Cottagers Week

A few days ago, during my weekly visit to the comic book store, I stopped at the dense graphic-novel shelves, tyrannized by choice.  Before me sat row upon row of the laughably misleading (The Essential Dazzler), the highly unnecessary (ElfQuest: Volume 14), and the already-read (Essex County).  After a minute of unfocused browsing, I arrived at a chunk of Punishers.  Thanks to a 2009 alt-weekly story, I’d recalled that The Punisher’s Six Hours To Kill was set in Philadelphia, where I live.  I picked it up and flipped on through, remembering why I hadn’t read The Punisher since I was 13: it was really kind of dumb.

Still, I’d come closer to buying the book than I reasonably should have—and the only reason for that was its setting.  Eighteen years had passed since I’d given Frank Castle any thought—eighteen years in which he’d killed his way through Queens, Detroit, and Nome.  Yet all it had taken to rekindle my interest was for him to hop in his van and roar down the Turnpike.  Had I read Six Hours To Kill, I might’ve recognized a street, a park, or a building—and that would’ve drawn me in.  Whether in comics, films, or novels, this verisimilitude is a gift—recognition that you actually exist.

In 1995, Steve Lopez debuted with Third and Indiana, named after an intersection in Philly’s crumbling Badlands.  The book was mediocre—its villain was a cartoon, its heroes whimpering saints—but its street details were compelling.  “An old man with a white mustache and a newsboy hat cooked ribs and chicken on the sidewalk in a barbecue fashioned from a black metal drum.”  “Kensington Avenue… sat in eternal darkness and gloom under the El, and the tracks were supported by an archway of rusted iron crablegs, a symbol of the city’s industrial death.”

In Pete Dexter’s Brotherly Love, gangsters and union guys battle it out on similarly gritty streets: “Michael sees them too late, one on the sidewalk, one on the street.  He takes the pistol out of his coat pocket, beginning to run, and shoots four times, blowing out the front window of a poultry store kitty-corner in the Italian Market.”  I live two blocks from the Market, and when I walk through with my wife, I’ll point towards Ninth and Catherine.  “In Brotherly Love, there was a shootout right over there,” I’ll say.  My hope, perhaps, is that she’ll find me somehow tougher—after all, I witnessed a goddamn shooting.  Instead, she’ll ask, “Wait—this was in a book?  So it didn’t actually… happen?”  “No, not really,” I’ll mumble.  But… I could’ve sworn…

Such split thinking speaks, of course, to the vitality of narrative, to how it tricks us towards belief.  But unlike camping with the Joads or mourning poor Piggy, reading about one’s hometown doesn’t transport so much as extend, enlarging our maps with each page.  I’ve spent time in nearby Germantown thanks to David Goodis’ Black Friday: “He was very careful about it as he walked along Morton Street, watching the doors, the porch posts, the brick walls underneath the porch.”  When Point Breeze makes the paper, I’ve been there through The Corrections: “Friable houses with bedsheet curtains.  Expanses of fresh asphalt that seemed to seal the neighborhood’s fate more than promise renewal.”

Until I wrote this piece, I hadn’t seen the thread that runs through my Philly reading: I focus on areas that I’d otherwise never enter; on things I’d rather not see.  Like a Baltimorean watching The Wire, I experience the nearby underbelly without having to actually experience it.  This might make me an earnest investigator or an entitled cultural sightseer; probably a mixture of both.  But whatever my motive, I’m not nearly as interested in the places I already know.  Were there a Philadelphia novel about a Bella Vista freelancer, I’d probably have to skip it.  I spend enough time with myself.

In a recent issue of Superman, The Man of Steel began a cross-country walk in West Philadelphia.  As with The Punisher, his visit made the news—but this time, much of it harped on errors.  For one, Superman trekked through “The South Side”—a term used in Chicago, but never Philadelphia.  And at a diner, he ordered a “Philly cheese steak sandwich,” as natural-sounding as a Bulgarian weekender.  Such details, while seemingly petty, are crucial to hometown readers.  We might be too busy, or nervous, or lazy to go out and explore what surrounds us—but if you’re the author, by God, you’d better get it right.  Because we’ll take your stories as journalism; they’ll shape our thoughts for years.  We may or may not be tourists, but you are surely our guide.

