and for most of them, their measure of quality is whether their product will pass as coffee. The local roasting plant has a noticeably better product and a story to go with it. So will coffee, like beer, become more of a small-scale, local business?

Friday, June 8, 2012

This Week in Bank Failures

The Vatican Bank is looking increasingly shaky two weeks after its board voted to dismiss the professional banker it had hired four years earlier, as part of an unprecedented effort to clean up the bank’s operations and make it a proper part of the international banking community. That board meeting occurred just after the pope’s butler had been arrested for leaking documents, and the bank president, accused of similar misconduct during the meeting, left hastily, not wanting to wait around to see if he too might be arrested. He would not avoid the police for long, however.

The ousted Vatican Bank president was questioned at length this week by Italian police, who confiscated his records of his time at the bank. The police were investigating two money-laundering cases, only one of which involved the Vatican Bank, and the confiscation of documents creates the appearance of an attempt to intimidate and silence the former bank president.

The Vatican Bank has a long and seedy history, and the latest moves can only be seen as a step backward in its attempts to transform into a fully legitimate bank. The troubles at the bank come at the same time that an internal war is dividing the cardinals who govern the Vatican. It is natural to see the sudden changes at the bank as a skirmish within that larger war, and the denials from the winning side at the bank can’t be given much weight.

Manhattan prosecutors have indicted Abacus Savings Bank and 19 employees for mortgage fraud. Prosecutors say the bank used false or forged documents for mortgage loans. The bank says it is cooperating with investigators.

Morgan Stanley is on the edge of junk-bond status, with investors, lenders, and ratings agencies worried about the broker’s European exposure, losses on business ventures, and highly leveraged business model. Morgan Stanley is paying down debts and reorganizing its financial arrangements to try to boost its financial status. If these moves are unsuccessful, it will shortly be forced out of some parts of its derivatives trading business.

Wall Street banks are preparing to lay off thousands of traders because of a global slowdown in stock trading. Volume has been declining for several years and is half of what it was three years ago. Summer is a traditionally slow season for the stock market, so some people on Wall Street are expecting layoffs to come this month.

According to insider estimates, UBS might have lost $350 million in the first day of trading for Facebook. This is just one of many reports that point to overreaching on Wall Street in the Facebook IPO.

The Treasury Department is preparing to auction off its remaining TARP investments so it can close the books on the program. Preferred shares currently owned by Treasury in 300 banks will be purchased by pension funds and private investors.

The pace of bank failures picked up tonight with the failure of Waccamaw Bank, based in Whiteville, North Carolina, with nearly $500 million in deposits. It had 16 locations mostly in coastal areas of North and South Carolina. Virginia-based First Community Bank is taking over the deposits and purchasing 97 percent of the assets.

Waccamaw Bank and its holding company had shown the unmistakeable signs of financial distress, with late financial statements leading to a Nasdaq delisting in November. This was followed in February by an auditor’s warning about the bank’s ability to continue operating. Around that time, the bank said it had reached a deal to sell most of its branches, but that transaction never took place.

Three small banks failed at closing time tonight, each with about $50 million in deposits.

  • The OCC closed Carolina Federal Savings Bank, located in the port city of Charleston, South Carolina, and the suburb of Mount Pleasant. Bank of North Carolina is assuming the deposits and purchasing most of the assets.
  • State regulators closed First Capital Bank in Kingfisher, Oklahoma, a small town in the central part of the state. F & M Bank is assuming the deposits and purchasing most of the assets.
  • State regulators closed Farmers & Traders State Bank, in Shabbona, Illinois, and Waterman, Illinois. First State Bank is assuming the deposits and purchasing the assets.

The four bank failures tonight bring the tally for the year to 28.

There was a credit union liquidation last weekend. California state regulators closed Telesis Community Credit Union, which had 37,600 members and $300 million in assets. Member accounts were transferred to Premier America Credit Union.

Thursday, June 7, 2012

The New Entrepreneurs

Tomorrow is, I think, the peak day for high school graduations. I will be writing on another subject tomorrow, so I wanted to take the chance today to wish the best of success to this year’s graduates. Most of all, I want to recognize those who, facing an indifferent job market, will have no choice but to start their own businesses. That is a lot to ask of anyone, but especially of a person with limited resources and little or no work experience. If this is you, my main suggestion is to get whatever help you can get from the people around you, especially when it comes to understanding what you need to do, because that is the area in which most businesses fail. Have a good story about what you are doing — that can make all the difference when you go asking for help.

If you know a new graduate who is starting a new business, please don’t think of them as crazy. Consider, instead, that they are making the best of an impossible situation. And if there is some way you think you can help, please don’t wait too long to offer your help.

Wednesday, June 6, 2012

Looking for Risk and Reward

American culture and Wall Street culture in particular tells us that there is no reward without risk. This is not really true, of course. Some of the biggest rewards in life are just a matter of doing. You never completely escape risk in life, but for many things, the risk is trivial compared to the reward.

My favorite example of this is the public health advice of washing your hands after arriving home from the subway or school. Where is the risk in washing your hands? Yet the reward is fewer cases of flu, and not just for yourself, but for everyone you see during a period of a few days afterward.

Maybe the risk of washing your hands is boredom. That is a joke, yet at the same time, it is not a joke.

