Hard times push more women to strip clubs
samsung1
Ohio
The Atlanta Journal-Constitution
She's stunning, even in sweats. But Leilani Burkhead's got her work cut out for her. It's 9 p.m. on a weeknight, time to hit the stage at Atlanta's Magic City strip club.
She slips out of her sweats and half-jokingly mumbles something about getting geared up to work the room.
It's an about-face from a few years ago when money rained down on dancers at this and other Atlanta adult-entertainment clubs like free-flowing Dom Perignon. Like the rest of the economy, adult dance clubs feel the pinch. The sluggish economy and closer police scrutiny have put about a dozen out of business in the past decade. And the regular patrons aren't so regular anymore.
But that hasn't slowed the would-be dancers lining up to apply for the $350 permit to work in the city's 19 clubs, Atlanta police say. Among the usual aspiring actresses and dancers, there are more college students, single mothers trailing toddlers, health and office professionals and even a few age-defying grandmothers — all looking for well-paid work in a city with unemployment above 10 percent.
“We have them coming in daily looking for work,†says Michael “Lil Magic†Barney Jr., the 28-year-old general manager of Magic City, a downtown Atlanta fixture founded by his father.
While there are no hard numbers, Atlanta police say they've seen a spike in applications for adult-entertainment permits in the past year or so due to the recession and the recent change in Georgia law that allows nude dancers to be as young as 18.
“We're seeing younger applicants,†said Detective Kamau Chinyelu, an investigator with the Atlanta Police license and permit unit. “We're seeing quite a few that have lost their jobs and are now making career changes.â€
Those who do wind up working in the business soon learn that even nude dancers have to work harder these days, as patrons spend less and don't return as often. The cyber-savvy dancers have turned to social media to hold customers' interest.
And for good reason. Even in this tough economy, a dancer can clear about $50,000 a year, and that beats working in a dentist's office or selling homes right now.
Like it or not, sex sells in Atlanta, where there are still more exotic and nude dance clubs in and around the city than anywhere else in the country, according to the Association of Club Executives, an industry trade group. Club work can be a strong draw in an economy that has shed 8 million jobs nationwide and propelled more women into the role of chief breadwinner.
“Women who may not have ever thought about working in the industry are rethinking†the idea, said Angelina Spencer, manager of the Washington, D.C.-based trade group. “Unfortunately, mortgages, car payments and groceries don't go away in a bad economy.â€
While city and development officials prefer not to talk about it publicly, Atlanta's erotic economy has long been a major financial force in the city, helping draw conventioneers and high-rolling celebrities alike.
Spencer, a former stripper turned lobbyist who has been tracking the adult-entertainment industry for seven years, estimates metro Atlanta's exotic and nude clubs generate $240 million annually, more than the city's three major sports teams combined.
While economists challenge Spencer's assessment, they do agree the adult-entertainment industry is a major economic engine in Atlanta.
“There's no question the business is fairly substantial; whether it's grown or shrunk I don't know,†said Atlanta economics consultant Don Ratajczak, who analyzed the industry about a decade ago while he was director of Georgia State University's Economic Forecasting Center. “When I did my estimates†on that industry, “we had a vibrant convention business and people winked at the adult entertainment. Since then, there's been some crackdowns.â€
Despite its enormous presence, the industry prefers to keep a low profile. A number of clubs contacted for the story — The Cheetah Lounge, Gold Rush, Onyx, Foxy Lady, Doll House and Tattletales — declined to comment or never responded. Clubs like Magic City and Cheetah have built a following over the years, and while the money doesn't flow as freely thse days, patrons still make their way to the clubs. So do the women looking to dance.
‘Steady, easy money'
By day, they're dental hygienists, college students, office workers. At night, they dance under stage names such as Prada, Safari and Diamond. Most are reluctant to give their real names, worried about the stigma it could bring Sunday morning at church or losing the free baby-sitting grandma provides.
“You can use the industry one of two ways — as a stepping stone or tombstone,†said trade group rep Spencer. “Usually the industry is a pass-through so women can go on to bigger and better things.â€
At Magic City, Michael Barney oversees an operation that includes 150 dancers, 12 waitresses, four bartenders, three DJs, two busboys and one “house mother†who looks after dancers' needs, as well as a security contingent to protect his dancers. He views them as family. “I'm a brother or daddy to some, and an uncle to others,†Barney said. Its a family whose members are there for different reasons.
B.K., a 25-year-old dancer at Magic City, began relying more on the club income when her job as a physical therapist was cut to one day a week six months ago. “It's been steady. It's easy money,†she said. “There's a stereotype people have of dancers. That we're prostitutes because we take our clothes off. But I go to work and go right home.â€
Prada, a 21-year-old dancer at Magic City, said she plans to use the money she makes dancing to open an eyebrow and lash boutique. For Simone Neal, another Magic City dancer, club work is her ticket to becoming the first in her family to go to college. Essentially working as an independent contractor, she estimates she earns $50,000 after paying a nightly fee to the club and tips to DJs and the house mother.
