Category: Consumer Protection

Saturday Soother – April 21, 2018

The Daily Escape:

Bluebells in Hallerbos, Belgium – April 2018 photo by shinbaninja. Bluebells bloom only for about 10 days.

Welcome to the weekend. Let’s take a detour from the continuous drip, drip, drip, of Comey, Stormy, Syria, Cohen, Russia, and North Korea. Instead, take a look at an example of GOP maliciousness that passed under the radar, like a cruise missile, but aimed at American consumers.

The NYT’s Thursday business section reported about Senate Republicans passing a piece of legislation that will eviscerate a little bit more of the Consumer Financial Protection Bureau’s (Bureau) supervision in the financial sector: (emphasis, brackets and link by Wrongo)

The Senate voted on Wednesday to overturn an Obama-era rule that restricted automobile lenders from discriminating against minorities by charging them higher fees for car loans, in the latest attempt by Republican lawmakers to roll back financial regulations.

Republican lawmakers, along with one Democrat, Senator Joe Manchin of West Virginia, seized on the Congressional Review Act to overturn guidance issued in 2013 by the Consumer Financial Protection Bureau. The 1996 law [Congressional Review Act] gives Congress the power to nullify rules formulated by government agencies but has primarily been used to void recently enacted rules.

After the Government Accountability Office determined late last year that the consumer bureau’s 2013 guidance on auto lending was technically a rule that could be rolled back, Republicans, led by Senator Patrick J. Toomey (R-PA), targeted it for rescission by using the Congressional Review Act. The House is expected to follow suit and also use the Congressional Review Act to void the guidance.

Republicans have been against the Bureau, which was established under the 2010 Dodd-Frank law since it was passed. Trump’s pick to lead the agency, at least on an interim basis, Mick Mulvaney, has largely frozen its rule-making and enforcement.

Democrats and consumer watchdogs criticized the Senate’s move. Rion Dennis of Americans for Financial Reform, said:

By voting to roll back the CFPB’s work, senators have emboldened banks and finance companies to engage in racial discrimination by charging millions of people of color more for a car loan than is justified….Lawmakers have also opened the door to challenging longstanding agency actions that are crucial to protecting workers, consumers, civil rights, the environment and the economy.

Senator Richard Blumenthal, (D-CT) warned that rescinding the Bureau’s guidance would lead to a flood of unfair, predatory lending:

This truly repugnant resolution ignores the unacceptable, undeniable truth that consumers’ interest rates are regularly marked up based on their race or ethnicity — a disgusting practice that continues to run rampant across the country…

A 2011 report from the Center for Responsible Lending analyzed loan level data and found that African-Americans and Latinos were receiving higher numbers of interest rate markups on their car loans than white consumers. The Bureau issued guidance in 2013 urging auto lenders to curb discriminatory lending practices and used that guidance to justify lawsuits that they brought against auto finance companies.

The Department of Justice can still bring lawsuits against auto lenders for discriminatory practices, even if the guidance is nullified. But legal experts say the government could be less successful in bringing such cases without the guidance from a government agency saying the practices are viewed as improper.

Why are Republicans so mean-spirited? This is just gratuitous maliciousness towards African-Americans and other people of color. Who benefits, except a few huge GOP donors in the financial services industry?

This is another example of why TURNOUT in November is all that we have left to save the Republic.

No way to spin it, we’ve had another tough week, so it’s time for a Saturday Soother. Let’s start by brewing a yuuge cup of Sumatra Tano Batak ($21/12 oz.). The beans come from the northern part of the Indonesian island of Sumatra, and are valued for their complex earth and fruit notes. That comes from using unorthodox fruit removal and drying practices called “wet-hulling.” Then the beans are roasted by PT’s Coffee in Topeka, Kansas. According to them, drinking it invokes the experience of eating cherries in a flower garden next to a patch of fresh, fragrant, just-turned earth.

Sounds like it could be the Fields of Wrong on a warm April day.

Now settle back in a comfy chair and listen to the most underappreciated jazz singer, Johnny Hartman. He’s Wrongo’s favorite of that era. Here he is singing “I’ll Remember April” from his 1955 album, “Songs from the Heart”. It was Hartman’s debut album:

Those who read the Wrongologist in email can view the video here.

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Saturday Soother – September 9, 2017

The Daily Escape:

Stepwell, Rahasthan India – photo by Victoria Lautman. Stepwells were carved to make it possible to bring water up from deep wells. Only about 250 stepwells remain.

Big week. Trump cozies up to Schumer and Pelosi, earning the enmity of Ryan and McConnell. Hurricane Irma slices through the Caribbean, and is making landfall in Florida as Wrongo writes this. The Wrong family offers its best wishes to those who are still in the path of the storm.

