Tag Archives: Monica Potts

The End Of Mubarak And The End Of Fannie and Freddie?

Uri Friedman at The Atlantic:

On Friday, the Obama administration laid the foundation for what is sure to be a fierce debate about the role government should play in supporting homeownership in the United States in the wake of the housing bubble and financial crisis.

The Treasury Department and the Department of Housing and Urban Development issued a report to Congress outlining how government can gradually scale back its involvement in the mortgage market and transfer housing finance to the private sector. The report proposes abolishing the government-backed mortgage providers Fannie Mae and Freddie Mac within ten years and suggests three possible systems to take their place.

Daniel Indiviglio at The Atlantic:

With that said, however, the government’s presence in the housing market will not disappear entirely. In fact, it would certainly remain intact for the affordable housing initiatives through the Federal Housing Authority and other targeted programs, as it had in the past. The big change would be how mortgage funding would be provided for the vast majority of mortgages in the U.S., which have heavily relied on Fannie and Freddie for decades. The Treasury wants the private market to step in and take on most of that funding responsibility and relieve taxpayers of some or almost all of the mortgage market’s risk.

Before getting into the three alternative policy possibilities that it offers, the plan explains how the mortgage market would be weaned off of Fannie and Freddie over a period of time. One change would be to gradually increase the guarantee fees that the GSEs charge, so that private guarantors would be able to better compete. Another change would be to require Fannie and Freddie to obtain more private capital to cover subsequent credit losses. The Treasury also intends to reduce the size of mortgages that qualify for Fannie and Freddie guarantees. Finally, the administration intends to wind down Fannie’s and Freddie’s mortgage portfolios, by at least 10% per year.

The Treasury also provides some guidance on mortgage underwriting and measures to crack down on predatory lending. Perhaps the most surprising assertion was that loans that obtain government backing going forward — excluding those in designated programs specifically targeting lower-income borrowers — should eventually be required to “have at least a ten percent down payment.” The Treasury also stressed the importance of ensuring borrowers have the ability to pay the mortgages they obtain.

Mark Calabria at Cato:

While the report does say a lot of the right things — such as protecting the taxpayer — it is awfully short on any real details.  And in many areas, the report makes clear that the Obama administration intends to keep the taxpayer on the hook for future losses arising from Fannie and Freddie.  For instance, after assuring us that the GSEs will have sufficient capital to meet their obligations, including debt, the report tells us that such capital will not come from investors, but from the taxpayer.  One has to wonder whether this report was written for the benefit of the Chinese Central Bank (one of the largest GSE debtholders) or for the benefit of the U.S. taxpayer.

Equally vague is the discussion of “winding down” Fannie and Freddie.  While that sounds great, how is this to be accomplished? And how long will it take?  Again it seems that this “wind-down” will be financed by the taxpayer.  It is suggested that the GSE guarantee fees will increase.  Again, by how much and when?

Paragraph 2 of Section 1074 of the Dodd-Frank act, which required this study, also requires an “analysis” of various options and impacts.  In all due respect to HUD and Treasury and their efforts, there is nothing in this report that remotely resembles an “analysis” — just vague generalities.

I appreciate the administration’s stated desire to move us closer to a private market solution, but we’ve heard these empty promises before.  Remember that financial reform was going to end “too big to fail” and bailouts?  Health care reform was going to “bend the cost curve”?  It is past the time of fluff.   We need actual details and an actual plan.

Ezra Klein:

Beyond the basically insane structure of Fannie Mae and Freddie Mac — private institutions with lobbyists, profit motives, and the protection of an unarticulated but widely acknowledged government guarantee to cover their big losses — the administration’s diagnosis of what went wrong in the housing market speaks much more to issues dealt with in the financial-regulation law than issues included in their three options for reform of the government’s system of housing finance and insurance.

The story they tell begins in the consumer market, where inadequate protections and incompetent regulatory oversight allowed the brisk trade in bad mortgages to people who couldn’t afford them to take off. It then moves to the opaque and underregulated finance system, where the banks were packaging products they didn’t understand into securitized bonds and selling them off so quickly that they stopped worrying about how risky they were, and where regulators didn’t see what was going on and thus didn’t demand the banks hold enough capital to protect themselves from the inevitable reckoning.

Fannie Mae and Freddie Mac were part of this story, of course. But they were late to the party. They only got into the riskier stuff in 2006, while the rest of the financial industry had been playing in the mud since 2001. Reforming them can help mitigate a housing crisis in the future. But given this chain of events, it can’t prevent it.

The root causes will be fixed — or not — in Dodd-Frank. It’s up to the Consumer Financial Protection Bureau to strengthen the weak consumer protections that allowed these mortgages to be sold in the first place. Regulators will have new powers to force financial players — particularly the megafirms whose failure threatened the whole system — to hold more capital as a buffer against bad times. Banks won’t be able sell off all their risk because the law says they have hold five percent of the risk of any product they originate — though as Bethany McLean notes, that’s not true when the product consists of “qualifying residential mortgages,” and it’s up to the regulators implementing Dodd-Frank to define what a qualifying residential mortgage is.

That’s not to say reforming the way the government structures its presence in the housing market doesn’t matter. It does. But the government isn’t looking to dramatically change the role they play in the housing market. They’re just looking to get away from poorly designed institutions like Fannie and Freddie. The real action — the work that could prevent another crisis — is still in Dodd-Frank, where many of the questions central to how the housing markets works going forward haven’t been answered, and where many of the rules that might stop it from blowing up again have yet to be written.

