And Still I Persist

Jules Crittenden — himself no stranger to war — talks with Vietnam vet John Eade about Thermopylae:

John Eade hasn’t seen a war movie in more than 40 years, but he’s thinking about seeing “300.” I kind of get that. There is something about the Spartans’ simple illogical willingness to die at Thermopylae that I suspect speaks across the centuries to a lot of combat veterans. It is possible to understand how glad they felt about the opportunity that presented itself. But it’s the kind of thing that, if you try to discuss it with people who haven’t experienced it, places you at risk of being considered seriously disturbed.

I still watch war movies, looking for the ones that do it well as a technical matter, though real war ruined war movies for me. Even in the best, a written, acted script is vaguely offensive, that people who have never done this should attempt to dramatize it. There are maybe a handful that come close to capturing the strange normality of extraordinary events, when death and valor are common, unsurprising occurrences.

Images and dialogue will never convey things like the feeling of lying awake before dawn, when fear shoves its way up and down your esophagus like a fat, filthy rat; or the subdued euphoric feeling as the assault gets underway and you are ready to die; or the laughter in the midst of combat; or the inexplicable sadness over the death of someone who would have killed you. The emotions and shock movies try to portray are so often the stock ones, and the wrong ones.

Some movies come close, but struggle to deliver even a small piece of what someone like Eade can convey in a few spoken words. It isn’t the words, it is that thing his words carry, something almost imperceptible that comes across between the words, if you are able to recognize it. Within its embrace, it becomes completely logical that one should desire, in the company of 299 comrades, to face 250,000 Persians and die….

“We held our ground,”  Eade said.  Spread out along 550 meters, 2nd Battalion of the 7th Cavalry had lost 124 of its 400 men in a few hours, with a similar number wounded. Thirty-four of the dead were from Eade’s Alpha Company.

Eade, now in his 60s, with broken body, is still a soldier. As Eade and I talked about Thermopylae the other night, we talked about the fact that for combat veterans, it is not ancient history. Eade knows what the Spartans knew.

Eade’s interest in this battle goes back to high school, and the way it captured his imagination then, when he was innocent of war. He says Vietnam bled the romance out of war for him, though I’m not sure that’s entirely true.

“I don’t think anyone who studies war doesn’t get stuck on Thermopylae. It’s that thing of standing your ground to the last man,” Eade said the other day. ”Three days of fighting set up the Persians for their ultimate defeat. It changed history. It has taken on mythic proportions. You want to be one of the 300 … If you had your chance to cut out or stay, you’d have stayed.”

Read the whole thing.  ..bruce..

From MarketWatch

Alt-A mortgage losses accelerate, study says

SAN FRANCISCO (MarketWatch) - Losses on so-called Alt-A home loans are accelerating and could hit the value of lower-rated portions of some mortgage-backed securities, according to a study released on Tuesday. Delinquencies have jumped on Alt-A mortgages originated last year with adjustable interest rates that let borrowers pay only the interest for a time. These loans, known as Alt-A ARM IOs, have seen a four-fold increase delinquencies of at least 60 days, four times the level of similar loans originated in 2003 and 2004.

The deterioration is “alarming” for investors in lower-rated bonds that are backed by these loans, he said. Mortgage loans are usually packaged together and sold as mortgage-backed securities (MBS) to institutions such as pension funds, insurers, and hedge funds. Liu’s study suggests that losses in Alt-A ARM IO mortgages could wipe out the credit support on BBB- rated tranches of some MBS.

This is a big open question - can the problems witnessed in sub-prime be contained there? If not the risk is broader than many suspect. Only time will tell.

[Welcome to those coming over from Winds of Change! — additional comments at the end of this post]

I haven’t seen 300 (the movie), though I own and have read Frank Miller’s graphic novel, as well as Gates of Fire by Steven Pressfield. More importantly, I also own and have read all of Herodotus’s The History, the closest we have to original source material on the battle at Thermopylae (Herodotus was born in 484 BC, while the battle at Thermopylae took place in 480 BC).