But, there is another storm brewing over at Equifax, who was nailed by a breach that could have essentially exposed everyone with a credit record in the US:

Equifax, a provider of consumer credit reports, said it experienced a data breach affecting as many as 143 million US people after criminals exploited a vulnerability on its website. The US population is about 324 million people, so that’s about 44% of its population.

Equifax said:

Criminals exploited a US website application vulnerability to gain access to certain files…

Probably yours, 143 million credit records were exposed. Equifax is offering free credit monitoring to anyone affected, but that’s a cheap make-good for compromising the credit information of almost everyone in the US with an Equifax credit file. That includes anybody who ever had a credit card, or completed a loan application in the past 25 years.

Needless to say, consider your identity compromised, and take steps before Equifax strikes again. If you’re wondering whether heads will roll at Equifax, don’t fret. It looks like they knew what was coming, and acted in their own self-interest:

Three Equifax Inc. senior executives sold shares worth almost $1.8 million in the days after the company discovered a security breach that may have compromised information on about 143 million U.S. consumers.

Equifax says that it discovered the intrusion on July 29.

Regulatory filings show that three days later, Chief Financial Officer John Gamble sold shares worth $946,374 and Joseph Loughran, president of US information solutions, exercised options to dispose of stock worth $584,099. Rodolfo Ploder, president of workforce solutions, sold $250,458 of stock on Aug. 2. None of these transactions were listed as part of 10b5-1 pre-scheduled trading plans, so they most likely were spur-of-the-moment.

In other words, these titans of capitalism knew for over a month, but didn’t tell anyone, and then sold shares before revealing the breach. BTW, Equifax’s stock crashed on the news. We used to call that insider trading, but we no longer expect corporate America to pay for its mistakes.

In a society that respected its laws, these guys would be already in jail. Not only have they hidden the attacks, giving people less time to react, but they have also sold their shares using privileged information.

The corporate rats always jump ship before the boat sinks.

In honor of Hurricane Irma, and to help those who have boarded up, filled the tank and moved out, we have two pieces of music today. For the fans of popular music, here is “Ridin’ The Storm Out”, from the 1973 album of the same name, by REO Speedwagon:

Takeaway Lyric:
The wind outside is frightening

But it’s kinder than the lightning

Life in the city it’s a hard life to live

But it gives back what you give

Those who read the Wrongologist in email can view the video here.

And for those who wish to be contemplative while experiencing the devastation, or awaiting news of it, grab a hot steaming cup of Georgio’s Colombia Pink Bourbon Los Cedrol coffee. Now, put on your headphones, and listen to Rossini’s “La Tempesta – VI Sonata a quattro in D major” for two violins, violoncello and double bass. Rossini wrote this in 1804, when he was 12 years old. Go ahead, eat your heart out, you’re unlikely to be that good, ever. This version is performed by Orchestra Atalanta Fugiens, conducted by Vanni Moretto:

 

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Houston’s Petrochemical Industry Fails to Protect City

The Daily Escape:

Ranwu Lake Campsite, Tibet – photo by Arch-exist Photography. Ranwu Lake is a tourist attraction in SE Tibet, and is called the “Tibetan Switzerland”.

Life in the age of corporatism resembles life in the food chain. In a potentially disastrous outcome from the Harvey flooding, a chemical plant in Crosby, Texas belonging to French industrial giant Arkema, has had several explosions of peroxide and other volatile chemicals. From the NYT:

The company had already ordered all workers to leave the damaged plant, and Harris County ordered the evacuation of residents within a 1.5-mile radius.

These chemicals have to be refrigerated and stored in safe Storemasta containers to avoid further damage. When the plant’s warehouses lost power, they transferred the product to diesel-powered refrigerated containers. But later, the backup generators were swamped by flood waters, so cooling was lost, and the explosions began. On Tuesday, the company released a statement:

Refrigeration on some of our back-up product storage containers has been compromised due to extremely high water, which is unprecedented in the Crosby area. We are monitoring the temperature of each refrigeration container remotely….while we do not believe there is any imminent danger, the potential for a chemical reaction leading to a fire and/or explosion within the site confines is real.

The rains are over, but the chemical fires linger. Richard Rowe, the CEO of Arkema’s American operations said:

The company has no way of preventing chemicals from catching fire or exploding at its heavily flooded plant…the company has no way to prevent…this worst case outcome.

The CEO says, “No way to prevent explosion“. Back in the olden days, that would be known as a “major design flaw”. Most engineers would have recommended placing the generator sets above at least the 100-year high water mark, just to prevent this kind of fun event. They would also put the diesel tanks above that water line.