Arnold Kling:

Incidentally, the more I think about it, the more outraged I am by the sketchiness of their proposal. It takes up only a few paragraphs, and those are quite vague. It is the sort of thing that, if somebody tossed it out at a meeting or in a blog post, you would say, “Might be interesting, but I am not quite sure how you would do it. Do you have a background paper on it somewhere?” In the form that it is presented in the report, I think that it is irresponsible to even call it a proposal. Shame on Treasury for putting something so half-baked at the center of their report.

This puts me in the strange position of defending Freddie and Fannie. My first choice would be for government not to hand out any goodies. But if you are going to have the government hand out goodies, the ability of regulators to control the costs and mitigate the risks will be much greater if we revert to Freddie and Fannie than if we try something new. Under any arrangement, the hard part will be what I call “staying off the booze,” meaning keeping the government from guaranteeing riskier mortgages (second mortgages, cash-out refis, loans on investment properties, loans with low down payments, etc.) when house prices start rising again.

Monica Potts at Tapped:

It’s far to ask whether we’ve been over-promoting homeownership, and, as Alyssa Katzdoes in the latest issue of the Prospect, what we maybe should do instead. Alyssa will have more detail on what happens after Fannie and Freddie on TAP Monday, but for the meantime, I’d like to point out what a symbolic victory this is for conservatives. Whether Fannie and Freddie should have been preserved probably wasn’t considered lightly, but conservatives have been vilifying the agencies as the cause of the crisis since the beginning. They weren’t, they were simply the last to ride a wave that started on Wall Street. That doesn’t mean the weird private/public limbo in which they did business wasn’t also a bad thing, but it does mean that conservatives will point to their demise as proof they were right.

Joseph Lawler at The American Spectator

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Filed under Economics, Political Figures, The Crisis

Walmart Woes

Erik Hayden at The Atlantic with a round-up.

SCOTUSBlog:

The Supreme Court stepped into two major controversies on Monday, agreeing to sort out when a class-action lawsuit may be filed when employees are seeking back pay for alleged workplace discrimination, and to clarify whether companies claimed to be a major source of global warming can be sued under the law of nuisance.  The first issue is raised in an appeal by the discount retailer, Wal-Mart Stores; the second an appeal by four large  electric generating companies that have been sued by a group of state governments.  The cases are likely to be heard in March or April.

A federal judge in San Francisco has cleared the way for a class of at least 500,000, and perhaps as many as 1.5 million, present and former women employees of Wal-Mart to sue the huge chain over alleged sex bias throughout its 3,400 stores in the U.S.   The Court agreed to hear one issue raised by the company, and added a question of its own.  The outcome will not decide whether the company did engage in  discrimination, but only whether the lawsuit may proceed as a class-action.  Potentially, billions of dollars are at stake.

The first question will be whether, under Federal court Rule 23, a lawsuit may seek a money verdict — in this case, a claim for back pay — when the class was created under a provision that limits remedies to corrective court orders, not money.   Besides agreeing to hear that, the Court told the parties to file briefs and prepare to argue on a second question — whether the class was a proper one, under Rule 23, when it was cleared to go forward under Rule 23(b)(2).   It is unclear whether the Court, if it answered that second question in the negative, would be signaling that the class case might still proceed under a different part of Rule 23 — part (b)(3), which does allow money claims.

Wal-Mart’s petition had raised a second question that embraced the broader argument that no class should have been approved at all, since the claims made by the women employees were so disparate and so diffuse that they really had nothing in common, and that, as a result, Wal-Mart would not have been able to mount a defense to such claims.   The Court rewrote Wal-Mart’s second question, without making it clear exactly what arguments the lawyers should now be making in addition to whether a money claim could be made in this case.

Dahlia Lithwick at the XX Factor:

The six plaintiffs in the suit claim that despite the enormous size of the class, Wal-Mart’s decision-makers determine pay and promotion based on a rigid and highly centralized “strong corporate culture that includes gender stereotyping.” Their claim is that women constitute more than 70 percent of Wal-Mart’s hourly workforce but less than one-third of salaried management. They seek back pay, punitive damages, and changes to Wal-Mart’s hiring and promotions policies. Wal-Mart’s liability may be in the billions of dollars. Aside from the size of the class, Wal-Mart argues that the lower courts used the wrong standards to certify the class.

This is a high-stakes appeal that has elicited strong responses from the Chamber of Commerce on one hand, and those who worry about the need for class-action suits to protect worker rights on the other. It’s going to garner an enormous amount of interest from those who contend that big business never loses at the Roberts court and that workers can’t catch a break. It may also prove an early litmus test for whether the presence of three women at the high court will in any way shape the debate about gender discrimination.

Marcia Coyle at The Blog Of Legal Times:

The merits of the case, however, are not before the justices. Instead, the Court will focus on whether the class was properly certified.

“We welcome the Supreme Court’s limited review of the class certification decision in this case. As that decision was based on a vast body of evidence, we are confident that the decision to certify the class was sound,” said the plaintiffs’ lead co-counsel Joseph Sellers, partner in Washington’s Cohen Milstein Sellers & Toll, in a statement. “We believe the Court will reach the same decision after reviewing the record before the U.S. District Court for the Northern District of California, where class certification was granted in June 2004.”