In it, Herodotus tells how Xerxes is puzzled by his spy’s report at the small number of Greeks holding the pass at Thermopylae, and that they appear to be involved in “gymnastic exercises [and] combing their long hair.” Demaratus, a Greek exile who fled Sparta to Persia, explains:

“I spake to thee, O king! concerning these men long since, when we had just begun our march upon Greece; thou, however, didst only laugh at my words, when I told thee all this, which I saw would come to pass….These men have come to dispute the pass with us; and it is for this that they are now making ready. ‘Tis their custom, when they are about to hazard their lives, to adorn their heads with care. Be assured, however, that if thous canst subdue the men who are here and the Lacedaemonians who remain in Sparta, there is no other nation in all the world which will venture to lift a hand in their defense. Thou hast now to deal with the first kingdom and town in Greece, and with the bravest men.” [Book 7, para 209; George Rawlinson translation]

Xerxes refrains from attacking for four days, expecting the Greeks to run away; they don’t, adhering to Spartan law that forbids either retreat or surrender:

When, however, he found on the fifth [day] that they were not gone, thinking that their firm stand was mere impudence and recklessness, he grew wroth, and sent against them the Medes and Cissians, with orders to take them alive and bring them into his presence. Then the Medes rushed forward and charged the Greeks, but fell in vast numbers; others however took the places of the slain and would not be beaten off, though they suffered terrible losses. In this way it became clear to all, and especially to the king [Xerxes], that though he had plenty of combatants, he had very few warriors….During these assaults, it is said that Xerxes, who was watching the battle, thrice leaped from the throne on which he sate, in terror for his army. [7:210, 212]

King Leonidas and the Spartans finally fall on the third day of battle. And, according to Herodotus, an inscription is made at Thermopylae, possibly the most famous war memorial in human history:

Ὦ ξεῖν’, ἀγγέλλειν Λακεδαιμονίοις ὅτι τῇδε
κείμεθα, τοῖς κείνων ῥήμασι πειθόμενοι.

Go, stranger, and to Lacedaemon tell
That here, obeying her behests, we fell. [7:228]

Or as Frank Miller puts it in his graphic novel 300:

Go tell the Spartans, passerby,
That here, by Spartan law, we lie.

Xerxes then asks Demaratus if all Lacedaemons are like this; Demaratus gives him the bad news:

“O king!” replied the other, “the whole number of Lacedaemons is very great; and many are the cities which they inhabit. But I will tell thee what thou really wishest to learn. There is a town in Lacedaemon called Sparta, which contains within it about eight thousand full-grown men. They are, one and all, equal to those who have fought here. The other Lacedaemonians are brave men, but not such warriors as these.” [7:234]

In the meantime, the rest of Greece — shamed and spurred by the deliberate self-sacrifice of King Leonidas and his band of Spartans — rallies for war. Xerxes’s fleet is destroyed at Salamis by the Athenians; Xerxes personally retreats from Greece, and the occupying force he leaves behind is eventually destroyed by the combined Greek forces.

And Western civilization, including many of the political and philosophical concepts we take for granted some 2500 years later, survives.

In fact, 160 years later, Greece returns the favor to Persia — Alexander III of Macedon, after uniting (at sword’s point) the Grecian city-states weakened in the aftermath of a long and bloody internal war, crosses the Hellespont himself, but heading east — and he doesn’t stop until he and his armies reach India. In his wake, Greek culture, science, politics and philosophy spread throughout many lands, and Alexander is surnamed “the Great”.

So why am I bothering to write about all this?

My father enlisted in the Navy at age 17 in 1941 and survived Pearl Harbor, the (Naval) Battle of Guadalcanal, and the invasion of Guam. The first time I visited in the USS Arizona memorial in Pearl Harbor (in 1975), I found tears streaming down my face, recognizing that most of the 1100+ names listed there were young men just like my father had been, and that they represented families and family lives that would never be. Ever since then, I have had a very tender — almost raw — spot when it comes to the willingness of men and women to go deliberately in harm’s way for the safety and liberty of others. It is a wrenching, horrible yet absolutely necessary cost for the freedoms we enjoy — and I fear that much of our society has lost sight of that (among many other things). I don’t speak from an abstract point of view, either; I have a son who is a Marine and will likely go over to Iraq late this year or early next year, while one of my daughters plans to enlist in either the Navy or the Marines as of this summer.

And so the story of Themopylae prods at my heart, just as I quietly weep every time I re-read Herman Wouk’s novel War and Remembrance and get to the Battle of Midway — where Wouk stops and lists the names of the actual pilots who died, who knowingly chose their own deaths, and in so doing changed world history for the better.

As Victor Davis Hanson notes, we owe much to Leonidas and his 300. Whether you choose to see the movie or not, reflect on how the bravery and death of a handful of Greeks back in 480 BC shaped the world we live in today, including the freedoms that we enjoy. Reflect also on the sacrifices of our own armed forces, to establish and preserve our liberties and freedom and to extend those same traditions and concepts to others.

And ask ourselves what we — as individuals — have done to deserve and live up to such sacrifices. ..bruce..

[UPDATED 03/14/07 - 2226 PDT]

My original posting above was inspired in part by an observation made by Marc “Armed Liberal” Danziger over at Winds of Change:

But one interesting thing popped up as I read the available reviews (many linked at www.rottentomatoes.com); the astounding historical and cultural ignorance of most film critics.