Maybe next time. The Houston Chronicle had this amazing map of chemical plants in the Houston area:

In case it is hard to read the map legend, the yellow markers are for petrochemical plants that have a “medium” potential for harm based on their location within the 100-year flood plain. The red markers have a “high” risk for harm. Houston’s ship channel and the surrounding area along the Gulf coast represent about 40% of U.S. petrochemical manufacturing. At least 25 Houston-area plants have either shut down, or experienced production issues due to Hurricane Harvey’s flooding.

Any guesses that the concentration of plants in the Houston flood zone will cause our corporate overlords to think about relocation of a few of these sites? Or, how they best secure them from the next 500-year flood, which looks like it will happen in say, the next five years? From Forbes:

Harvey was a wake-up call, reminding us that it is time to take a more serious look to ensure the safety of the petrochemical industry and the public at large, just as the nuclear power industry has done in reaction to the Fukushima disaster.

But Arkema has worked hard to change EPA rules in their favor. David Sirota reports that the new rules, which were set to go into effect this year, were halted by the Trump administration after a lobbying campaign by Crosby plant owner Arkema and its affiliated trade association, the American Chemistry Council:

Those rules – which would have taken effect on March 14 – were blocked by EPA administrator Scott Pruitt. The move was a big win for the chemical industry that has spent more than $100 million supporting federal lawmakers since 2008.

Apparently, sacrifices must be made in the name of making America great.

The closures are not just disrupting markets; they’re also causing the release of toxic pollutants that pose a threat to human health. The NYT reports that damaged refineries and oil facilities have already released more than two million pounds of hazardous substances into the air. Facilities within hazardous industries should implement safety measures such as a high speed safety door to ensure hazardous materials are contained.

The sheer number of facilities around Houston that have to come back online at the same time creates another huge emissions problem. From City Lab:

The real problem is that the plants are allowed to operate so close to residential areas in the first place. Houston’s lack of zoning regulations have been front-and-center in discussions about why Harvey has been so terrible for the city, and that’s no different in the discussion about air pollution.

Not to worry, Houston, your petrochemical corporations will be fine. They have insurance. They will get to write off any damage against their profits. They will get tax incentives to rebuild, or if they choose to move, tax credits from the town down the road.

The people? Most will have no insurance to rebuild their homes or to purchase new furniture.

And the pollution impact? A cost of doing business for the petrochemical industry.

Unfortunately, for the people, pollution’s about their health. And there will be no help forthcoming for the most vulnerable Houstonians.

Have a slice of Texas-themed music: Here is Robert Earl Keen, doing “Corpus Christi Bay” from his 1993 album “A Bigger Piece of Sky”:

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FCC Says America Doesn’t Need Fast Internet

The Daily Escape:

Gibraltar, looking toward the Atlantic, 2016 – photo by Wrongo

The FCC has just said that Americans might not need a fast home internet connection. Instead, mobile internet via a smartphone might be all the public needs. No matter how fast the public’s internet connection is, people all over America will still be regularly accessing adult content websites such as https://www.porn7.xxx/, whether it be through their smartphone or any other device. From Ars Technica:

The suggestion comes in the FCC’s annual inquiry into broadband availability. Section 706 of the Telecommunications Act requires the FCC to determine whether broadband (or more formally, “advanced telecommunications capability”) is being deployed to all Americans in a reasonable and timely fashion. If the FCC finds that broadband isn’t being deployed quickly enough to everyone, it is required by law to “take immediate action to accelerate deployment of such capability by removing barriers to infrastructure investment and by promoting competition in the telecommunications market.”

Today’s Wrongologist column is for all of those people who said “both parties are the same, it doesn’t matter who you vote for“. Nothing like the “small government” folks at the FCC telling America what type of internet access we need. It is fortunate that there are still internet providers out their devoted to giving a high-quality service, such as the internet Nebraska has.

During the Obama administration, the FCC determined that broadband wasn’t reaching Americans fast enough, particularly in rural areas. And, they did not consider mobile broadband to be a full replacement for a home (or “fixed”) internet connection via cable, fiber, or other technologies. Many rural areas are now benefiting from higher speed internet providers moving into their locations, if you’re wanting to learn more about whether fiber could come to you look into Denham Springs news.

Last year, the FCC concluded that Americans needed BOTH home and mobile access:

34 million Americans, about 10% of the country, still lack access to fixed broadband at the FCC’s benchmark speed of 25Mbps for downloads, 3Mbps for uploads…

The FCC also concluded under then-Chairman Tom Wheeler that since home internet connections and smartphones have different capabilities and limitations, Americans should have access to both instead of just one or the other.

