SAVING BRUTALIST BUILDINGS—PAUL RUDOLPH. It seems strange that buildings that were built only fifty years ago are now threatened by the wrecking ball, but technological change—think of electrical requirements, for example—has been enormous. Another reason is the unpopularity of some of the buildings. I posted here about how a lot of people just don’t like concrete. Adela Louise Huxtable had an article in the Wall Street Journal for February 25 about Boston’s City Hall and Paul Rudolph’s Art and Architecture Building at Yale, two buildings which she says are representatives of Brutalism. “The name Brutalism —from the French beton brut, the raw concrete used by Le Corbusier and favored by modernists — is more commonly used today as a term of opprobrium by a public that profoundly dislikes the style’s rough textures and powerful forms.” Huxtable clearly admires the Art and Architecture Building, calling it a “brilliant, virtuoso performance.” Here is a picture of it. The building has now been restored. Apparently, the building was only saved for restoration because of the “high cost and extreme difficulty of demolishing solid concrete.”
Archive for February, 2009
SAVING BRUTALIST BUILDINGS—PAUL RUDOLPH.
Saturday, February 28th, 2009LESSONS: BEWARE USING ONLY ONE NUMBER.
Friday, February 27th, 2009LESSONS: BEWARE USING ONLY ONE NUMBER. Kids, I keep trying to identify lessons from the financial crisis that will apply down the road. Some of the particular follies that have happened will never be seen again; they will be replaced by similar follies. When I was taking accounting in law school, I was puzzled by the emphasis on rules relating to income per share. My naive reaction was that if the information or explanation was footnoted, that people would look at the entire picture. Over time, I learned that people do simplify in analyzing problems, such as evaluating prices of shares of stock. (Think of the single number as a sound bite). One of the appeals of the complicated formula that I posted on yesterday was that the mathematician “didn’t just radically dumb down the difficulty of working out correlations; he decided not to even bother trying to map and calculate all the nearly infinite relationships between the various loans that made up a pool. …. Never mind all that, he said. The only thing that matters is the final correlation number—one clean, simple, all-sufficient figure that sums up everything.”
WHAT WOULD BAGEHOT SAY ABOUT TOXIC ASSETS?
Friday, February 27th, 2009WHAT WOULD BAGEHOT SAY ABOUT TOXIC ASSETS? I have posted before here and here on what Walter Bagehot had to say over a hundred years ago about the current financial crisis. Christopher Caldwell in the Financial Times had this quote from Bagehot’s LOMBARD STREET: “The business of banking ought to be simple. If it is hard, it is wrong. The only securities which a banker, using money that he may be asked at short notice to repay, ought to touch, are those which are easily saleable and easily intelligible.” What makes the financial crisis so difficult is that the bankers have devised assets which may take months or years to sell because they are not easily intelligible.
THE EQUATION THAT LED TO A LOT OF TOXIC ASSETS.
Thursday, February 26th, 2009THE EQUATION THAT LED TO A LOT OF TOXIC ASSETS. I have posted previously that a lot of the financial crisis seems to come from intellectual mistakes by brilliant people. Felix Salmon has an article in Wired which prints a formula which was, according to the title of the article, “The Formula That Killed Wall Street.” It’s a wonderfully complicated formula–based on a copula function. I don’t have the fonts to reproduce it. Scroll down at the link if you want to see what it looks like. The article also has a very good description of how the toxic assets were created. The formula makes a very strong assumption: “the model used price [prices of risks in the markets] rather than real-world default data as a shortcut (making an implicit assumption that financial markets in general, and CDS markets in particular, can price default risk correctly).” The result is that, to quote the 2005 Wall Street Journal article cited in the Wired article, “The model runs the data through the copula function and spits out a default correlation for the pool — the likelihood of all of its companies defaulting on their debt at once.” Notice that rather than thinking about the probability of an event which would lead a pool of mortgages to all default at once—say, a large decline in housing prices—the probability depends on data from years when no such decline had happened to arrive at a very low probability of it ever happening. A paper about the formula was published in The Journal of Fixed Income in 2000. By 2005 trillions of dollars of the new securities were traded.