Kenneth Turan of the LA Times was the only one who ‘got’ the historical context of Thermopylae (even though he didn’t like the movie). Sheesh. You’d think that people who write about culture for a living would know something about it, wouldn’t you?

Marc’s got an excellent follow-up posting addressing the issue of patriotism (or, as some would have it, “patriotism”) and touches on the key point that I somewhat clumsily thrash around:

What’s missing from Matt’s (actually nuanced) argument is one simple point; the Spartans are us - they are, literally, among the ancestors of this rickety enterprise we all know as Western Civilization, and so - beyond our affinity for their heroism, or their connection to the notion of freedom (for landowning nobles, at least) - we owe them a debt of patrimony.

That, of course, is one of the central themes in the writings of Victor Davis Hanson, particularly The Western Way of War and Who Killed Homer? (both of which I recommend highly).

For me, there is an emotional resonance beyond the “debt of patrimony”. I actually know all four verses to “The Star-Spangled Banner“, because it’s in the standard LDS (Mormon) hymnbook, and when we sing it in church, as usually happens around the 4th of July, we sing all the verses. [Actually, the LDS Church dropped the 3rd verse when it revised the hymnbook in 1985, undoubtedly because the 3rd verse says unkind things about the British. A pity; I rather enjoyed the frisson of having both the complete “Star-Spangled Banner” and “God Save the King” in the same hymnbook.] And though I’ve been singing the 4th verse for 40 years, I can still never get through the first few lines without choking up:

Oh! thus be it ever, when freemen shall stand
Between their loved homes and the war’s desolation….

My dad did that for 30 years; my son (named after him) has stepped into that same role. Western Civilization, which we enjoy so much even as we criticize it, exists because millions of men (and women) over the past 2500 years have knowingly sacrificed their lives and left behind grieving families and friends. And, to echo Marc’s observation, it’s not just film critics who have an “astounding historical and cultural ignorance” — it’s Western society as a whole. ..bruce..

[UPDATED 03/13/07 - 2005 MDT]

Apparently, the stock ripples are worldwide:

A steep sell-off swept through global stock markets on Tuesday as investor confidence was hit by the escalating woes of the US subprime mortgage market and weak US retail sales data.

The S&P 500 ended the day down 2.04 per cent and the Dow Jones Industrial Average tumbled 1.97 per cent, while the yield on the 10-year Treasury note fell below 4.50 per cent as investors sought the safety of government bonds. London’s FTSE 100 closed down 1.16 per cent at 6,161.2 and the FTSE Eurofirst 300 index was down by a similar margin.

“Markets are pricing in a realistic chance that problems in the subprime sector will spill over into the general mortgage market,” said Richard Gilhoolly, senior fixed income strategist at BNP Paribas.

Hat tip to the Drudge Report.  ..bruce..

[Original post]

My able co-blogger, Bruce Henderson, has been on top of the subprime/foreclosure story for some months, but it’s now catching on in the media and, based on the stock market today, among investors as well. Here’s a round-up of the stories just at CNN-Money today:

• Bonds jump on subprime fear: Bond prices surged Tuesday as the fallout of the subprime lending sector rattled investors’ nerves and tumbling stock markets sent investors looking for refuge, while the dollar fell against the yen and the euro.
• Scary math: more homes, fewer buyers: “[National] inventory is 20 percent higher than last year, vacancy rates have soared and prices are down about 3 percent,” [Dean Baker, co-director of the Center for Economic and Policy Research] says. “Now, with the tightening of credit, I don’t see how prices don’t fall another 5, 6 or 7 percent.”
• Record foreclosures in fourth quarter: The percentage of all outstanding loans that entered the foreclosure process was 0.54, 0.08 percentage points higher than the third quarter and the highest ever recorded in the survey. The previous record was 0.50 in the second quarter of 2002….All major loan types contributed to the increase, but subprimes and FHA loans were up the most.
• NYSE moves to delist New Century: New Century was listed on the NYSE under the symbol NEW (Charts). The stock has lost about 90 percent of its value since the start of the month on news of growing defaults and problems getting new financing.
• New Century, Accedited lead subprime plunge: The meltdown among U.S. subprime mortgage lenders broadened Tuesday, as shares of Accredited Home Lenders Holding Co. lost two-thirds of their value and New Century Financial Corp. sank, with investors fearing both would run out of cash.
• Subprime: the risk to Wall Street: The banks stand to take a double hit. First, they lose if subprime lenders can’t pay back the money they’ve borrowed from Wall Street to bankroll their mortgage business, said Gary Gordon, managing director of research at independent research firm Portales Partners. Second, with the growing problems roiling subprime, there will be fewer of these mortgages issued for the banks to repackage and sell as securities to investors - an area that has become extremely lucrative for Wall Street.
• Is this the subprime apocalpse? (Or is it just a scary story?): I have lots of information now. Suddenly, the possibility of a housing credit crunch that breaks the economy is much more vivid to me. That doesn’t necessarily mean it is any more likely.