Wal-Mart has lost the class action issue four times in lower court rulings, noted Sellers.

Wal-Mart, represented by a team of lawyers from Gibson, Dunn & Crutcher, led by partner Theodore Boutrous, contends that the class was improperly certified, both as to its size and type. It argues that the plaintiffs, who are seeking back pay, were certified under Federal Rule of Civil Procedure 23(b)(2), used for classes seeking injunctive relief and, instead, should have been required to meet the tougher standards for classes seeking damages.

In the grant of review Monday, the justices ask the parties to address whether claims for money damages can be certified under 23(b)(2) as well as whether certification under that rule was consistent with the certification requirements of Rule 23(a).

Carrie Lukas at The Corner:

It will be interesting how this plays out. Walmart claims that its employment practices “expressly bar discrimination and promote diversity,” and it is hard to imagine that the official employment practices would do the opposite. The crux of this case will likely be the outcomes of that employment system: If, on average, women have ended up earning less than men with similar job titles, that will be evidence of discrimination.

Those familiar with debates about the so-called wage gap (the difference between the earnings of the median working man and working woman) know that there are many reasons other than discrimination why women sometimes end up earning less than men do. As a report for the Department of Labor (conducted using data from the Current Population Survey) concluded:

Although additional research in this area is clearly needed, this study leads to the unambiguous conclusion that the differences in the compensation of men and women are the result of a multitude of factors and that the raw wage gap should not be used as the basis to justify corrective action. Indeed, there may be nothing to correct. The differences in raw wages may be almost entirely the result of the individual choices being made by both male and female workers.

It’s an important fact to keep in mind: Even if statistics show that men and women earn different amounts, discrimination isn’t necessarily to blame.

Monica Potts at Tapped:

I’m not expecting the current court to side against Wal-Mart, however. At every opportunity, the Roberts Court has expanded the rights of corporations. Moreover, as Tiku points out, the issue might even split Obama’s two appointees. Wal-Mart twice cited Justice Elena Kagan, who wrote an influential law-review note on class certification while she was a student at Harvard.

But class-action suits are important ways for a discriminated class of people to be compensated. If Wal-Mart as an institution discriminates against women, it seems perfectly reasonable that those affected stretch across the country and through the entire corporate hierarchy. Women already have a hard time seeking redress against discrimination; it’s disappointing to consider that it’s about to get even harder.

Don Suber:

For years, conservatives have called for tort reform. Legislating tort reform is difficult because so many lawyers like it (including the defense attorneys for businesses) and really the courts do not like to be told what to do.

The class-action lawsuit is the biggest paid. It always seem the lawyers get millions while the “victims” get coupons for prices off on their next purchase from the maker of the defective product.

Walmart may help end that abuse.

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Filed under Feminism, Supreme Court

She Won’t Shake Her Salt Shaker, She Won’t Shake Her Salt Shaker

Ed Morrissey:

How does government intervention get sold to citizens?  First, publicize a “crisis” and warn that dire consequences will follow without some immediate changes.  Push people into changing their choices voluntarily with social pressure and warnings of impending disaster.  At some point, declare those efforts insufficient and propose government intervention as the only way to save people from themselves.

DDT? Global warming?  Alar?  No … salt:

The Food and Drug Administration is planning an unprecedented effort to gradually reduce the salt consumed each day by Americans, saying that less sodium in everything from soup to nuts would prevent thousands of deaths from hypertension and heart disease. The initiative, to be launched this year, would eventually lead to the first legal limits on the amount of salt allowed in food products.

The government intends to work with the food industry and health experts to reduce sodium gradually over a period of years to adjust the American palate to a less salty diet, according to FDA sources, who spoke on condition of anonymity because the initiative had not been formally announced.

Officials have not determined the salt limits. In a complicated undertaking, the FDA would analyze the salt in spaghetti sauces, breads and thousands of other products that make up the $600 billion food and beverage market, sources said. Working with food manufacturers, the government would set limits for salt in these categories, designed to gradually ratchet down sodium consumption. The changes would be calibrated so that consumers barely notice the modification.

Maura Johnston at The Awl:

The FDA, following in Mike Bloomberg’s footsteps, is making plans to force food manufacturers to gradually reduce the amount of salt in their offerings. Salt content went unnoticed until now because it was “generally recognized as safe,” but that was back before the average American was eating 3,500 milligrams of it a day. (That’s the equivalent of 1.25 Triple Baconators. Which seems a little low!)

Mary Katherine Ham at The Weekly Standard:

The FDA will accomplish this regulatory coup, according to Washington Post‘s sources, by merely moving salt out of the “generally recognized as safe,” category, which only requires accurate nutrition labeling into the unsafe substance category, which the FDA can regulate aggressively. It’s the same trick the EPA pulled to expand the role of regulators over carbon levels. They simply had an “endangerment finding” that moved the substance from one EPA-created category into another, more heavily regulated EPA-created category, and voila!, regulatory power.

Kevin Drum:

I am so in favor of this. It’s sort of like the Do Not Call list: I don’t really care about ideology here, and I don’t really care if this is nanny statism or government overreach or anything else. I’m just totally in favor. And you know what? By the time this is done, my guess is that nobody will even remember a difference. They’ll just be eating healthier food that tastes better and doesn’t cause as many strokes or heart attacks. Three cheers for the FDA.