But now we have a Republican administration. Ajit Pai, the GOP’s new FCC Chairman, is poised to change that policy by declaring that mobile broadband with speeds of 10Mbps downstream and 1Mbps upstream is all anyone needs. This is a deep tongue kiss from the FCC to the broadband industry.

More from Ars Technica: (brackets by the Wrongologist)

This [Agit’s plan] would be the first time that the FCC has set a broadband speed standard for mobile; at 10Mbps/1Mbps, it would be less than half as fast as the FCC’s home broadband speed standard of 25Mbps/3Mbps.

In Europe you can now routinely get 250Mbps internet service, and higher speeds in parts of Asia. Good job FCC!

The changes were signaled in an FCC Notice of Inquiry, the first step toward completing a new analysis of broadband deployment. The document asks the public for comments on a variety of questions, including whether mobile broadband can substitute for fixed Internet connections.

Pai has previously made it clear that he thinks mobile broadband can substitute for fixed connections. In 2012, Pai’s first year as a member of the FCC board, he criticized the then-Democratic majority for concluding that mobile internet service can’t replace home Internet.

Those who work from home need faster speeds, and the number of “at home” workers is growing. Companies have learned that letting employees work from home gets them a lifestyle improvement by ending the weeks of their year spent commuting. Working from home also lets companies lower their commercial rents.

Consumer internet usage will increase as you’re able to read by viewing this source here and similar pages regarding internet stats in the past and future. With the current costs of mobile data, an evening of Netflix delivered by smartphone will put the average US consumer over their data plan maximum. The data caps in most mobile plans are low, and the costs of overages are high. Reliability is another issue. The service is fragile in storms, and unstable under high volume usage, such as at large public gatherings.

Do you remember the good old days when we made fun of Russia and China for their quaint infrastructure? Now, Republicans are trying to pretend the future doesn’t exist.

Maybe America doesn’t need interstate highways, local roads might be good enough. Pai is playing to Trump voters: Why would they want anything faster than mobile? They get Trump’s Twitter feed, so what else to they need?

You don’t like this? Is it making you angry?

You should know what to do by now. Hint: It usually happens on a Tuesday.

Music appreciation: Today we hear “Hymn to Freedom” by the Oscar Peterson Trio. It was written in 1962 in support of the Civil Rights movement. Here it is live in Denmark in 1964, with Oscar Peterson on Piano, Ray Brown on Bass and Ed Thigpen on Drums:

Freedom from the FCC and the Ajit Pai’s of the world is what we need.

Those who read the Wrongologist in email can view the video here.

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United Airlines: Try Doing The Right Thing

The Daily Escape:

Kravica waterfall in Bosnia Herzegovina -photo by Vedrana Tafra

Wrongo needs to start by saying that he has nearly 800,000 lifetime air miles on United Airlines (UAL) and, after the forcible removal of a paying passenger, he will try to avoid flying them again.

You know the story: United Express in Chicago loads passengers on a plane heading to Louisville. Then four employees arrive, needing seats. United was unwilling to offer enough compensation to induce passengers to give up their seats, and ordered four passengers off of the aircraft. Three left, but one refused, saying he had to be in Louisville in the morning.

United officials called the Department of Chicago Aviation, (part of the City of Chicago), the type of government agency that you never even knew existed, to remove him. Officers grabbed his arms, dragged him screaming across the armrests and along the floor and off of the aircraft, apparently injuring him in the process.

Unusual situations like this test organizations and their leadership. The key information here is that UAL wanted to make space to carry their own staff. The flight was not “overbooked”, UAL wanted to take back seats of a few paying passengers to accommodate their own staff. Apparently, UAL had bungled its own logistics, and then looked to its paying customers to solve the problem.

Poor customer service like this exists because of corporate culture, and because the company rarely has to pay a price for it.

In Wrongo’s past, he managed 1000 employees who had technical support and/or customer service contact with the public. We had a mantra: Know when to Do The Thing Right, and know when to Do The Right Thing. 95% of the time, the job is to follow established procedures, to guide the customer to a pre-established solution that had been vetted, one that was company policy.

Our staff’s job was to “do the thing right” in those cases, to follow our processes.

5% (or less) of the time, our people would see something novel, outside the scope of established policy. Something that called for reaching an equitable solution that wasn’t in any manual.

Then, our employees needed to “do the right thing”.

These aren’t difficult concepts to instill, they are entirely consistent with most people’s personal experience, and usually with their views about fairness.

United should try empowering people to do the right thing, when going by the book fails the customer. Whatever it might have cost to compensate volunteers, it would have been far cheaper than what UAL will now pay to this passenger as soon as he gets in touch with a personal injury lawyer and starts to make a case regarding legal processes and compensation going forward.

