Talking down the local market

46 Terrace Ave. Rvsd

46 Terrace Ave. Rvsd

This house was sold as a shell for $902,000 in December 2003. The buyer gutted it, renovated it and resold it seven months later in July, 2004 for $1.775 million. That buyer sold it in August ’07 for $1.925 and now it’s been placed back up for sale, first at $1.850 and, today, for $1.745 – below its 2004 price. I, of course, take full responsibility for this unhappy result. If only I didn’t write about falling prices buyers would not only be paying 2007 prices they’d be happy to pay even more, all for the privilege of living in Greenwich.

I knew about the power of this blog, naturally, but even I was surprised to see that I’ve infected our new president with my pessimism. Here is what he said yesterday,which should do nothing to help the current climate of fear. Had he not read this blog, we could have expected a sunny prediction of good times to come:

And if there’s anyone out there who still doesn’t believe this constitutes a full-blown crisis, I suggest speaking to one of the millions of Americans whose lives have been turned upside-down because they don’t know where their next paycheck is coming from.

That’s scary enough but the man continued with this bit of economic wisdom that really alarmed me.

It is only government that can break the vicious cycle, where lost jobs lead to people spending less money, which leads to even more layoffs. And breaking that cycle is exactly what the plan that’s moving through Congress is designed to do.

I know that I attended the University of Connecticut Law School while our president’s degree is from Harvard, but somehow I seemed to have learned a little economics along the way while his career as a community organizer seems to have closed off that path of learning. Too bad for all of us. Would you go out and buy a house today with an expectation that its value would remain steady or increase in the coming year? I wouldn’t.

42 Comments

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42 responses to “Talking down the local market

  1. anonymous

    Should have checked the box for “African American” or “Hispanic”; you could have gone to Harvard, too

    Surely you don’t pay taxes…taxes are only paid by little Republicans…if nominated for a Cabinet job, you can always blame your accountant/tax advisor

    All that tax-free income allows for greater spending and home affordability…

  2. CEA

    There is clearly a psychology factor here.

    Sellers, in pricing high, basically are buying a lottery ticket: maybe, just maybe, that 1 in 7,823,012 will go their way. No one tells them that that is a .0000001% chance – to them, it is more like a “1 in 10” chance and thus worth the gamble that they’ll find that “one buyer who will fall in love with it”.

    This happens just often enough (maybe once or twice a year) that a seller thinks that it will happen to them, though as is human nature, the average person grossly overestimates the chances it will happen. 185 Clapboard Ridge – 5600 sq ft, 3 acres – a total gut reno needed, probably at least $2 mil – sold for $8.7 mil. That keeps a potential seller going for ages (meanwhile, the new owner cannot afford to continue so work has stopped, but that is another story).

    Humans underestimate the cost of time (waiting) and overestimate the chances of a positive outcome (higher price than the market indicates).

    It is my (admittedly unscientific) assumption that only about 5%-10% of houses are “really” for sale, that a buyer will negotiate and wants to get out in the next 6 months. The rest are people who are willing to pay the mortgage, taxes, and maintenance for an unspecified period of time, until their dreams of hitting the big-time fall down to earth.

    The Mad Monkeys of this world are dreamers, not realists. The people who rail against you are the same.

    I work with numbers, so I am always tarred as the doom-and-gloom and hyper-realistic, and people ask “why can’t you see that there IS a chance”, blah blah blah. I look at public companies ALL DAY LONG and see what happens when the market turns and there are the wild-eyed crazies still telling me IBM is “worth” $150.

    No, it is only “worth” what the market will pay for it. It is only worth $97 today, or 9 times its earnings. Maybe, at some time in the future when the economy is better and people want to own stocks again, it will be “worth” $150 (or 17 times its earnings). But not now.

    “Earnings” for a house are its rental possibilities. What are houses renting for these days? $10,000 a month for how many square feet here:

    http://www.raveis.com/propdetail.asp?rental=Y&STATE=CT&PG=1&TOTAL=129&FROM=propfind&sortdir=ASC&KEY=2628059&FSTKEY=2632165&LASTKEY=2587892&LASTPG=26

    (That is also for sale, I think Chris has indicated.)