LOTS OF TOXIC ASSETS.
Wednesday, February 25th, 2009LOTS OF TOXIC ASSETS. This quote from Lloyd Blankfein, the chief executive of Goldman Sachs, in the Financial Times for February 9 gives an idea of the scale of the toxic asset problem: “In January 2008, there were 12 triple A-rated companies in the world. At the same time, there were 64,000 structured finance instruments, such as collateralised debt obligations, rated triple A.” I had been looking for the quote and found it via Wordpress. This link also connects to an interesting economics blog.
“ONE MORTGAGE AT A TIME.”
Wednesday, February 25th, 2009“ONE MORTGAGE AT A TIME.” Professor Alan Blinder wrote in the Wall Street Journal on February 4 that “There are many foreclosure-mitigation plans.” He concluded “I fear that smart refinancing will have to be done one mortgage at a time.” With the problems of tracing mortgage transactions, that may take a very long time.
“PRODUCE THE NOTE”—LOOKING FOR THE BEANS SO YOU CAN COUNT THEM, REVISITED.
Wednesday, February 25th, 2009“PRODUCE THE NOTE”–LOOKING FOR THE BEANS SO YOU CAN COUNT THEM, REVISITED. I posted here about the difficulties that the people trying to recover assets for Lehman Brothers were having in locating those assets. Rights in a mortgage might have been chopped up into tranches (slices) and resold as parts of pools–not of mortgages–but of slices of mortgages. If Lehman owned a security based on one of those pools, unwinding what happened was taking a long time. Mary Jane showed me a Diane Sawyer video which approaches the problem from the other end. It points out that if you are facing foreclosure on your house, simply asking that the note be produced can cause long delays. I can’t find a way to link to the Diane Sawyer video, but here is another video which has the same message. I had speculated in the linked post that there were backoffice problems with these complicated assets.
HOW TO SPEND $100,000,000.
Tuesday, February 24th, 2009HOW TO SPEND $100,000,000. I spoke recently with a friend who works for a federal agency that received a large amount of money under the stimulus bill (I chose $100,000,000 to give you an idea of the number of zeroes involved). What criteria should the agency use? The idea of the stimulus is to spend money quickly, but projects are not usually ranked or selected using that criterion. I suggested that in the calculation of the benefits and costs of the project, the cost of any resources used in the next year (or perhaps the next seven quarters) should be assumed to be zero. This is one way to implement the logic of the stimulus that there are extra resources in the economy that are not being used at this time.
THE RETURN OF THE SEMI-COLON?
Tuesday, February 24th, 2009THE RETURN OF THE SEMI-COLON? I posted here about the passions aroused by the semi-colon, including a duel that was fought over whether to use a colon or a semi-colon. In yesterday Financial Times, Lucy Kellaway celebrated over receiving a text message which used a semi-colon. She compared a sample of her e mails that she recently received with a sample she made in 2000 for a column. Over 25% of the earlier e mails were in lower case. Only one in the current sample and that from an older person she thinks challenged–as I am–by the shift key. She concluded: “Just as recession encourages people to put on ties (as I wrote last week), it also makes them look more kindly on the capital letter and the semicolon.”
ROMAN FOOD AND ROMAN NAMES.
Monday, February 23rd, 2009ROMAN FOOD AND ROMAN NAMES. I had known that Cicero’s family name came from the Latin word for chickpea. While looking at KITCHEN MYSTERIES, a book on the science of cooking by Herve This, I learned that other distinguished Roman families derived their names from foods: Fabius comes from faba, the broad bean; Lentulus comes from the word for lentil and Piso comes from the word for pea. Wikipedia tells me that Murena comes from the word for lamprey.