Moe Lane:

Look, I understand that the nanny-state Left doesn’t trust its own judgment and ability to make informed decisions, and that’s fine.  In fact, I agree with them: I don’t trust their judgment or ability to make informed decisions, either.  But why do they insist on trying to interfere with my judgment or ability to make informed decisions? – Aside from them generally being annoying neo-Puritan gloom-magnets, of course.

At any rate, I can’t wait to see the FDA explain to the American people why they can’t have proper bacon anymore…

Joel Achenbach at WaPo:

The most fascinating part of this is the notion that the government can change our palate through incremental measures. Yeah, and maybe in 10 years we can be trained to like half-hour situation comedies again, and the three top sports in America will once again be baseball, boxing and horse racing.

Here’s the bottom line: As a nation we’ve come to be repulsed by ourselves. We’re overweight and oversalted. We consume too much and save too little and are a fiscal mess and have too much on our credit cards and spoil our children and live in houses that are excessively large and now, to punctuate the whole miserable picture, our government is going to have to save us from salt, or more precisely, from our palates — from our big fat tongues.

Just watch: Someday they’ll tell us there’s something wrong with burning gasoline.

UPDATE: James Joyner

UPDATE #2: Monica Potts at Tapped

Matthew Yglesias

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Filed under Food

The Birds And The Bees Had Money In Lehman

James White at Wall Street Journal:

A report issued today by  the CDC found the teen birth rate dropped 2% in 2008 and the rate for Hispanic teens hit a two-decade low. There had been declines in the birth rate for U.S. girls ages 15 to 19 between 1991 and 2005. Then increases in the birth rate among teens for the next two years had caused worry among public-health officials that the climb might be becoming permanent.

“This is good news,” said Stephanie J. Ventura of the National Center for Health Statistics, told the Washington Post regarding the latest teen data. “It might come as a surprise because people were concerned the teen birth rate was on a different course.”

Birth rates in 2008 also fell for women in their 20s and 30s, and the overall birth rate declined 2%. Officials said that could be linked to the economic downturn and a slowdown in immigration to the U.S. resulting from the weak job market.

Bucking the downward trend, however, were women over 40. Those in their early 40s posted a surprising 4% rise in their birth rate last year, reaching their highest mark since 1967. The data show that the older women got, the less willing they were to postpone a birth, the report’s lead author, Brady Hamilton of the CDC’s National Center for Health Statistics, told the Associated Press.

Monica Potts at Tapped:

Here’s the easy answer for why women in their 40s didn’t slow down during the downturn, from the AP story: “‘You get to the point where biological clock starts ticking and people realize they have to do it,’ said [James] Trussell, who was not involved in the research.” Yes, because we all know that’s our sole reason for being.

The idea that women take their finances into consideration when they make family planning decisions shouldn’t be a huge shocker to anyone by now, but it usually pops up in stories about whether bad economic times up the abortion rate. Whether women can afford a child is a big reason behind why many decide to have abortions. And that makes total sense. According to federal government figures, it costs $196,010 for a low-income family to raise a child over his or her lifetime, and $269,040 for middle-income families. With figures like that, condescending conversations about personal responsibility and self-sacrifice don’t really mean much.

Again, with this piece, as in so many others, the mostly male doctors give the looming fertility clock tower the central role, reminding women that if they wait until their early 40s, they might not have another chance. That’s why doctors hypothesize that women continued to have babies in their 40s despite the bad economic climate. But it also seems possible that women in their 40s were financially secure enough not to have to worry about what was going on in the broader economy.

Huffington Post:

Birth rates in the United States began to decline in 2008 after rising to their highest level in two decades, and the decrease appears to be linked to the recession, according to a Pew Research Center analysis of state fertility and economic data.

This analysis is based on data from the 25 states for which final 2008 birth numbers are available. State-level indicators were used because the magnitude and timing of the recent economic decline varies from state to state, thus allowing a more nuanced analysis of links with fertility than is possible at the national level.

In 22 of these 25 states, the birth rate — the share of women of childbearing age who gave birth — declined or leveled off in 2008, compared with the previous year. In 20 of the 25 states, the number of births declined or leveled off from the previous year.

The analysis suggests that the falloff in fertility coincides with deteriorating economic conditions. There is a strong association between the magnitude of fertility change in 2008 across states and key economic indicators including changes in per capita income, housing prices and share of the working-age population that is employed across states.

The nation’s birth rate grew each year from 2003 to 2007, and has declined since then. As will be shown later in this report, the number of births also peaked in 2007 to a record level, dipped nearly two percent in 2008 and continued to decline in 2009, according to National Center for Health Statistics (NCHS) data. This analysis focuses on birth rate changes in 2008, the year after the national recession began. Research shows that past recessions are linked to fertility declines but that other factors also play a role.

Jim Moss at Firedoglake:

Does this mean we can expect a baby boom once the economy recovers?

Paul Krugman:

There have been many stories about the decline of the birth rate in 2008, with almost all attributing it to the recession. But James Trussell raises an interesting point: doesn’t it take nine months from conception to birth? Abortion aside, to reduce births in the first three quarters of 2008 in response to a recession that started in Dec. 2007 would have taken pretty impressive rational expectations.

What are we missing?