    $10,000/month = $120,000 a year. What multiple would you pay for that? IBM is trading for 9 times its earnings. Granted, you can’t live in IBM, so how much more should a house trade for? 20x its earnings, so $2.4 mil? The owner would laugh at you, but let’s face it – 20x is a huge number.

    Human psychology is what it is. They are undervaluing time and overestimating the chance of a high price.

    “It is what it is”.

    CEA

  3. CEA

    anonymous @ 9:28: if you are implying that Obama only got into Harvard based on his skin color – or even partially on his skin color – then you are the Greenwich people loathe. Thanks for perpetuating the “bigot” stereotype.

    • christopherfountain

      CEA, I can’t speak for anonymous, but it is entirely accurate to think that some blacks got into college and law school because of their race – the schools were quite proud of doing so, in fact. And while I was quite happy with my own education at UConn Law, it did rankle, long ago (I assure you I got over it almost at the same time) that I had perfect LSATs, a high GPA from Boston College and some interesting life experiences in business at the time I applied to the Ivies (on the advise, by the way, of my college guidance counselor who assure me I was a shoo in) to be rejected outright by two and wait listed, then rejected by another. The trouble, as I see it, with affirmative action is that while losing out to a better qualified person in any endeavor – admissions, trials, whatever one does in life – is relatively painless because one can acknowledge that he was beaten by the better man or woman, losing an opportunity because you’re the wrong skin color breeds at least a stirring of resentment.
      I certainly understand that just a decade or two before I applied to school the exact opposite condition prevailed and a black man would never even have been considered for a spot, and if society wants to redress that by counter-discrimination, I’m okay – I did just fine in life regardless, and I should have, given the luxury of two well educated parents, a good school system and a privileged life. But it should be open. To deny what’s going on (or what was going on – I don’t follow the issue these days) is disengenuous and, I think, harmful. If we can’t have transparency in our bank bailouts, let’s at least impose it on issues like affirmative action.

      • christopherfountain

        Nope – I’m for a meritocracy in all matters, win or lose. But we do agree on many, many things CEA, and one of them is that, while this blog certainly doesn’t restrict itself solely to real estate matters, a drawn out battle over affirmative action is probably not where it should go.
        Best,
        Chris

  4. anonymous

    CEA, well summarized

    Given how irrational public securities mkts can be w/many supposedly “professional” investors, it is no surprise that housing mkts, comprised largely of retail investors, w/numerous social/intra-family dynamics, are far more emotional and glacial in pace of pricing changes….

    My condolences to competent realtors who need to navigate all the financial/social/family/emotional minefields of real estate bid/ask prices, esp in a downmkt

  5. anonymous

    Would guess that the median test scores/grades of various minorities admitted to elite colleges are about as underwhelming as those of many non-minority kids admitted…whose parents wrote a generous check, a tax-deductible donation, to college of choice

    Who said life is fair? Most assume (until proven otherwise) that trust-fund kids are just as inept as affirmative action kids….

    • christopherfountain

      I agree, although sometimes the process is more open with the drooling trust fund kids. Williams College, for instance, has a “Bronfman Science Building” that happened to be donated and completed just in time for one of the lesser Bronfmans to matriculate (1971, if I recall). hey – let in a dummie, get a science building? Fair deal for everyone. And again, I have no particular bone to pick about affirmative action, just as long as its acknowledged. But now, I think we’ll get off this subject.

  6. CEA

    Chris, maybe you and I have differing views on things, and perhaps this forum is not just the “Greenwich real estate and people” I had thought it was.

    I do not consider myself a Democrat, or an Obama apologist, but I do think he is no dope. He was going to get into Harvard Law on his own. The Anonymouse post wasn’t about “black people in general”, but about Obama in particular.

    Women make, on average, 80% of what men make. So if your daughter works hard and finds out she makes 80% of what a male colleague in the same job gets, would you think it “fair” that she gets a 10% raise and he get a 10% reduction? Or that she get a 20% raise for doing the same work she was doing, while the guy gets none?

  7. J

    If Obama had released his college transcript from Columbia then I would believe that he was accepted to Harvard Law on merit.

  8. Retired IB'er

    CEA,

    I was a little surprised that you pegged the “real” sellers at 5-10%.