This also illustrates how America is changing: Large corporations are willing to use the police to enforce their policies. The passenger’s choice was to comply with police demands, or face physical intimidation, or worse. And Chicago’s sub-contracted police were too eager to jump into the fray.

We should ask: Did the injured passenger break any law by refusing to give up his seat? If that’s the case, the plane was filled with lawbreakers. If not, why was an element of the Chicago police doing UAL’s dirty work?

The Seventh Amendment of the Constitution guarantees a jury trial for civil cases in the federal courts:

In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved

The $20 amount is trivial in today’s economy. But that idea of a jury trial has been killed by corporatist judges on the Supreme Court, and other courts, and has been replaced the company’s terms of service. When you agree, it takes away most of your rights – disputes are resolved through arbitration that the corporation almost always wins. In this case, UAL’s terms of service gives them almost unlimited authority when dealing with its passengers, including a rule regarding “refusal of transport” (Rule 21) and “denial of boarding compensation” (Rule 25).

But that doesn’t justify bad corporate behavior. Or violence.

But, thanks to Congress’s bipartisan policy of ignoring anti-trust laws for several decades, just four firms now control the vast majority of domestic flights, and they don’t really compete with one another. This is from the DOT’s report on airline competition:

Less competition means you don’t have to worry as much about annoying people with delays or overbooked flights. It also means you can make a lot more money. There’s less pressure to cut ticket prices – even when the price of oil, an airline’s biggest cost, is plummeting – and it’s easier to introduce ever-more obnoxious fees and charges.

UAL isn’t worried about you sharing a video of a passenger being dragged off their plane, because you have no real choice when you fly from certain cities.

Ultimately, the responsibility to blunt this trend is ours. Replace Citizens United. Remove corporatist judges. Keep our police on a short leash.

Don’t just upload a video, organize your neighbors and vote!

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Saturday Soother – April 1, 2017

The Daily Escape:

(Wildflowers near Lake Elsinore CA March 2017 − photo by Lucy Nicholson)

The large print giveth, and the small print taketh away, and we had an excellent example this week. From the NYT:

More than 550,000 people have signed up for a federal program that promises to repay their remaining student loans after they work 10 years in a public service job. But now, some of those workers are left to wonder if the government will hold up its end of the bargain — or leave them stuck with thousands of dollars in debt that they thought would be eliminated.

The Department of Education has said in a legal filing that borrowers could not rely on the program’s administrator to say accurately whether they qualify for debt forgiveness. The thousands of approval letters that have been sent by the administrator, FedLoan Servicing, are not binding, and can be rescinded at any time.

The debt forgiveness program covers people with federal student loans who work for 10 years at a government or nonprofit, a group that includes public school employees, museum workers, doctors at public hospitals and firefighters. The federal government approved the program in 2007. And along with this bad news, there is no transparency: When the NYT contacted FedLoan, a spokesman referred questions to the Department of Education, who declined to comment on the suit, or on any of the issues it raised, including whether any mechanism exists for borrowers to challenge a denial.

Loopholes. America loves loopholes. We aren’t a nation of laws, we’re a nation of loopholes.

If all of this wasn’t enough wrong for you this week, Devin Nunes and the White House played “I’ve got a secret” with the House Intelligence Committee and the American people. That brought the usual grandstanding from Republicans, but nothing can top what Rep. Ted Yoho (R-FL) who unintentionally told the truth while defending Nunes on MSNBC:

You gotta keep in mind who he works for…He works for the president. He answers to the president.

Soon, a Yoho spokesperson was walking that back. Yoho, Yoho, and it’s back to school he goes. To learn a bit more about who Congress critters work for.

I know, these two stories sound like April fool’s day fibs, but sadly, both are true.

You need a break, so Wrongo suggests a hot mug of Tanzania Peaberry coffee. Put your feet up and brush off the week’s trail dust. Let’s relax with Mozart’s Violin Concerto No. 3 in G major. He wrote this in 1775. He was only 19 at the time, but was already the Konzertmeister at the Salzburg court. Here is Hillary Hahn with the best 23 minutes of your Saturday:

Those who read the Wrongologist in email can view the video here.

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New FCC Chair Guts Net Neutrality

Today we premiere a new feature, the “Daily Escape”, a photo that hopefully will take you away from all that is wrong just now. Some photos will be by Wrongo, but most will be from professionals. They will not have any particular relevance to the topic of the day. They are here to help you pause for a moment, and go to a different place.

Today’s Daily Escape: George Peabody Library, Johns Hopkins University

Now, on to what’s wrong…

The principle that all Internet content should be treated equally as it flows to consumers is called “net neutrality”. Net neutrality looks all but dead under Trump’s new head of the FCC. From the NYT:

In his first days as President Trump’s pick to lead the Federal Communications Commission, Ajit Pai has aggressively moved to roll back consumer protection regulations created during the Obama presidency.