Christine Kim at Heritage Foundation:

But the mainstream media completely ignored the most genuinely concerning trend in childbearing.  In 2008, more than 4 in 10 children, or about 1.7 million births, were born to unmarried mothers.

For decades, unmarried childbearing has been trending unrelentingly upward.  In 1960, about 5.3 percent of all births were to unmarried mothers.  Ten years later, it had doubled to 10.7 percent.  By 1980, it was 18.4 percent, and in 1990, 28 percent.

The 1996 welfare reform, which aimed to reduce out-of-wedlock childbearing as it is a primary cause of child poverty, slowed its growth rate for a few years, but by 2003, it resumed the dramatic climb, an increase of 17 percent in 5 years.

In 2008, 40.6 percent of all births in the U.S, were to unwed mothers, according to the new CDC report.  While unwed teenage childbearing comprised one-half of all unmarried births in 1975, in 2008, the 133,000 births to those under age 18 comprised less than 8 percent of all unmarried births (22 percent if 18- and 19-year-olds are included).

Indeed, out-of-wedlock childbearing has largely become a twenty-something phenomenon.  About 37 percent of all unwed births were to the young twenty-something, and another 23 percent to unmarried women in their late twenties.

Tom Toles at WaPo:

The debate about population has calmed quite a bit in the last few decades since we’ve learned that resources are more elastic than once thought and that trend lines show global population will crest in a half century or so, just in time to enjoy the fruits of our current carbon policies. But now the dark warnings about population come from the OTHER side: that we (as in we the developed countries) are not having ENOUGH children.The arguments as I understand them are that it’s hard to have a growing economy with a shrinking population (we’ll leave immigration for another day) and that we won’t be able to care for our retirees without more workers to foot the bill. These are serious arguments, interesting arguments, but I think there is a name for the type of system that requires ever greater numbers of people coming in to sustain the fewer that were in before: PONZI SCHEME. These are known to end badly.

How do we know what the human carrying capacity of earth is? As Warren Buffett has pointed out, we don’t know, but we do know it’s not infinite. I have my own formula. I think that until the number of species that are under severe threat because of human predation or habitat loss falls to the negligible, the presumption is there are still too many people.

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Filed under Economics, Families, The Crisis

No Change Of Mind Left Behind

Diane Ravitch’s new book The Death and Life of the Great American School System here.

NPR:

In 2005, former Assistant Secretary of Education Diane Ravitch wrote, “We should thank President George W. Bush and Congress for passing the No Child Left Behind Act … All this attention and focus is paying off for younger students, who are reading and solving mathematics problems better than their parents’ generation.”

Four years later, Ravitch has changed her mind.

“I was known as a conservative advocate of many of these policies,” Ravitch says. “But I’ve looked at the evidence and I’ve concluded they’re wrong. They’ve put us on the wrong track. I feel passionately about the improvement of public education and I don’t think any of this is going to improve public education.”

Ravitch has written a book about what she sees as the failure of No Child Left Behind called The Death and Life of the Great American School System. She says one of her biggest concerns is the way the law requires school districts to use standardized testing.

Tyler Cowen:

Her bottom line is this:

The more uneasy I grew with the agenda of choice and accountability, the more I realized that I am too “conservative” to embrace an agenda whose end result is entirely speculative and uncertain.  The effort to upend American public education and replace it with something market-based began to feel too radical for me.  I concluded that I could not countenance any reforms that might have the effect — intended or unintended — of undermining public education.

Ravitch of course was once the number one advocate of these very ideas; read this excellent article on her intellectual evolution.

Overall it is a serious book worth reading and it has some good arguments to establish the view — as I interpret it — that both vouchers and school accountability are overrated ideas by their proponents.  (Short of turning the world upside down, some school districts will only get so good; conversely many public schools around the world are excellent.)  But are they bad ideas outright?  Ravitch doesn’t do much to contest the quantitative evidence in their favor.  There are many studies on vouchers, some surveyed here.  Charter schools also seem like a good idea.

Jessica Olien at The Atlantic:

An interview with Ravitch followed a story about Central Falls High in Rhode Island which recently fired its entire staff of teachers because of low achieving students.

An emphasis on test scores can make it hard for teachers in poorer schools to get ahead. When their entire performance is based on the tests and they are rewarded or punished accordingly it can seem like the system gives wealthier schools an automatic advantage. As a result, Ravitch says that the testing encourages schools desperate for funding to game the system.

When asked whether it was healthy to have some competition in the education marketplace, Ravitch countered that “there should be no education marketplace,” emphasizing that education for children is not meant to be run like a business.

“Schools operate fundamentally — or should operate — like families. The fundamental principle by which education proceeds is collaboration. Teachers are supposed to share what works; schools are supposed to get together and talk about what’s [been successful] for them. They’re not supposed to hide their trade secrets and have a survival of the fittest competition with the school down the block.”

Alan Gottlieb at Huffington Post:

Ravitch raises red flags about charter schools and the foundations that promote them. While it might not be these foundations’ intentional agenda to destroy American public education, she says, their pushing of charters, choice and accountability are doing just that.

Echoing many of the arguments of teachers’ unions across the country, Ravitch says that charters drain the best, most motivated students from regular public schools, leaving those schools in a death spiral, for which they are then blamed.