    While I agree a number of sellers are waiting for lightening to strike, I think the majority are trying to sell (despite the unrealistic pricing). Most people will not put their house on the market (enduring all the hassles) if they are not interested in selling. Clearly, some are in more or less of in a hurry, but I suspect 90% or so will end up selling their houses within a couple of years.

    At this point I would agree that the “realistic” sellers add up to 5-10% (at least on the surface i.e. looking at inflated asking prices as opposed to what they might actually accept).

    Unfortunately, the remaining “unrealistic” sellers have been conditioned to expect real estate to go up, and so waiting for the market to catch up (pre-bubble attitude) or now rebound (post bubble attitude) is rampant in most sellers (and maybe realtors) psyche. Of course, you and I know that they will end up chasing the market down to the detriment of their net worth and getting on with their lives.

    My guess is the psychology of it all is very similar to most people’s inability to sell a losing stock; instead, they hold on, waiting, hoping, for it to rebound, which it usually does not.

  9. Peg

    Careful analysis of studies that show men earning 20% more than women for the same work are generally showing them to be bogus. The work is not identical.

    Women – on average – simply are not willing to sacrifice their children and community and personal health the way that men are. In other words, a man might be willing to spend more hours and effort on the job than a woman; women are more likely to stay at home with a sick child, help friends, get sleep, etc.

    I’m not saying this is true of all men or all women – merely the law of averages. So, while there probably remains some prejudice and disparity in wages, some of it is simply a function of the underlying fact that men and women do not value all in life identically.

    And as for “affirmative action” – I am happy to give extra help to those who perhaps need it due to unfortunate childhood experiences and poverty. I simply don’t like to base it upon race or sex.

  10. CEA

    Peg:

    Without getting into a discussion on “causality”, racism leads to unfortunate childhood experiences, inability to get a job, and therefore racism.

    It was just 1965 that there was a Voting Rights Act to guarantee blacks the basic right to VOTE peacefully. That is, I presume, within your lifetime.

    Do you think, just maybe, that if it was necessary to pass a law allowing a black person to vote, that things might have been – oh, I don’t know – difficult?

    Did you know that it was only a Supreme Court ruling in 1967 – again, not that long ago – that allowed a black person to legally marry a white person? Go look at the history of “Loving v. Virginia”, it is heartbreaking.

    Do you think that, perhaps, racism leads to “unfortunate childhood experiences”? I am white, attractive enough, and I remember the teasing because I was slightly “different” and not a WASP, so I cannot fathom what that would have been like were I of a different color.

    Racism can lead to difficulty in getting jobs, then difficulty in promotions and opportunities, and thus difficulties in adequate compensation. I don’t see poverty as causing racism, but I do see the latter.

    __________________

    Retired IB’er:

    I guess I am not getting the difference between “realistic” sellers and “real” sellers. To me, if you are willing to wait 2 years, you are not a “real” seller. That is an awful lot of time and energy, both on you the seller’s part and on the broker’s part.

  11. CEA

    Oh, and Peg? Here are studies showing women make 80% of men:

    U.S. Bureau of Labor Statistics: 2008 databook

    http://www.bls.gov/cps/wlf-databook2008.htm

    Here is the chart of greatest interest:

    Click to access wlf-table16-2008.pdf

    And if you want to give me the “women choose other things”, that is complete and utter BS. Here is another study that shows 1 year out of college, women in the same jobs make less, and 10 years out it is even worse.

    http://www.aauw.org/research/behindPayGap.cfm

    You know, I don’t mind people saying controversial things, but don’t throw out “careful analysis of studies” without actually reading the studies themselves.

  12. Peg

    CEA – I don’t doubt that racism doesn’t cause serious problems for people. Nevertheless, people face all sorts of obstacles in their childhoods: parents with substance abuse, mental illness, grinding poverty, etc. – and plenty of people who grow up in such circumstances are non-black. I believe in helping people who need it. Why do you think that they shouldn’t – and that all black people should be assumed to require affirmative assistance?

    As for your comments about stats with women’s earnings in contrast to men’s….. the census charts give raw figures: what women make in contrast to men. There is zero comparison about hours put in, priorities of the workers, and so forth. For every man I know who has gotten a good education and decided to stay home with the kids (and yes, I know some) there are far more women who do this.