Mr. Pai took a first swipe at net neutrality rules designed to ensure equal access to content on the internet. He stopped nine companies from providing discounted high-speed internet service to low-income individuals. He withdrew an effort to keep prison phone rates down, and he scrapped a proposal to open the cable box market to competition.

Before he became FCC Chair, Pai served as an FCC commissioner, one of the Republican minority under the Obama administration. In that role, he opposed reclassifying broadband providers as common carriers, which allows the agency to regulate them like utility companies, a necessary step if the FCC was to enforce net neutrality rules. That reclassification might be next to go.

Today consumers can pay Internet service providers for a higher-speed Internet connection, but regardless of the download speed they choose, under new Chair Pai’s plan, they might get some content faster, depending on how much their content provider has paid the service provider.

Tim Wu at the New Yorker offered some insight: (emphasis by the Wrongologist)

With broadband, there is no such thing as accelerating some traffic without degrading other traffic. We take it for granted that bloggers, start-ups, or nonprofits on an open Internet reach their audiences roughly the same way as everyone else. Now they won’t. They’ll be behind in the queue, watching as companies that can pay tolls to the cable companies’ speed ahead

The new rule gives broadband providers what they’ve wanted for about a decade: the right to speed up some traffic at the expense of others. The motivation is not complicated. The broadband carriers want to make more money for doing what they already do. Never mind that American carriers already charge some of the world’s highest prices for a service that costs less than $5/month to provide.

In the large-scale server market, Internet traffic is nearly free. In that market, a terabyte of data costs about $1/month. That’s 1000 gigabytes/month, if you are not familiar with usage of that size.  The home user pays 10x to as much as 1000x more than that per month; $100 for 100 gigabytes of traffic is not uncommon. A recent offer from AT&T for 45 M/bit internet is $30/month, which includes 1TB of data/mo. So 1000 gigabytes costs $30, or $1 per 33 gigabytes, but, if you exceed ATT’s limit, the price goes up dramatically: You would have to pay $10 per each additional 50 GB.

No volume discount for you, but Netflix will get one.

Requiring access fees for faster service will be good for Netflix, since it won’t have to worry as much about competitive traffic, particularly from small companies. The ultimate result will be to lock in the current set of incumbents who control the internet, ushering in the era of big, fat, (and possibly) inefficient monopolies.

Republicans and big corporations like to say that they are against regulation because the free market should rule. That economic efficiency brings lower prices.

It is always a lie.

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All Aboard The Bailout Train

In February 2014, Wrongo alerted that hedge funds and other Wall Street firms had been buying up single family homes, many of which had been foreclosed on during the housing crisis between 2007 and 2010:

Most rental houses in the US are owned by individuals…but a new breed has emerged: Wall Street-backed investment companies with billions of dollars at their disposal. In just the last two years, large investors have bought as many as 200,000 single-family houses and are now renting them out.

Tim G, a Wrongologist reader who is an expert in mortgage finance, commented at the time that he hoped that:

Fitch/Moody’s and any other rating agencies learned their lesson from 2007, and won’t (as you suggested) just slap AAA ratings on these. By definition these rental properties carry much more risk, since if they are vacant for any period, the incentive to keep paying drops quickly.

Well, slap they did. You know the drill from 2008; the new game was just like the old game: The new bundled securities were AAA rated by the same rating agencies. The bonds were sold to those seeking high yield without commensurately high risk.

Now we have a new wrinkle. Wolf Richter is reporting that Invitation Homes (owned by private equity giant, Blackstone) today owns 48,431 single-family homes. This makes Invitation Homes the largest landlord of single-family homes in the US. They just obtained government guarantees for $1 billion in rental-home mortgage backed securities. From Richter:

The disclosure came in an amended S-11 filing with the SEC on Monday in preparation for Invitation Homes’ IPO. Invitation Homes bought these properties out of foreclosure and turned them into rental properties, concentrated in 12 urban areas. The IPO filing lists $9.7 billion in single-family properties and $7.7 billion in debt.

The plan is to have a successful IPO, and then refinance some of the debt with the sale of $1 billion of government-guaranteed rental-home mortgage-backed securities.

Fannie Mae, a government-sponsored entity (GSE) that was bailed out, and then taken over by the US government during the 2008 financial crisis, is providing the guarantee of bond principal and interest, and the offering documents call them “Guaranteed Certificates”. More from Wolf: (emphasis by the Wrongologist)

This is the first time ever that a government-sponsored enterprise has guaranteed single-family rental-home mortgage-backed securities, issued by a huge corporate landlord. It’s an essential step forward in financializing rents: taxpayer backing for funding the biggest landlords.

