No. 2: Baskets O' Loans

Is our ability to deal with the downward drop in residential real estate impaired by the fact that economic ownership of the mortgages is scattered - held "out there" in the market? How do you administer that?

Well, wait. There is someone - let's call him the Collection Agent - who is in the chain and has a list of debtors. When they make a payment, the CA checks it off, takes a little piece, and sends the balance along. At the other end there is someone - let's call him the Distribution Agent. When money rolls in the DA looks at his list of holders, checks them off, takes a little piece, and sends them their share.

So the CA knows who is going into foreclosure and the DA knows who is going to have to take less than expected.

So this time, in contrast to No. 1 below:

When it's time for the debtor to give up, he surrenders ownership of the house to the CA (which holds for the ultimate owners) but the debtor can continue to live there as a tenant. Rent is enough to cover major maintenance, insurance, taxes, and costs of administration of the arrangment by the CA and the DA, but zero is applied to debt service. The tenant has to keep the place up. The ultimate owners keep the loan for, let's say, 10 years. At the end, or if the property can't keep a tenant on those terms in the meantime, it's sold and then the CA, the DA, and the ultimately owners divvy up any proceeds.

Solving the Crisis, One Issue at a Time
No. 1: Foreclosed Homes

I'm starting to get it. The torrent of words that is roaring past on the economic crisis is at levels of 5000, 10,000, 25,000 feet. Way over the head of the problems. Leaving us with: put new money in giant institutions at the top of the pyramid and eventually we can all borrow our way back to health. And now add this: let's couple it with WPA 2009.

Nah. Break it into pieces and fix each piece.

Today: the huge inventory of foreclosed homes, which is expected to grow even larger.

Our traditional approach - throw out the debtor and auction off the property - is a fair way to get back to true value but on a massive scale it is just going to dig a massive short-term hole.

Instead: when it's time for the debtor to give up, he surrenders ownership of the house to the bank but can continue to live there as a tenant. Rent is enough to cover major maintenance, insurance, taxes, and costs of administration of the arrangment by the bank, but zero is applied to debt service. The tenant has to keep the place up. The bank does not have to write down the asset - so long as it can keep a tenant in there on that basis, it can keep the loan on its books in full. For, let's say, 10 years. At the end, or if the bank can't find a tenant on those terms in the meantime, it's sold and then the bank takes the loss. Or keeps the gain.

Takes no new cash, stablizes the residential market.

Next: homes where the debt is parcelled out and held in securitized pools.

River Bottoms - St. Charles County

There are broad vistas right up close to cities on rivers - people won't build there, it can flood, we know it well in this confluence of the Mississippi, the Missouri, and the Illinois.

So we have this, 20 minutes from downtown.

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2009 just cannot be more troubling than 2008, can it?

I cannot believe I haven't done this before.

Photos, that is.

This is Calhoun County, Illinois. A genuinely amazing place, reachable mostly by ferry. With flat riverlands, and hills like a Midwest version of the Cotswalds, orchards, high hedgerows, views of the Mississippi and the Illinois.

Big Boys

I am still trying to puzzle out what happened with this Great Credit Meltdown of 2008, and have a long way to go. As this point I'm skeptical. There is a problem for me in that smaller, well-run banks here in the Midwest would be surviving without all the government intervention, and smaller, well-run companies seem to be doing OK - reducing headcount, yes, but meeting payroll with those who are left.

And we are going to provide over $100 billion to keep AIG intact.

What gives? I think there are just too many big institutions that are creditors of AIG, and they just don't want to lose big money. There was a commentator on the tube today saying that if AIG liquidated, it'd be a fire sale. Buyers would get AIG assets for 20 cents on the dollar.

A. So what?
B. 20 cents on what dollar? A dollar based on 2007 valuations?

I hate it when left-wing slogans turn out to be right. But man, as of today, it really looks to me like we are nationalizing losses. And the really big boys - AIG's creditors - can't face a true, market-clearing, bottom-finding liquidation.

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Whew.

At last, it's over, and back to things that matter. Like listening to music, and playing it.

I'm listening to Chet Baker, even though I guess he's regarded as a lightweight and I found about him through a Starbuck's ad. Or maybe it was Volkwagen. Who cares - this ocean of media can toss off flotsam and if I pick some up and make it into, say, a coffee table - great.

I'm playing what I've always called blues runs. There may be a hipper term. They are the flourishes that blues pianists use to (a) show off and (b) fill in between melody lines, whether a singer's or player's. Makes them sound shallow, but they're not. They're cool.

This would be the perfect place to paste an example, but I don't want to slow down, and this is all for me anyway. (Good God, I hope I know what I'm referring to.) The vaguely interesting aspect of the project is how to get comfortable with these babies outside the key of C. I've been using C runs for years, even in tunes in G, but that's about it. Time to go to another level (to use an expression that is awfully current but nonetheless fits) and hence work on this standard run - trying to make it second nature in C, D, E, G, and A. I love F, but it and B don't work, they'd require completely different fingering.

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