(Image: west philly, from lisacee’s photostream)

Last week, Max directed our attention to a major new piece of reporting on the financial crisis: a Portfolio article by Millions favorite Michael Lewis. The author of Liar’s Poker, among other books, Lewis is a gifted explainer of an industry badly in need of explanations. In the Portfolio piece, for example, he immerses us in the world of short-sellers who saw the subprime meltdown coming. However, the key paragraph – wherein trader Steve Eisman has an epiphany about how investment banks are leveraging subprime bonds – resorts to a sports metaphor, and thus fails to demystify an elusive instrument at the center of the financial crisis: the credit default swap (CDS).”When a fantasy player drafts Peyton Manning, he doesn’t create a second Peyton Manning to inflate the league’s stats,” Lewis writes.But when Eisman bought a credit-default swap, he enabled Deutsche Bank to create another bond identical in every respect but one to the original. The only difference was that there was no actual homebuyer or borrower. The only assets backing the bonds were the side bets Eisman and others made with firms like Goldman Sachs. Eisman, in effect, was paying to Goldman the interest on a subprime mortgage. In fact, there was no mortgage at all. ‘They weren’t satisfied getting lots of unqualified borrowers to borrow money to buy a house they couldn’t afford,’ Eisman says. ‘They were creating them out of whole cloth. One hundred times over! That’s why the losses are so much greater than the loans.’I’ve heard financial insiders inveigh against peons who “don’t know a credit-default swap from a turnip,” but how are we to wise up, if explanations only come in the form of metaphors (athletic or agricultural)? Grabbing a fig leaf from the N+1 playbook, as it were, I decided to ask a friend in finance to explain the Peyton Manning analogy, as simply as possible. Here’s what he had to say (wait for “the rub”):Assume the following: Eisman buys a crappy mortgage security (say, a $1,000 bond from a mortgage given to a strawberry picker who makes $14,000 dollars per year). Say the mortgage rate the strawberry picker pays is 15%. This means he’s agreed to pay $150 a year to Eisman. But Eisman is worried that the strawberry picker will default because the guy’s house value has collapsed and his income is drying up. Thus, Eisman wants to buy insurance on the $1,000 he’s loaned. The way he does this is via a credit default swap.A CDS is essentially an insurance policy on a loan, and here’s how it works. Eisman finds a counterparty willing to sell him insurance on his loan (a big investment bank like Lehman Brothers). Eisman agrees to pay the bank a fixed rate every year for protection of the mortgage security he owns (the crappier the loan, the higher the rate). Let’s say for the $1,000 loan to the strawberry picker, his rate will be 10%. The bank pays him nothing on a regular basis, BUT, if the borrower defaults, they pay him the full $1,000.So: if times are good and everyone makes payments on time, the payments are structured as follows: The strawberry picker pays $150 per year to Eisman; Eisman pays $100 per year to Lehman (which then uses some of the cash to provision for losses, and uses the rest to make more loans). The strawberry picker gets to keep his house, Eisman keeps $50 per year (loan payment from strawberry picker minus the insurance premium he pays to Lehman), and Lehman gets $100.Got the structure? Now here’s the rub.Imagine Eisman never actually had exposure to the loan in the first place. Being the brilliant skeptic he is, Eisman would never lend $1,000 to a strawberry picker with little income. He thinks that strawberry man is doomed to default on that loan, and he actually wants to bet AGAINST him. So instead of giving the loan and buying insurance, he just buys the insurance (hence the often used and rarely understood term “side bet”). To do this, Eisman still has to pay the “premium” for the insurance he’s bought, and since it’s a risky loan, the rate is high (e.g. $100 per year in the example above). [Though he stands to win $1,000 if the loan defaults.] In effect, Eisman is paying a “subprime-like” interest rate to Lehman every year! That’s what Lewis was getting at.I would have used a different metaphor. I would have said it’s like a New Yorker buying a bunch of home insurance policies in New Orleans because you are expecting that there will be a massive hurricane coming to wreck them. Now lets say that the insurance company took the money you were giving it, didn’t provision for the coming doom, and instead, used that money to lend to more people building and buying houses in New Orleans.That’s leverage upon leverage upon leverage. And that’s the mess that is unraveling before us.