These government guarantees allow Invitation Homes to pay lower interest rates. The bottom line is that Invitation will have cheap financing for future home purchases, and thus lower costs and greater profits.

It’s a sweet deal: low-cost funding made possible by government guarantees, is a special gift that was agreed to by the Obama administration. Other corporate landlords will want to follow in Blackstone’s footsteps, and it is difficult to see how Fannie Mae will choose not to guarantee the other firms.

Bloomberg reported on a Dodd-Frank mandated stress test conducted by the Federal Housing Finance Agency. It showed that during the next severe economic downturn, Fannie Mae and its sister Freddie Mac would need between $49 billion and $126 billion in taxpayer bailout money.

Socialize the losses, Part Infinity.

The Blackstone deal looks like new policy: The government subsidizes the largest landlords, helping increase their profits from renting out the same single-family homes that individual homeowners lost to the same financial thugs during the housing foreclosure crisis. The mission of Fannie Mae is to promote home ownership, not to give real estate entrepreneurs a way to limit their losses.

This guarantee was worked out under Obama’s watch, but Blackstone did not make it public until it updated its filing with the SEC this week. The timing is curious. The public disclosure comes after the Trump team is in charge, meaning Obama wouldn’t face criticism, and the Trump Administration will certainly let the deal stand.

This is worse than the government’s gift of TARP to Wall Street. That at least had optics that said it protected Main Street. But, this securitized mortgage market doesn’t involve Main Street, and the market isn’t even in big trouble.

This isn’t a bailout. It’s a grift. The Kleptocracy is now more entrenched than in 2008.

How ironic. Big business gets a sweetheart government deal, while the GOP moves to cut social programs.

Will this add new jobs to the Trump economy?

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Saturday Soother – January 21, 2017

Did Wrongo miss anything yesterday? We had multiple meetings, and thus, no chance to see the “You Bet Your Country” reality show that premiered in DC.

Look on the bright side, there are now only 1,459 days left in the reign of DT, so two things to focus on:

  • Work hard to save the ACA, and
  • Remember to toast to the health of Ruth Bader Ginsburg and Stephen Breyer every day.

Today is the Women’s March in Washington DC. Two days in a row of firsts for our Orange Overlord. Yesterday, he was sworn in as the 45th president. Today, he sees his first mass protest in the form of the Women’s March, and companion marches (600 at last count) around the country and the world.

New York Magazine tweaks the main stream media’s coverage thusly: (brackets by the Wrongologist)

…the media’s treatment of the [women’s] march has been so fretful that you’d be forgiven for thinking that this grass-roots demonstration of hundreds of thousands on behalf of women’s rights is an example of feminism in crisis and disarray.

Whenever there are protests from the left, we’re always adjured that we’re doing it wrong and/or that our “message” is defocused or unclear. Leftwing protests get little coverage in the MSM. Wrongo has observed that when there are rightwing protests, they are typically universally covered by the MSM. Plus their “message” is always described as clear, and unequivocal.

There have been protests at most recent inaugurals, but they have been generally along the parade route, as there were in DC today. The car and trash can burnings made today’s DC protests look more like what we see in European capitals.

What the Women’s March envisions is a protest that creates as much buzz as the inauguration itself. That means the organizers are attempting to create a widespread, and diverse coalition for this event. The hope is: (1) a huge crowd shows up to protest; (2) the protest is marked by its size and the quality of its direct action (without violence); (3) the obvious fissures in the coalition remain unclear to the public until long after the march.

The March on Washington in August, 1963 was one of the largest political demonstrations in American history. The organizing idea was a protest for “jobs and freedom”. You may not remember that John Lewis’s original speech at the March on Washington was highly controversial. Now, 54 years down the road, no one cares, because of the power of Lewis’s personal history, and the fact that the march ultimately led to the passage of the Civil Rights Act of 1964.

The March on Washington was broadcast on TV, because we had not yet become jaded about protests, and the White House was vulnerable from both sides of the racial divide. The Women’s March is only expected to be live-streamed via cell phone. The networks will give us highly edited snippets on the evening news.

The value of these large public protests are in building a more unified opposition movement. Perhaps it will happen this time, although there is a risk that it fizzles like the Occupy Movement did.

The Tea Party began building their national presence with a rally of maybe 7000 people in tri-corner hats, enabled by a few Congress Critters. That was enough for the media to legitimize their birth. Perhaps it will work for the Women’s March: it will become a viable movement only if the commitment to messaging and building a national presence in Congressional districts and statehouses is carried through.

