Peter L. Berger's Blog, page 642

Fair Mortgage Rates? Blacks Need Not Apply

Racism and sexism both factor into considerations of mortgage applications, says a study just released by the Journal of Real Estate Economics and Finance. From Quartz:

“We conclude that, while the racial disparity in mortgage rates is widespread between black and white borrowers, it is the more financially vulnerable black women who suffer the most,” the researchers wrote. […]

Using Freddie Mac’s mortgage cost calculator, that gap means a white man’s $200,000, 30-year mortgage with a 4.5% interest rate would cost a black man a little over $3,000 more over the course of the loan. Black women, on the other hand, would pay nearly $9,000 more than white women with such a loan.

There’s plenty of indication that African American homeowners regularly face discriminatory lending practices. Leading up to the financial crisis, blacks were more than three times as likely to receive high-interest mortgages than their white counterparts with a credit rating of 660 or higher, all else equal. In the wake of the Great Recession, due to the incidence of high-interest loans, foreclosures have disproportionately impacted black American communities. This study adds a novel metric to the conversation by going beyond the standard question of what kinds of loans blacks receive and how often they are approved for these loans. The dollar value of this increased burden is enough to raise alarm.

NY Farmers Look to Circumvent Fracking Ban

Late last month Governor Andrew Cuomo put a bow on a fracking ban in New York state, but that hasn’t stopped some residents from exploring ways to tap the Marcellus shale bounty under their land. A group of farmers in a county just west of Binghamton submitted a proposal to frack not with water, but propane gel. The Ithaca Journal reports:

“We are outside of the state’s ban,” Tioga Energy Partners, LLC legal counsel Adam Schultz said. “The state banned high-volume hydraulic fracturing, but that’s not what we’re doing.”..Tioga Energy Partners is the contracting company working with the Snyder Farm Group on the drilling application. […]

The Snyder group is a collection of five Tioga County farm families who have leased land for natural gas development. The group is seeking to develop a 53-acre natural gas well in Halsey Valley, which is in the Town of Barton, Tioga County — about 25 miles south of Ithaca and 30 miles east of Elmira. […]“What the state studied, and eventually decided to ban, was the use of high volumes of water for fracturing purposes,” Schultz said. “This process that we are proposing doesn’t use any water, the fracturing takes place using liquified petroleum gas.”

It says something about the opportunity this group of farmers sees in shale, that they’d be willing to go to these lengths to circumvent the ban. When that ban became official, we pointed out that such a blanket approach would inevitably alienate landowners keen on reaping the economic benefits from shale production, especially in a part of the country still looking for ways to replace bygone heavy industry.

Mineral rights allow individuals to choose whether or not they’d like to live with the drawbacks that hydraulic fracturing brings with it: noise, trucks, and as with any energy source, risks. Taking that choice away seems a ham-fisted way to deal with the controversial drilling practice. And in south central NY, there’s already work underway to circumvent that policy.

The Internet’s Creators Sound the Cybersecurity Alarm

The Defense Advanced Research Project Agency (DARPA), whose Arpanet turned into the modern internet, sees a real catastrophe looming in the virtual world. As it stands, our cyber security basically isn’t up to the task of guarding against the havoc that hacking is already beginning to wreak.

It sure doesn’t seem like they’re just crying wolf; this week’s grim update on the recent hacking of the Office of Personnel Management revealed that it’s actually 25 million people whose sensitive information was stolen, up from a previous estimate of around 4 million.To deal with the problem, the Pentagon wants to take virtual defense to a new, automated level, which would represent a fundamental shift. The Washington Post reports:

Today, most network protective systems are like fire alarms; they sound when there’s smoke, and then the firefighters arrive to extinguish the flames. But the Defense Advanced Research Projects Agency, dubbed the “Department of Mad Scientists,” envisions a massive, automated computer system that not only detects the smoke, but prevents the fire from happening in the first place — or snuffs it out almost immediately.

“The computer security industry is basically a bunch of automated detectors set up to let us know when it’s time to call the cavalry — those people who can do the job computers can’t,” said Michael Walker, a DARPA program manager. “And when we call in the cavalry, most of the time we’ve already lost.”To build a fully automated, computer-driven system that would find bugs in software and patch them on its own, DARPA has invited teams from all over the country to compete in a major cyberbattle it calls the Grand Cyber Challenge, with a $2 million first prize.The goal is to level a playing field that today is wildly in favor of hackers, Walker said. If a computer system could be envisioned as being 1 million miles long, he said, hackers only have to find a single crack, while “the defense has to guard the entire wall.”