“As currently configured, charter schools are havens for the motivated,” Ravitch writes. “As more charter schools open, the dilemma of educating all students will grow sharper. The resolution of this dilemma will determine the fate of public education.”

The problem with this argument, of course, is that it implies that ‘motivated’ students from low-income families should be denied the opportunity for a better education so that the institution of public education, which has served them badly, survives to fail another day.

Here I side with Howard Fuller, who on a recent Denver visit proclaimed: “I am from the Harriet Tubman school of education reform.” Every kid who escapes a bad educational environment is one more kid with a better chance at a fulfilling life.

Ravitch excoriates the Bill and Melinda Gates Foundation, the Walton Family Foundation and the Eli and Edythe Broad Foundation for being unelected policy-making monoliths, utterly unaccountable, that are shaping the direction (or as she would argue, dismantling) of public education.

“There is something fundamentally antidemocratic about relinquishing control of the public education policy agenda to private foundations run by society’s wealthiest people,” she writes.

…The foundations demand that public schools and teachers be held accountable for performance, but they themselves are accountable to no one. If their plans fail, no sanctions are levied against them. They are bastions of unaccountable power.I ask Ravitch: To whom, then, should we cede control over public education? An answer as banal as “the people” won’t cut it. Elected school boards? Their failures, especially in big cities, are the stuff of legend.

Andrew Samwick:

Competition and collaboration are not mutually exclusive.  Far from it — almost everywhere you look in nature, the winners of “survival of the fittest competition” are the entities that found ways to collaborate and succeed.  (Cue Richard Dawkins.)  But what does not occur in nature or society, because it is not viable over any reasonable length of time, is a strategy of making a “family” out of disparate actors just by placing them near each other.  (Cue F. A. Hayek?)  Families involve tremendous amounts of sacrifice of the selfish interests of one member for those of another.  The willingness to do that systematically does not occur without strong bonds of kinship.

It is in fact a mistake to think that choice and accountability by themselves will be enough to improve performance, without the other elements of a competitive marketplace.  The most important of those elements is freedom of entry by any producer who thinks he can do a better job than the current producers.  Consider Ravitch’s disappointment with NCLB to date, as quoted in Chapter 6 of her book:

But what was especially striking was that many parents and students did not want to leave their neighborhood school, even if the federal government offered them free transportation and the promise of a better school. The parents of English-language learners tended to prefer their neighborhood school, which was familiar to them, even if the federal government said it was failing. A school superintendent told Betts that choice was not popular in his county, because “most people want their local school to be successful, and because they don’t find it convenient to get their children across town.” Some excellent schools failed to meet AYP because only one subgroup — usually children with disabilities — did not make adequate progress. In such schools, the children in every other subgroup did make progress, were very happy with the school, did not consider it a failing school, and saw no reason to leave.

Schools have many characteristics.  So-called performance, as measured by standardized tests, is only one such characteristic.  What the paragraph reveals is that location is important as well.  And in most cases, the school district has not allowed an alternative provider to come into the market and match the existing school on all of its non-performance characteristics while improving performance.  There is, in most cases, still a local monopoly on enough of the characteristics that matter.  Unless you break that monopoly, until you do in fact allow direct competition with “the school down the block,” you should not expect to be treated to service that is any better than what you typically get as a member of a captive audience.

Monica Potts in Tapped:

The idea of school choice fuels the charter school and voucher systems, and the hope is schools become better through a sense of competition. A steady, if unproven, criticism of school choice systems is that the best schools simply enroll the best students. Even if they don’t actively do so, there could be a self-selection bias in the parents who actively seek out better schools to send their children to. But research found the biggest problem was that parents who were offered the chance to enroll students in better schools often did not do so. They liked the idea of the school as being part of the community. After looking at the data, Ravitch now feels that’s an idea worth going back to.

UPDATE: Robert VerBruggen at NRO

Ramesh Ponnuru at The Corner

Austin Bramwell at The American Conservative

UPDATE #2: Jim Pinkerton and Robert Wright on Bloggingheads

E.D. Kain at The League

Kevin Drum

Ryan Avent

More Kain

UPDATE #3: Kain again

Even More Kain

Rick Hess at Education Week

UPDATE #4: Kevin Carey at TNR

Rod Dreher

Sonny Bunch at Doublethink, here and here

UPDATE #5: DiA at The Economist

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Filed under Books, Education

Reuters Isn’t The Only Organization Pulling Stories

Monica Potts at Tapped:

The Lancet has finally, finally withdrawn a long-discredited study linking autism to vaccinations for measles, mumps, and rubella.

The ethical problems behind the research have long been noted, and other studies have failed to repeat the findings. But the retraction comes too late to stop the 1998 study from doing damage. Money is diverted to studying vaccines rather than finding the real causes of and solutions to autism, and parents are refusing to get their children vaccinated. That’s led to an increase in diseases we know definitely hurt children, like measles, in developed countries that had long seen them disappear.

Ronald Bailey at Reason:

Since its publication, study after study could find no such correlation between vaccination and the development of autism. The immediate reason for this long overdue retraction is that the U.K.’s General Medical Council just sanctioned lead researcher on that study, Canadian gastroenterologist Andrew Wakefield, for acting unethically. The retraction should end this harmful controversy, but I fear that the Wall Street Journal is right when it suggests:

… while the withdrawal supports the scientific evidence that vaccinations don’t cause autism, it isn’t likely to persuade advocacy groups who still believe in the link.