    Larry Summers was correct; there ARE differences (on average, to be sure) between men and women. Until we are able to will away biology, it is likely that more women than men will put their kids before their jobs – and thus, perhaps, earn less because they are not working identically to the males.

    I won’t even go into potential biological differences between men and women, for fear I might get thrown off For What It’s Worth by the politically correct. I remember what happened to poor Larry S….

  13. anonymous

    CEA – Well spoken – as always – on all accounts! We need more intelligent people like you here in Greenwich (and in this country for that matter).

  14. Retired IB'er

    CEA,

    Instead of realistic I should have written forced: either relocation, divorce, lost job, etc.

  15. anony-moose

    I am interested in the original post for another reason…

    “I know that I attended the University of Connecticut Law School while our president’s degree is from Harvard, but somehow I seemed to have learned a little economics along the way while his career as a community organizer seems to have closed off that path of learning. Too bad for all of us.”

    The implication here being that Mr. Fountain has a comprehensive plan for rescuing our economy that would definitely work, unlike the Bush bailout attempt, and unlike this one. I would like to hear it (no sarcasm there), because it must be an interesting one.

    After all, the fear of Wall Street over Obama’s supposed lack of a plan (as per a later blog entry) implies that just sitting back and letting the market handle things won’t work. So, in the spirit of every sports fan who knew absolutely that he could do a better job than the coach on the field, what’s your plan? 🙂

    • christopherfountain

      Well anony-moose, I’d start with the idea is not “the only thing that can save us” – quite the contrary, I’d say. Then instead of using taxpayer money to create an artificial value for the worthless investments banks have made, I’d step back, let the banks collapse into bankruptcy and let new investors start over. That would wipe out the existing shareholders, you say, and they have powerful friends in Congress! Precisely. Then I’d take a look at our federal spending. Education Department? Abolished.$80 billion (?) saved. Dept. of Agriculture? Abolished. $100 billion saved. Energy Department? Abolished. HUD, CRUD, whatever other departments we have, off they go into oblivion. I suppose we’d better do something about the Defense Department but after revising that we can call it a day. Oh – the Stimulus Bill? Never enacted, $1 trillion saved.
      All of which would be a good start.

  16. anony-moose

    This article isn’t as interesting as some I’ve gotten from this blog, but it has a few sobering bits in it… http://www.google.com/hostednews/ap/article/ALeqM5hcRUmluMV_dTNVstYavAKbZDiRLwD966RFI01

    For instance, “Financial experts don’t expect the United States to go the way of Iceland, where a collapse of the banking system last month threw the tiny country into turmoil and toppled the goverment.

    What keeps them up at night is a scenario closer to that of Japan, which bungled its own bank bailout in the 1990s and limped along during a “lost decade” of anemic economic growth and high unemployment.”

  17. Stanwich

    CEA, get off your high horse. In a meritocracy color should not matter. Obama’s election, as painful as it will prove to many of us financially, proves that affirmative action is no longer needed and was racist at its core to begin with. This kind of stuff has no place in our society, period. I don’t care how/when/where injustice has reared its ugly head. Affirmative action is basically injustice hoisted upon a different set of people. I never understood how it was constitutional to begin with.

  18. Red

    CEA, I’m with you on this one. Stick to your guns (note I did not say knitting).

    Ummarried, childless female executives still earn less than male executives. Childless female schoolteachers earn less than childless male schoolteachers. The biology-is-destiny argument is a convenient ruse to cover for institutionalized discrimination. In the end, Larry Summers was a prime example of a crappy high-ego male executive who couldn’t manage his organization — he deserved to be fired.

    As a society, we simply aren’t “there” yet. Closer than 20 years ago, but not there yet.

  19. Peg

    Can I vote for Christopher’s plan? Where do I punch my chad?

  20. CEA

    Peg , did you actually read this, as I posted above?

    http://www.aauw.org/research/behindPayGap.cfm

    1 year out, female college grads make less in the SAME JOBS as males. 10 years out the gap is worse. And, by the way, I agree with Larry Summers that there are mental skills that are different in varying qualities between men and women. That does NOT make it fair that a woman in business makes less than a comparable man. Or in marketing. Or in teaching, or in any field.