The pace and the scale of hacks is getting scary, as the OPM hack starkly highlighted. There is an asymmetry between the capacity to attack in cyberspace and even the best currently available virtual defenses. The fact that NATO and the U.S., among others, have said that cyberattacks can in principle constitute acts of war does nothing to quell our concern about this issue.

Here’s hoping that the agency which created the internet can figure out how to keep it from turning into the front line of the future’s battles. Otherwise, we’ll be hearing about a lot more about things like high profile hacks of sensitive information and (though we happen to like this one) computer viruses that make Iranian nuclear centrifuges destroy themselves. Talk about opening Pandora’s box.

Algeria’s Berber Awakening

An outbreak of violence between Algeria’s Mozabite Berber and Chaamba Arab populations resulted in at least 22 deaths in the last two days, the deadliest such clash since tensions between the two groups emerged after the vandalization of a Berber shrine in late 2013. The NYT:

The violence in the poor desert region of Ghardaia, more than 600 kilometers (375 miles) south of Algiers, was the latest episode of sporadic but sometimes deadly unrest between rival gangs of Berbers and Arabs.

Riot police moved in to quell the clashes that included fires and vandalism targeting shops, cars and public buildings in the towns of Guerrara, Ghardaia and Berianne, the official APS news agency reported.

Writing in these pages back in 2011, North Africa scholar Bruce Maddy-Weitzman highlighted a resurgence of Berber cultural identity and predicted that, as it took the form of a more proper movement for social and political authority, conflicts could arise. And indeed, in the past year and a half, hundreds of Mozabite homes and shops in the M’zab region of Saharan Algeria have been destroyed in altercations between the two ethnic groups. Algerian President Abdelaziz Bouteflika, addressing the incident on Wednesday, stated his intention to stem the tide of violence and seek lawbreakers “with diligence and severity.”

In a region that is defined by religious and ethnic clashes, the tensions between the two neighboring communities is not without precedent. As the Berbers seek to reclaim and preserve their millennia-old, native heritage, the best case scenario is that the Algerian government accommodates their want for cultural and political authority.

Gazprom Gets a Taste of Its Own Medicine

The Russian gas firm Gazprom has been in the news lately because of its stand-off with Ukraine over unpaid bills. Now the shoe’s on the other foot: Turkmenistan is alleging that the company hasn’t yet paid for 2015 gas deliveries. Reuters reports:

“Since the beginning of 2015, OAO Gazprom has not paid for its debts to state concern Turkmengas for the shipped volumes of Turkmen natural gas,” Turkmenistan’s Oil and Gas Ministry said in a statement on its official website (www.oilgas.gov.tm). […]

“Russian company Gazprom has become insolvent on its natural gas purchase-and-sale contracts due to the continued global economic crisis and economic sanctions imposed by Western nations on Russia,” the ministry’s statement said.

Turkmenistan has seen its exports to Russia fall by some 75 percent over the past seven years, and Gazprom is threatening to halve those imports to a paltry four billion cubic meters in 2015.

Whether it’s importing or exporting hydrocarbons, Russia isn’t shy about throwing its weight around. With Ukraine, it has worked to capitalize on the beleaguered country’s heavy reliance on Gazprom supplies for winter heating; with Turkmenistan it’s now playing hardball with a country that in the past has heavily relied on Russia as a buyer.But Turkmenistan has something in common with its allegedly deadbeat neighbor: both are turning east to China as they search for new custom.

Japan Mulls Joining NATO Missile Consortium

Japan is reportedly interested in signing on to a 12-country NATO missile consortium, created to manage and fund the development of an advanced ship-borne missile produced by U.S. arms companies. Japanese representatives traveled to The Hague in May to learn more about the project, and discussions within the government in Tokyo are apparently in an early stage. The U.S., for its part, is enthusiastic about the prospect. Reuters reports:

Having Japan on board would spread the project’s costs, but Washington also sees a role for Japan in leading multinational military industrial partnerships in Asia at a time when China’s military modernization and assertiveness is alarming many countries in the region, said the U.S. source. […]

“We think this project will allow Japan to lay the groundwork for further defense export programs in the future,” the U.S. source said. “We would welcome this kind of security cooperation activity by Japan in the region.”