The last story is a welcome reality check, particularly in citing why expert predictions aren’t necessarily any more reliable than those made by reasonably informed individuals. On the other hand, the troubled subprime market will have an impact on both existing homeowners and those seeking to buy their first house, for reasons that Henderson explained a few days ago.

Maybe it’s not such a bad thing that I’m renting right now. ..bruce..

Outstanding graphic from a report by Credit Suisse showing the break down of the size of the mortgage business by percentage and estimated absolute value. Of special note is that a majority of the money (51.4%) now comes from outside the Government Sponsored Entities (GSE), and through Wall Street and hedge funds. That means that pension plans, 401Ks, IRAs and Mutual Funds could possibly be holding on to some toxic debt. That makes it imperative that folks find out if the funds they are invested in, and counting on for long term, could be at risk because of the mortgage industry troubles.

(click on graphic for larger view)

Some Terms Behind The Chart:

ARM - Adjustable Rate Mortgage: This is a mortgage with a variable interest rate. Typically the mortgage has a fixed rate for 1-3 years, often at a low “teaser” rate. After the introductory time is over, the interest rate will adjust to a new rate based on some benchmark, such as LIBOR, plus some number. When the adjustment hits, the monthly payment adjusts as well. In this day and age, that means the payment goes up. Many of these loans were written with 1% or 2% teasers for 2 years, and are now adjusting into the 8% range (some higher). This results in a huge payment shock for some folks who took out these kinds of loans.

Interest Only - This is a loan where for the introductory period, you are not paying any principal on the loan, only the interest portion of the payment. That further lowers the initial payment during the “teaser” time period, but further increases the “Boost” once the intro period is over. Payments can more than double after the introductory period.

Option ARM - This is the most toxic sort of loan, the person with the mortgage does not even have to play the full interest during the introductory period, they have an “option” to pay whatever amount they choose. They could be paying off the principal as well as the interest, but it should come as no surprise that most choose to pay a minimum amount. After a certain period the loan converts to a fully amortized mortgage, and the amounts they should have been paying (but weren’t because they optioned to pay less) are added onto the loan balance. In essence the total value of the loan balloons over time.

Why does this matter? As Wall Street became the primary funder of these wacky mortgages, the risk that maybe they were not as good an investment as was assumed was injected into the funds that purchased them, and that created them. Of course Wall Street was most interested in selling as many of them as possible. They had little or no history on how to price this risk, or who should or should not be funded for such a large block of money.

How much of this is fraud? We should find out over the next year or so. This chart is an important key to remember.

Hit tip to Calculated Risk

Here is why this is all so dangerous (simplified money flow)

Step 1 - Mortgage company originated mortgages
Step 2 - Mortgage company borrows money from Wall Street via warehouse financing
Step 3 - Mortgage company provides borrower with cash and receives note payable (the mortgage)
Step 4 - Mortgage company bundles up mortgages and ships them back to Wall Street less processing fee and covers its original borrowing
Step 5 - Wall Street packages and then slices and dices and sells derivative securities (collateralized by the mortgages) to pension funds, insurance companies , money market funds, foreign investors, etc.
Step 6 - Home owners begin to default on these mortgages thus effecting the mark-to-market value of the derivative securities
Step 7 - Pension funds, insurance companies , money market funds, foreign investors, etc. go to Wall Street and demand that they take back these securities
Step 8 - Wall Street goes back to mortgage company and asks them to buy back the original mortgages
Step 9 - Mortgage company has no money to pay the “call” — they never did — it was Wall Street’s money

This is exactly how companies like New Century are unwinding so fast. They had very little actual money on hand, they were largely just taking orders and funneling the results into investment pools. When the time came to pay up on the bad paper, all they had left was the money they were supposed to be using for loans.

So will the bagholder be the investors or Wall Street? If Wall Street fails to make good on the securities sold to investors they’ll be done. Therefore, the FINAL BAGHOLDER IS WALL STREET.

Over the past 10 - 15 years, everyone who is saving for retirement, who is trying to make money has put money into Wall Street. That means the real final bag holder is all of us who have been investing.

When that payload of pain hits, most of us are going to feel it.