    ______________________

    Stanwich:

    I come from a family of 1-generation-off-the-boat immigrants who got 0 help. Did not speak the language, but my grandfather got educated, worked hard, and did extremely well. No affirmative action here.

    I never believed in it until college, when my best friend (black), whose background was similar to mine – prosperous suburb, extremely successful parents, Ivy education, attractive, slim, you name it she had it all – and she was having difficulty getting Wall Street jobs. As were her black friends. It wasn’t interview skills (we had group interviews at some of the i-banks in those days). I would also walk down the street with her in NY or Boston and hear the absolutely most amazingly disgusting comments. She shrugged it off, asked for no help, and now has her own company.

    So, this is no high horse I am on. I think that blacks have had some amazing racism, and Obama’s making it to President doesn’t mean an end to bigotry, just as taking down the NINA signs did not mean an end to anti-Irish bigotry, the Nuremberg trials did not mean an end to anti-Semitism, etc.

    That’s like saying “Hey, a house finally sold at asking price – the recession is over!”

  21. CEA

    Peg/Stanwich:

    I was once asked at a Goldman Sachs interview, “if you got pregnant, would you have an abortion to save your job?”

    My black friend was asked at Morgan Stanley what her favorite food was. She said lasagna. The (obviously white) interviewer asked, “so if you’re from Africa, does that mean you cook African lasagna? They can’t afford the ingredients.”

    and from another i-bank (i’ll have to ask her which one, it wasn’t Morgan) “you know that if you go out with a white guy, he’s only doing it for fun, he’d never take you home to his parents”. Yes, during an interview.

    Welcome to a white male dominated world.

    • christopherfountain

      Well in England, CEA, you’re asked to have an abortion to save the world from global warming. What does that have to do with the current topic? Nuthin’, just thought I’d point it out. : )

  22. CEA

    Last – Stanwich – and this is not said in anger, but I genuinely want to know your opinion.

    Do you think this country is a meritocracy? It has infuriated me my whole life how easy it is for the sons-and-daughters of the rich and famous have it. From Hollywood (Kate Hudson, Bryce Howard, Tom Hanks’ son whose name I can’t remember, etc.) to politics (Andrew Cuomo, George W. Bush, even the whole Caroline-Kennedy-being-considered-for-Senate) to business (I am sure you know plenty of people whose daddies got them their jobs) – it is so much “who you know”. Nepotism is rampant!

    It takes a long, long time for that to change, it involves there being non-traditional higher-ups who DO have power (Dick Parsons at Time Warner, say, or Joe Uva at Univision, or Indra Nooyi at PepsiCo), and then THEY can bring along others, etc.

    I think, with Obama in the White House, it will be 1 generation(just like it took the first working women in the late 1960s a generation – or to the 1980s – to have an impact) before you can say that things have “changed” for minorities. Unfortunately things don’t change overnight.

  23. CEA

    CF – seriously. I was 21 at the time, about to graduate college, I had no idea if the “right” answer was Yes (I’m so dedicated) or No (I have morals). I said “I don’t know, I haven’t encountered that situation and don’t plan to”.

    • christopherfountain

      Well CEA, dumb interview questions, you’ll be relieved to know, aren’t restricted to female applicants (although the ones I encountered were all asked by dumb white males). At Cummings & Lockwood, now the same firm in name only, looking for a summer legal internship, I was asked, “So, where did you prep?”, and at Breed Abbot & Morgan, now also deservedly defunct, my interviewer said, “University of Connecticut – that’s an agricultural college, right?” I assured the fellow that, yessir, we all had to milk the cows (bos taurus) before heading off to tort’s class. he didn’t seem to think I had the proper respectful attitude towards someone who worked in the Citi Building (another soon-to-be-defunct institution, come to think of it. The cows live on!)

  24. Peg

    CEA – I would imagine that you are aware it is illegal to ask all those questions you listed during job interviews. Not sure why you think that anything I said intimated that either racism or sexism is dead. All I’m saying is that today, we’ve got laws to deal with such behavior. Slap these corporations with a few multi-million dollar lawsuits, and they may well clean up their acts. Surely you are aware that many corporations today have entire departments devoted to embracing “diversity” and to doing their best to root out all vestiges of racism and sexism in their company.