What will be more significant for the future are the state capitol and major city rallies once the protesters leave Washington. Resistance IS the message: The voters did not deliver Trump an overwhelming mandate to do the things his juggernaut is planning to shower on America.

Handled correctly that could make Trump and the GOP vulnerable. The Wrongologist will post a first-person report from an attendee at the Women’s March, on Tuesday.

But today is Saturday, and you need to mellow out a little. Here is something radically different, yet completely familiar. This is the Austrian brass ensemble Mnozil Brass performing Queen’s “Bohemian Rhapsody”. What better tribute to Freddie Mercury? These guys are demonstrably horny and have lots of brass. High energy, and completely entertaining:

https://www.youtube.com/watch?v=NJTIJRoEWPE

Those who read the Wrongologist in email can view the video here.

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Amazon’s Echo and Personal Privacy

Wrongo’s daughter gave him an Amazon Echo Dot for his birthday. Bob Lefsetz says that Amazon is becoming the new Apple: (brackets by the Wrongologist)

The Echo came with almost no instructions. Simple packaging. Not a work of art, like [Steve] Jobs’ creations, but far from the old Microsoft where there’s so much info you’re inundated.

Simple and slick, particularly when it comes to using Echo to listen to music on Spotify, (assuming that you have Spotify premium) because Alexa eliminates a step. Before the Echo, you navigated your PC or mobile to Spotify’s site, entered the artist or track you wanted to hear in Spotify’s clunky search engine, then waited for the track to pop up, and then clicked on it to play.

With Alexa, you say the name of the track and/or the artist, and tell Alexa you want to hear it on Spotify, and it begins playing. Very nice.

Alexa brought in yuuge sales numbers for Amazon this season. Bloomberg reported:

Sales for Echo speakers based on Alexa’s voice-recognition software were nine times more than the 2015 holiday season…Echo and Echo Dot were the best-selling products across Amazon this year…

Sales were so good that Amazon sold out of its Echo speakers in mid-December. The Echo shortage shows voice-activated assistants have found a strong niche with consumers. Smart home devices in general are booming at the moment and so it the desire for installation services like crestron programming. But there’s a potential dark side to having an Alexa device: Alexa’s job is to listen to you speak, and then recognize and use those data.

This begs the question of whether you should have any expectations of privacy if Alexa is plugged in. If you think this is an academic question, consider that police in Arkansas want to know what an Amazon Echo device may have heard during a murder:

Authorities in Bentonville issued a warrant for Amazon to hand over any audio or records from an Echo belonging to James Andrew Bates. Bates is set to go to trial for first-degree murder for the death of Victor Collins next year.

Sound Orwellian to you? Your hot new Xmas gift may be the Trojan horse that kills your privacy.

Police say Bates had several other discoverable smart devices, including a smart water meter. The water meter shows that 140 gallons of water were used between 1 AM and 3 AM the night Collins was found dead in Bates’ hot tub. The police think all that water was used to wash away evidence of what happened that night.

The data from the water meter, and the request for stored Echo information raise questions about what constitutes individual privacy in the internet of things (IoT). Due to the “always on” nature of the Echo, authorities want any saved audio the speaker may have picked up that night. The Echo is supposed to be only activated by certain words, but it spoke random answers to Wrongo, when not asked a question, if the room it was in was filled with people over the holidays.

What’s more, Echo captures audio and streams it to the cloud when the device hears a wake word, such as “Alexa.” What the owner says are called “utterances” by Amazon, and they are stored in the cloud until a customer deletes them either individually, or all at once.

Why does Amazon save your words? Probably because you can order items from them via the Echo. A record of the sale could be necessary in a dispute.

In the Bates case, Amazon would not provide the police with any information that Bates’ Echo had logged on its servers. It later released a statement:

Amazon will not release customer information without a valid and binding legal demand properly served on us. Amazon objects to overbroad or otherwise inappropriate demands as a matter of course.

So, Amazon just told the Bentonville police and police everywhere what they have to do to get your stored information: Your privacy is in play if you have an Echo, and you get arrested.

We have an expectation of privacy in our homes, but these devices listen to you, they talk to each other, and to companies like Amazon and Spotify, so the challenge to individual privacy seems very clear. Governments from city to federal, will try to develop any information they can about a criminal case. If those data are gleaned from a smart device in your home, it’s just another data point, and it will become your job to make the case that your Constitutional rights were violated.

The Constitutional question is whether the data you generate in your home through internet-connected devices are data that you own at all. Do you share ownership with corporate America?

Does the state have rights to your private information if they say they need it?

Tip: Alexa has a microphone off button. Use it. Its possible that Amazon can’t hear you then.

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