In fact, the anti-vaccine group SafeMinds has already jumped to the defense of Wakefield, declaring:

SafeMinds is very disappointed by the GMC’s [General Medical Council] findings  The false testimony and the ensuing GMC FTP hearing have had the effect of delaying necessary research into cause and treatment for autism, and dissuading scientists from pursuing research relating to vaccines as a cause of chronic disease.

Sigh.

Chris Mooney at Science Progress:

On a scientific level, the most severe undermining of Wakefield’s study came in the form of a 2004 analysis by the Institute of Medicine, one wing of the U.S. National Academy of Sciences. The IOM examined no less than 16 separate studies on the purported dangers of the MMR vaccine, in addition to Wakefield’s. The latter they found “uninformative with respect to causality”; overall, they concluded that “the evidence favors rejection of a causal relationship between MMR vaccine and autism.”

Even prior to that, ten of Wakefield’s original coauthors (out of twelve in total) had backed away from the work in a 2004 letter to The Lancet. “We wish to make it clear that in this paper no causal link was established between MMR vaccine and autism as the data were insufficient,” they wrote. “However, the possibility of such a link was raised and consequent events have had major implications for public health.”

Meanwhile, a series of investigative stories published in The Times of London unearthed Wakefield’s undisclosed ties to vaccine litigation in the U.K. The full Lancet retraction that occurred yesterday builds on all of these developments, including, most recently, an investigation into Wakefield by the U.K.’s General Medical Council which declared him “irresponsible” and questioned, among other matters, the risks imposed upon children in the original study.

Let’s pause for a moment here. We’re talking about a single, small study—on just 12 children—that stirred a mass anti-vaccine movement and a trend away from vaccination that threatens public health in some wealthy counties. Already, you should be wondering how it could be possible to build so much upon such a slender reed. But if you then consider the subsequent fate of the study, and the scandal that has attended it, a reasonable person would surely conclude that the original scare about the MMR vaccine and autism had no serious foundation whatsoever.

Here’s the thing, though. It seems obvious to all recent commentators—myself included—that the latest Wakefield news will have virtually no impact on Wakefield’s passionate followers, the anti-vaccine ideologues in the UK and United States who have long cheered him on, and will continue to do so. If anything, it will probably only make them still stronger in their convictions.

David Kirby at Huffington Post:

Wakefield’s critics can condemn, retract, decry and de-license all they want, but that does nothing to stop or alter the march of science, which has come a long way over the past 12 years, and especially in the last year or two. The evidence that autism is increasing at alarming rates, and that some thing (or things) in our environment is wreaking havoc on a vulnerable one-percent of all US children is now so irrefutable that, finally, the federal government is climbing aboard the environmental research bandwagon – way late, but better than never.

This long-overdue paradigm shift will leave many in the scientific community with some proverbial but nonetheless uncomfortable egg on their increasingly irrelevant faces: Those who have protested with shrill certainty that autism is almost purely genetic, and not environmental in nature, and therefore not really increasing at all, will hopefully recede from the debate.

And that begs a nagging question: If those people were dead wrong about environmental factors in autism, could they also be mistaken in their equally heated denials about a possible vaccine-autism link? More bluntly, why should we heed them any longer?

We need to examine a host of environmental factors (air, water, food, medicine, household products and social factors) and how they might interact with vulnerable genes to create the varying collection of symptoms we call “autism.” But these triggers almost have to be found in every town of every county of every state in the land – from Maine to Maui.

Are vaccines the only contributing factors to autism? Of course not. Other pharmaceutical products like thalidomide and valporic acid, as well as live mumps virus, have been associated with increased autism risk in prenatal exposures, so we already know that a variety of drugs and bugs can likely make a child autistic.

But, there are now at least six published legal or scientific cases of children regressing into ASD following vaccination – and many more will be revealed in due time.

There was the case of Hannah Poling, in federal vaccine court, in which the government conceded that Hannah’s autism was caused by vaccine-induced fever and overstimulation of the immune system that aggravated an asymptomatic and previously undetected dysfunction of her mitochondria. Hannah received nine vaccines in one day, including MMR.

Then there was the Bailey Banks case, in which the court ruled that Petitioners had proven that MMR had directly caused a brain inflammation illness called “acute disseminated encephalomyelitis” (ADEM) which, in turn, had caused PDD-NOS, an autism spectrum disorder, in Bailey.

And last September, a chart review of children with autism and mitochondrial disease, published in the Journal of Child Neurology, looked at 28 children with ASD and mitochondrial disease and found that 17 of them (60.7%) had gone through autistic regression, and 12 of the regressive cases had followed a fever. Among the 12 children who regressed after fever, a third (4) had fever associated with vaccination, just like Hannah Poling.

Wesley Smith at First Things:

I post this not to get into the vaccine controversy.  Rather, if the article is as deficient in veritas as the Lancet states, I wonder if the article was more an “advocacy” piece than a “science” study. As I have noted repeatedly before, the scientific paper has become a powerful method of promoting ideological/political agendas. That has to stop, because it not only distorts politics but undermines science itself.

Jonathan Adler

UPDATE: Daniel Drezner

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Filed under Health Care, Public Health, Science

That’s A Big Key In The Mail

Lingling Wei and Mike Spector in WSJ:

A group led by Tishman Speyer Properties has decided to give up the sprawling Peter Cooper Village and Stuyvesant Town apartment complex in Manhattan to its creditors in the collapse of one of the most high-profile deals of the real-estate boom.