    Never once did I say that there aren’t instances where people are illegally treated unfairly due to their race or their sex. I’m only saying that with the latter, there are plenty of instances where a company is not getting “equal work” – and that is why the employee is not getting equal pay.

    If you admit (which you seem to do) that there are (generally speaking) differences in abilities between the sexes, then perhaps those differences come to play in the workplace?

    And – sorry to tell you this, CEA, but I actually did look at your report in detail now. Did you?

    In its guts, it says that men are more likely to work longer hours than women – both full time and part time. I didn’t study the entire report, but it lists a number of factors that highlight distinctions between men and women (like women demand more flexibility from a job than men do) which could easily lead to differences in earnings. If, for instance, a man works (on average) 45 hours a week and a woman 42 – then perhaps the man would make a bit more than the woman?

    On top of it all – this report comes from an advocacy organization! If this were a non-issue – this group’s raison d’etre would disappear.

    Finally – ain’t saying that women never face discrimination. I know they do (I have). I’m only saying that it no longer is rampant like it was 30 years ago. And we are all far better served by “affirmative action” when it focuses on helping those who need it – irrespective of sex, race, religion – than assuming that poor dears who are black or female can’t make it in the world because of their skin color or hormones.

  25. CEA

    In that vein, I had one guy ask me “Where did you summer?” and I had NEVER heard that before – using “Summer” as a verb. You lived in Greenwich, you “summered” in Greenwich (again, this is the 80s, so before people started getting summer houses in the Hamptons).

    • christopherfountain

      CEA, that shows that you weren’t paying attention to girl chat at GA. What the heck were you doing, studying? My family summered in Riverside. Of course, we wintered there too.

  26. Stanwich

    CEA, my family is of a similar background, my father is right off the boat (literally) and they had no safety net/government support yet somehow they managed to buy a nice home in Greenwich and send three kids to private universities without special aid or loans. It belittles their struggles to promote/hire/advance people based on genetic factors such as race or sex. In my experience I have seen unqualified students at Greenwich High get into Yale and other schools for no other reason than their race. In the workplace, I have seen huge resources dedicated to diversity efforts which produced really bad results.

    Proponents of race and gender-based advacement programs always cite nepotism and opportunities presented to wealthy people as a rationale for such programs. But that does not changes the fact that the programs are racist and sexist. There is nothing you can say that would rationalize that.

    Ofcourse this country is not a meritocracy, but it doesn’t mean we can’t strive for it. There was no programs for my father to buy a house or get a job because he couldn’t speak English. When an employer told my grandmother in the ’50’s that she wouldn’t get hired because she Catholic, there was no government resource to complain to, she didn’t sue them, she didn’t have some group picketing outside. Real hardship is what my grandparents lived through during the Great Depression or having to live through German occupation…..not having a special hand-out because of your race or gender cannot equate.

    As a white male that now fits into the wealthy white male category that doesn’t get such privileges, I can tell you that I have worked very hard for what I have achieved, academically and financially. The only hand-out I ever got was from my parents who put me through college without having to pay any loans. To see other people or a certain race or sex get special treatment is absurd because I never got any special treatment and never will.

  27. pulled up in OG

    Has PETA called yet about abusin’ the fillies?

  28. CEA

    Stanwich, I don’t know what the answer is. I don’t know how you reconcile qualified people getting spurned from jobs and opportunities because of their color, with less-than-qualified people getting special treatment because of their color.

    I don’t know how you level the playing field.

    It’s like the old “rather let 100 guilty men go free than 1 innocent man go to jail” that our judicial system works under.

    I guess I think that what your grandmother heard SHOULD be a rectifiable thing (and it was, but it took time).

    So I guess two issues:

    1. How do you make it fair for the truly qualified who get dinged, and as a corollary:
    2. How long are we willing to wait for that?

    I don’t know, Stanwich, I am torn.