The association between risk and reward has become an automatic habit for many people. They seek out risk like a rainbow, imagining it will lead them to the pot of gold.

People do this even though we all know intellectually that there is no value in risk in itself. There are countless ways you can put yourself or your assets at risk in which there is no plausible story of anything good coming from it. People who have adopted the thinking of risk and reward do this out of habit. They think they seek risk as marker for possible reward, but really they are seeking risk just for the excitement. The story about the reward may be no more credible than the story of the pot of gold at the end of a rainbow, and the imagined reward, when studied closely, often turns out to be smaller than the risk.

When the habit of risk-seeking takes hold, countless rewards that come without risk are neglected.

Financial risk-seeking is always an epidemic at times like this when bank interest rates and other conventional returns on capital are low. It leads people to seek out riskier investments, including ones that can’t be justified rationally, such as the recent Facebook IPO, or the Ponzi schemes that we read about in the news several times a year. A heightened level of aggregate risk-taking leads inevitably to big financial crashes.

It is a topsy-turvy time of rapid and unpredictable change to begin with, when the ambient levels of risk are already higher than we would normally expect. To counter this, we need more low-risk and risk-free rewards. Things like taking out the trash and washing our hands, and whatever similar things we can find on a larger scale.

Tuesday, June 5, 2012

Iran Fading

The ruling elite of Iran may have proved that they could void an election and continue to cling to power, but it quite wouldn’t be right to say they got away with it. Iran’s global presence has been fading steadily, and it seems safe to say that the profitability of the rogue business enterprises that virtually own the government has declined also.

It was hard to imagine in January that Iran would all but disappear from the world’s checklist by May, but that’s what can happen when a government is weakened by internal feuding. Meanwhile, according to online accounts, the situation for ordinary citizens in Iran has deteriorated as they increasingly become pawns in the government’s internal disputes.

Monday, June 4, 2012

More People Riding More Buses

Adapting to higher gasoline prices, more people in the United States are taking the train or the bus. Public transportation ridership counts in the first quarter were up 5 percent from the year before and set new records in many major cities. Only a small part of that increase is because more people are working. Much of it is a simple matter of people wanting to save money. And it helps that public transportation systems are improving. Trains especially have become more reliable, and suburban rail systems have added more parking capacity so that more people can park their cars and proceed by train.

The popularity of the iPad accounts for some of the increase in ridership. If you can get a seat on the bus, you can watch movies or write messages during the commute, and for some people, that is reason enough to take the bus instead of driving the car.

The fuel savings are large enough to have an impact on gasoline prices and to cut into the trade deficit. Mass transit by itself won’t be enough to keep gasoline prices low, but it is an essential part of the solution to the massive energy-cost drag on the economy.

Sunday, June 3, 2012

Summer in March Plays Tricks With Economic Trends

The “summer in March,” two or three weeks in March when the weather was just as warm as it is today in half of the United States, is still playing tricks with our economic data.

The biggest effect is seen in seasonally adjusted data. If March was better than you could ever expect, it makes April and May look like a disaster by comparison.

Even in measures that are not seasonally adjusted, though, a boost in March can turn into a lull by June or July. The people who shopped for a house or a car in March probably won’t be shopping for one now. The people who bought their summer clothes in April may not need any more clothes till September.

But we count on seasons being the same from year to year so we can see how we are doing economically. This year’s peculiar change of season has left us not knowing.

Saturday, June 2, 2012

Delivery Trucks, and How New York City Shed a Culture of Anarchy

My work took me to New York City this week, and it gave me a chance to reflect on how much the city has changed in the past 20 years.

The resurgence in tourism is one of the first things you notice when you step out onto the street in New York. The more fundamental change, though, is something you don’t see.

What you don’t see are the delivery trucks. That is a big change, and that is the change that made the city more accessible.

It used to be that the streets in New York were dominated by delivery trucks all day long. It is not that they were such a big part of the traffic, but it takes only one illegally parked truck to reduce the traffic capacity of a block by more than half. And it wasn’t just one. In a commercial district you could expect to come upon two or three delivery trucks per block, parked for ten minutes or an hour at a time in a place designated for driving.

It messed up traffic, to be sure, but it also changed the character of the street. There is an air of safety you can feel on a city street knowing that everyone can be seen from all directions. It wasn’t like that with trucks lined up along the curb blocking the view across the street. The visual obstruction effectively turned a broad avenue into a blind alley. And in the commercial neighborhoods, the most important areas in the city, every block was like this.

New York City had made a point of emphasis of getting delivery trucks to obey parking laws as early as 1980, but no one took it seriously at first. In an anarchic city where double-parking was a way of life, it was hard to imagine a delivery truck towed away. Somehow that changed, and the city eventually towed away enough trucks to get delivery companies and their customers to change their habits.

Obviously, that was one of many things that changed in New York City. Streets that used to be covered with trash have become respectably clean. A transit system that was barely limping along in the 1980s has become almost a model of efficiency, so that fewer people feel the need to drive. The police are a more visible presence on the streets. But as I look at it, the key was the delivery trucks. Having police on the block, after all, means little if you can’t see them and they can’t see you.

Friday, June 1, 2012

This Week in Bank Failures

There were no U.S. bank closings tonight. Deposit flight continues in countries seen as financially compromised, with the main attention this week on banks in Spain, Greece, and Argentina.