Joining the agreement would further Prime Minister Shinzo Abe’s security-minded agenda, while also satisfying America’s desire for Japanese involvement in a multi-national defense arrangement. Defense ties between countries can go beyond simply treaty obligations, and joint arms programs are one the the chief ways allies can deepen their relationship on security issues. Proponents of Japanese involvement in the missile consortium also note that the move that could get Japan making more arms deals with allies, strengthening an emerging regional coalition aimed at standing up to Beijing’s expansionism. With Abe’s grand plan for a militarizing Japan hanging in the political balance at a moment when China is lashing out against its neighbors, every bit counts.

The Democrats Turn Left

Between the 2010 midterms and President Obama’s re-election in 2012, the conventional understanding of political polarization was that Republicans had shifted sharply to the right, while Democrats had remained essentially where they were, or maybe edged ever-so-slightly leftward. The argument that polarization is largely a Republican-driven phenomenon—that the two poles are drifting apart, but that the red pole is moving much faster than the blue one—looked weaker after the 2012 election, when Obama came out swinging for an ambitious liberal agenda in his inaugural address. Now, as the 2016 election gets underway, this narrative will likely need to be scrapped entirely. The New York Times recently reported on the Democratic Party’s leftward lurch, and how frontrunner Hillary Clinton is adapting to it:

Nearly 20 years after President Bill Clinton declared that “the era of big government is over,” Hillary Rodham Clinton is proposing muscular federal policies that would require hundreds of billions of dollars in new spending and markedly expand Washington’s influence in a host of areas, from universal prekindergarten to Alzheimer’s disease research…

Against the sweep of Democratic Party history, Mrs. Clinton’s proposals reflect a decided return to vibrant liberalism.

The government programs of Franklin D. Roosevelt – whose presidency Mrs. Clinton regularly invokes – and Lyndon B. Johnson aimed to transform the lives of poor and elderly Americans with jobs, health care, and retirement benefits. But the consecutive electoral losses of Jimmy Carter, Walter F. Mondale, and Michael S. Dukakis in the 1980s – as well as President Ronald Reagan’s framing of government as “the problem” – gave rise to centrist Democrats like Bill Clinton who envisioned federal programs as safety nets rather than solutions to every social ill.

During the 2012 election, Barack Obama memorably attacked the Republicans’ rightward shift, saying that Ronald Reagan could not win a modern Republican presidential nomination. That may be true, but it’s also true that Bill Clinton could not win a modern Democratic presidential nomination—as evidenced by the fact that Hillary Clinton has had to renounce the majority of her husband’s positions in order to be competitive.

This left-populist resurgence comes even as the nation might be poised to drift rightward, for two reasons. The big challenge—and opportunity—facing America today is the decline of the postwar welfare and managerial state beginning in the 1970s (what we call the “blue model”). The Democratic party’s orthodox response to this trend is to try to shore up what’s left of that model, and rebuild some of what’s been lost. But as Walter Russell Mead has documented at length, the blue decline traces, at least in part, to economic and demographic factors like globalization, technological change, and the aging of the population that simply can’t be put back in the genie’s bottle.

And it’s not clear that the majority of the American public wants policies aimed at reviving the blue model anyway. As John Judis has argued at length, the conventional wisdom about the “emerging Democratic majority” has been challenged by new evidence that key demographics—especially, Hispanics, Asians, and millennials—might not always be as solidly Democratic as the party has come to believe. The middle class is not suffering as much as the blue modelers tend to assume, and polls show a public wary of dramatically expanded government programs. If that’s the case, the Democratic party might soon find itself more out of sync with the electorate than it currently seems to expect.

Kirchner Blames “Shylocks” for Her Troubles

Argentina’s President Cristina Fernández de Krichner is at it again on social media. Haaretz reports:

In one tweet, Kirchner wrote that she had asked the children which Shakespeare work they were reading, and they replied “Romeo and Juliet.” “I said, you have to read The Merchant of Venice to understand the vulture funds,” she tweeted, saying everyone laughed.