  29. Anonymous

    Mr. Fountain, please read Obama’s book and check the historical public record. It’s widely known that Obama didn’t make a race declaration on his application to Harvard Law. Obama graduated with high honors from both Columbia and Harvard Law. He was the Editor of the Harvard Law Review, graduated near the top of his law school class and received countless offers from the most prestigious appellate courts(prerequisite for Supreme Ct clerkship) and from the top Wall Street corporate law firms. Through hard work, persistence and remarkable vision and fortitude, this young man from a very humble background and upbringing became a Illinois State Senator, US Senator and the President of the United States.

    You, on the other hand, are a real estate broker and small time local blogger. Harvard rejected you and accepted President Obama. Clearly Harvard Law made the right choice.

    Mr. Fountain, please take responsibility for your own self-perceived failures in life. Did you graduate in the top 5% of UConn Law? Were you Editor of the UConn Law Review? Did you get a high profile clerkship after law school? Did you work and eventually obtain partnership at Wachtell Lipton or Sullivan & Cromwell or Cravath or Skadden Arps? Did the thought ever cross your mind that perhaps your current station in life has nothing to do with a “black man” getting preferential treatment over you as opposed to your own inherent shortcomings and aptitude?

    • christopherfountain

      Yeah well, I had better LSATs and I make more money than he does as President, so I’ll bear up, somehow.

  30. Anonymous

    Sorry to break it to you mate but the $400k that Obama makes as President is a mere pittance of his overall wealth. Obama is a millionaire many times over due to his highly successful, best selling books. Obama is a gifted writer and I can only imagine the astronomical signing fee and lucrative royalty terms that the President will receive after leaving office ($50mm?). If Obama should pursue the lecture circuit, ala Bill Clinton, he will easily eclipse the former President in terms of overall wealth and fortune. $300mm over the next twenty years would be a very conservative estimate of his earning potential. You take the higher LSAT score. I’ll take being President of the United States, the beautiful wife, adorable children and the opportunity to become one of the wealthiest and most powerful men in the world.

    • christopherfountain

      Oh I know, but I have no use for Airforce One, the White House or even, yet, a security guard, so I’m content with what I have.

  31. Peg

    Far be it from me to knock wealth; I applaud it. But, in the long run, wealth is not the measure of any man.

    Back in the days when being a “public servant” really was an apt term, we had leaders like Harry Truman. Truman may not have died with a bank account that would make him “wealthy.” Yet in my book, his value was way above many with more net worth. Way above.

  32. Anonymous

    And you know what? We are all happy that you are doing what you do. I might not agree with everything you say but I read your blog daily and thoroughly enjoy the content. Keep up the good work!!

  33. anony-moose

    “Then instead of using taxpayer money to create an artificial value for the worthless investments banks have made, I’d step back, let the banks collapse into bankruptcy and let new investors start over. That would wipe out the existing shareholders, you say, and they have powerful friends in Congress! Precisely.

    I don’t care about the existing shareholders any more than you do. There are issues with your plan, though: the triple-threat of homogeneous investment models, the irrational emotions of investors, and the scope of integration of the modern economy.

    In short, blithely letting banks fail would lead to a panic. The panic would be massively amplified and reinforced by automated computer models, which by themselves probably do a good job of protecting their clients’ money, and together would lead to catastrophe. Remember the old pictures of bank runs from the past, with people lining out the door? Today, the bank runs would be done electronically, and on a scale of staggering trillions.

    First the stupid banks would fail, and then the vacuum of cash would cause the failure of a number of other banks that weren’t that bad off. The surviving banks would become even more paranoid about lending out money, and the flow of credit would really freeze.

    But who cares about bankers? Afterwards is when things get really nasty. Businesses entirely unrelated to banking require cashflow from banks to maintain day-to-day operation. But the stupid panicked banks would stop lending to them, and completely healthy businesses would be crippled or destroyed. So really, when you say you’re in favor of letting all the bad banks fail, you’re actually in favor of obliterating the entire US (and world) economy. I’m ignoring the subsequent libertarian fantasy parts of your post, because in our hypothetical scenario your government would have collapsed before you could get to that part. 😀

    The question worth asking: how did we let any entity get so large that its failure could take out an entire country’s economy with it? I’m not really liking these super-banks we have today, that lend, take in deposits, and invest however they want. When you combine the vast capital of a bank, the cowboy investment strategies of an investment house, and loosened regulations that let them leverage more than ever before, you’re asking for trouble.