The decision comes after the venture between Tishman and BlackRock Inc. defaulted on the $4.4 billion debt used to help finance the deal. The venture acquired the 56-building, 11,000-unit property for $5.4 billion in 2006—the most ever paid for a single residential property in the U.S. The venture had been struggling for months to restructure the debt but capitulated facing a massive debt load and a weak New York City economy that has undercut rents and demand for high-priced apartments.

The property’s owners signaled they would be unable to reach a deal with lenders and instead decided to allow creditors to proceed with what amounts to an orderly deed-in-lieu of foreclosure, which means a borrower voluntarily gives the property back to lenders to avoid a foreclosure proceeding.

“It has become clear to us through this process that the only viable alternative to bankruptcy would be to transfer control and operation of the property, in an orderly manner, to the lenders and their representatives,” the venture said in a statement to The Wall Street Journal. “We make this decision as we feel a battle over the property or a contested bankruptcy proceeding is not in the long-term interest of the property, its residents, our partnership or the city.”

Chris Rovzar in New York Magazine:

“We make this decision as we feel a battle over the property or a contested bankruptcy proceeding is not in the long-term interest of the property, its residents, our partnership or the city,” the statement continued. Tishman will also “not consider a long-term management contract to continue operating the property that does not involve ownership. Without a restructuring that would keep our ownership group as part of the equity, we felt it best that the new owners install a new management team.” The developers had collected at least $10 million in property-management fees since the purchase, but last year had begun to manage the property for a loss. Now investors and creditors, like the government of Singapore, Florida, and California state pension plans, and the Church of England, face not only investments that are worth nearly nothing, but the prospect of figuring out what to do, and how to manage, this elephant of the East Side.

Naked Capitalism:

The acquisition of the 11,000 apartment complex known as Peter Cooper Village and Stuyvesant town was a classic example of peak of cycle excess. The $5.4 billion price was the most ever paid for a residential property. The valuation, in what I am told was unprecedented for an institutional commercial real estate transaction (remember, the owner is a commercial landlord) was based on projected rentals rather than actual (and I believe actual can include step-ups in signed leases).

The really bizarre part of this deal was the aggressive increases in rentals that the buyers projected. These apartments are all in Manhattan, which has tenant-friendly housing regulations. Moreover, many of these apartments were rent-regulated, and apartments can be “decontrolled” (which also applies to rent stabilized apartments, in which rental increases are permitted, but only to the extent approved by the rent stabilization board, with the intent of letting landlords recoup increases in operating costs) only under certain circumstances. The percentage of apartments the new owners said they’d be able to bring to market rentals was wildly implausible. And then the downturn hit, and the “market” rents they anticipated didn’t pan out either.

Megan McArdle:

It’s tempting to point fingers and laugh, because as I discussed in this month’s magazine, this was a breathtakingly stupid deal.  As the commercial real estate bubble expanded, you saw a version of what had happened during the stock market bubble:  multiple inflation.  (Arguably, this is also kind of what happened in residential real estate). Much of the price increase in commercial real estate between 2000 and 2007 was due to rising rents.  But about half was just that buyers, suddenly and for no apparent reason, became willing to pay more for a given stream of projected rents.  Where previously, buyers might have wanted a price-to-rent ratio of ten or eleven to one, by the height of the bubble, they were willing to pay 14 or 15 times rents.

Collective insanity?  Or were they simply betting on asset price inflation–that some “greater fool” would be willing to buy their property from them at a higher price?  Hard to say.  But the net effect was a pretty impressive inflation in the commercial real estate market.  As in residential real estate, lenders participated too, loaning a higher percentage of the building’s value, and demanding less amortization over the life of the loan.

Neil Hume at The Financial Times

Monica Potts at Tapped:

In one respect, it’s a triumph for affordable rental housing, especially in Manhattan, where the middle-class has been squeezed out. The inability of the working class to maintain a foothold in much of New York City was a big downside of the boom, and the possibility that they could come back could be an upside to the bust.

But this story also serves as a reminder that sometimes it makes the most sense to walk away. As many commentators have pointed out, we tend to assign immorality when families who own homes decide, after crunching the numbers, that paying their mortgage is no longer worth it, but have no such qualms when businesses make the same decision:

A provocative paper by Brent White, a law professor at the University of Arizona, makes the case that borrowers are actually suffering from a “norm asymmetry.” In other words, they think they are obligated to repay their loans even if it is not in their financial interest to do so, while their lenders are free to do whatever maximizes profits. It’s as if borrowers are playing in a poker game in which they are the only ones who think bluffing is unethical. That norm might have been appropriate when the lender was the local banker. More commonly these days, however, the loan was initiated by an aggressive mortgage broker who maximized his fees at the expense of the borrower’s costs, while the debt was packaged and sold to investors who bought mortgage-backed securities in the hope of earning high returns, using models that predicted possible default rates.

After all, as Daniel Gross points out, you are living up to the terms of the deal if you walk away from the home you’ve decided not to pay for. Urging homeowners to continue to pay their mortgage is more about the big picture — all of those foreclosures would be bad for the banks. But it’s pretty easy to argue that we’ve worried about the banks enough.

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