“No, don’t laugh. Usury and bloodsuckers have been immortalized in the greatest literature for centuries,” she tweeted.

Neither accusations of Jews manipulating global financial markets nor Kirchner’s far-fetched conspiracies are new. In 2013, she accused a Jewish community leader of having ties to a “foreign espionage agency” and having knowledge of “a new terror attack planned against Argentina”.

The “vulture funds” that Kirchner compares to Shylock are not the source of Argentina’s trouble. Rather, what the judge in that case characterized as a “diplomacy of default” and Kirchner’s subsequent mismanagement of her country’s resources and opportunities are the roots of the problem. Kirchner’s bizarre theories may help her distract some from her own political failures, but they’re certainly doing nothing to help the ill health of the body politic.The quality of mercy may not be strain’d; neither, though, is the value of knowing when to stop digging.

Sec Treas: Hamilton Is Safe

The drive to get a woman on U.S. currency will not deprive Alexander Hamilton of his one major monument, Politico reports:

Treasury Secretary Jack Lew Friday pushed back at critics, — including former Federal Reserve Chairman Ben Bernanke — who’ve attacked his plan to replace Alexander Hamilton with a woman on the $10 bill.

“There are a number of options of how we can resolve this,” Lew told POLITICO’s Ben White at a Morning Money event in New York Friday morning. “We’re not taking Alexander Hamilton off our currency.”

Despite Lew’s blustery denials, that is indeed more or less what was proposed before the criticism came in—Hamilton would be at best moved to the background of the new $10 to make room for an as-of-yet-undetermined woman. Aggravatingly, Hamilton seems to have been chosen more or less at random: the $10 was simply the next bill up for redesign.

At the time this news broke, Walter Russell Mead noted that:

Hamilton should keep the ten dollar bill. Not only was he our first and greatest Secretary of the Treasury, and the founder of the system of capital markets and government finance that enabled the United States to become the greatest power in the history of the world, he was of all the Founding Fathers the one who speaks most clearly to American society today. He was an immigrant who became a pillar of the American establishment, a penniless kid whose talent brought him to the top. He believed in an open society. He was the most abolitionist of the Founders, supporting New York’s society to abolish slavery in that state—even if that cost him support in other parts of the country.

If we want to make room for new figures, whether a woman or for any other consideration, there are better options.

Well, it appears America’s sense of gratitude is not exhausted yet. Protests poured in from both sides of the political spectrum and from figures from plumbers to pundits (this tribute by Michael Pettis is particularly good) seem to have made themselves heard. As Lew walks back the earlier plan, the details of the rethought redesign—if any exist—are yet to be unveiled. But it seems that, for now, Alex is safe.

Turkey Lights Its No Vacancy Sign

The Syrian exodus is creating a full-fledged refugee crisis in Europe. Now Turkey, which is already full-up with some two million Syrians, fears that fighting around Aleppo could drive as many as another million refugees to its border. And as Reuters reports, the government is looking for a little help from its friends:

“Turkey has reached its total capacity for refugees. Now, there is talk that a new wave of refugees may emerge. That would exceed Turkey’s (capacity), and it would put the EU face to face with more migrants,” Volkan Bozkir told the newspaper Hurriyet during a trip to Brussels. […]

Bozkir said the amount Turkey had spent on refugees – it has established a string of camps along its 900 km (560-mile) border with Syria – dwarfed the contribution from the European Union, which Turkey wants to join.“We have spent $6 billion so far. The total amount that the EU has provided is 70 million euros and it is still just a promise, it has not yet arrived with us,” he said.

Earlier this week, the UN reported that the Syrian war had produced a total of over four million refugees, one sixth of the country’s population. About one third of the 137,000 refugees who have crossed into Europe already in 2015 are Syrian, while about 270,000 Syrians have sought asylum in the EU in total so far. When Turkey can or will not accept any more refugees, many more will try to make their way to Europe.

The inadequacy of the EU’s already strained migrant policies came to light earlier this year, when around 900 migrants drowned trying to cross the Mediterranean. Since then little has been done to better accommodate the growing influx of stateless migrants. The U.S., for its part, has accepted less than a thousand Syrian refugees since the war began more than four years ago. Turkey’s warning should serve as a wake up call to the international community that this real, human problem is not going away soon.