“I love to dance,†said Neal, a petite 27-year-old who drives four hours from Florida to dance in Atlanta. “I thank God for everything I make.â€
Then there are those like Leilani Burkhead, who is working to get out of the business. For now, the single mother is working a lot of 18-hour days: from 7:45 a.m. to 6 p.m. at an orthodontist's office, then 8:30 p.m. to 3 a.m. at Magic City. She receives no child support, so both jobs help pay bills and her 9-year-old son's school tuition.
“I didn't want to dance, but you've got to do what you have to do,†she said.
On a recent afternoon, about a dozen women lined up at the city's permit office in northwest Atlanta. Most would not identify themselves beyond their club names. But they were all interested in one thing: making money.
Getting into the industry is tougher these days. Would-be dancers must have a job offer from a club before they can get a permit, which involves an extensive background check. The city prohibits anyone convicted of a felony or sex-related crime from dancing, police spokesman Otis Redmond said. The tougher scrutiny has shaved the new permits granted from a decade high of 3,448 in 2007 to 2,642 last year, police say.
Money flows less freely
On a recent Thursday at the Cheetah, a dimly lit club and restaurant known for its $50 steaks, a dozen or so lunchtime patrons were on hand, including two soldiers in fatigues scheduled to ship out to Iraq that afternoon. An Atlanta Hawks player at the bar drank in the applause when patrons cheered an ESPN replay of one of his shots on the giant flat-screens hovering overhead.
With the exception of “stack nights†— when the money rolls in with little effort, as when celebrities and high rollers show up — patrons aren't spending as much. Dancers who could once make $5,000 in a single evening say those nights are increasingly rare. The trickle-down effect hits the pockets of DJs and other support staff.
Among customers, bottles of champagne have been replaced by bottles of beer or a few drinks that are nursed all night. The city's slower convention business has dried up the pool of out-of-towners. As for more frequent visitors?
“The regulars aren't so regular,†said Simone Neal. “I have to watch my money more closely now. I can't spend like I used to.â€
To try to boost their appeal, some adult club dancers have embraced Facebook, Twitter and other social media, a move that appears to be paying off. The idea is that customers will stay connected and return to the club on the next business trip, Barney said. Some dancers now have international followings online.
Sometimes, though, Facebook can't beat face time. Dancers say they are spending more time schmoozing with patrons.
During lunchtime at the Cheetah, a striking blonde spent about 30 minutes hovering at one table, chatting with a businessman about her child's school projects before he opened his wallet for a private dance.
Nearby, a trio of lingerie-clad women swayed to rapper T-Pain's “I'm N Luv With A Stripper.†For $10, the women will display more than just their dancing skills. With a little more financial encouragement, they'll come to a table for conversation and a private dance.
One of the soldiers, intent on making his last few stateside hours memorable, went to the club's ATM and withdrew $200.
The strip club economy
Clubs: U.S.: 3,829
Metro Atlanta: 19
Economic impact: U.S. $15 billion
Metro Atlanta: $240 million-plus
Employment: U.S.: 500,000
Estimated annual earnings of Atlanta dancers: $20 million
Six largest U.S. markets for strip clubs: Dallas, Houston, Atlanta, Miami-Ft. Lauderdale, Orlando, Las Vegas, Los Angeles
Source: “The Erotic Economy†by Angelina Spencer, Association of Club Executives
--------------------
How we got the story
Police reporter Megan Matteucci noticed scores of women lined up at Atlanta Police headquarters every time she went to pick up reports. Detectives there told Matteucci the women were applying for a license to strip. Intrigued, Matteucci made a Freedom of Information Act request for numbers on adult- entertainment permits and talked to veteran business reporter Tammy Joyner, who thought the spike might be connected to the economic downturn. The reporters, along with photographer Bita Honarvar, visited and contacted a number of clubs. Joyner and Matteucci also talked to permit applicants, dancers, club owners, police officials, women's rights groups, economists and adult-entertainment industry officials.
http://www.ajc.com/business/hard-times-p…
She's stunning, even in sweats. But Leilani Burkhead's got her work cut out for her. It's 9 p.m. on a weeknight, time to hit the stage at Atlanta's Magic City strip club.
She slips out of her sweats and half-jokingly mumbles something about getting geared up to work the room.
It's an about-face from a few years ago when money rained down on dancers at this and other Atlanta adult-entertainment clubs like free-flowing Dom Perignon. Like the rest of the economy, adult dance clubs feel the pinch. The sluggish economy and closer police scrutiny have put about a dozen out of business in the past decade. And the regular patrons aren't so regular anymore.
But that hasn't slowed the would-be dancers lining up to apply for the $350 permit to work in the city's 19 clubs, Atlanta police say. Among the usual aspiring actresses and dancers, there are more college students, single mothers trailing toddlers, health and office professionals and even a few age-defying grandmothers — all looking for well-paid work in a city with unemployment above 10 percent.
“We have them coming in daily looking for work,†says Michael “Lil Magic†Barney Jr., the 28-year-old general manager of Magic City, a downtown Atlanta fixture founded by his father.
While there are no hard numbers, Atlanta police say they've seen a spike in applications for adult-entertainment permits in the past year or so due to the recession and the recent change in Georgia law that allows nude dancers to be as young as 18.
“We're seeing younger applicants,†said Detective Kamau Chinyelu, an investigator with the Atlanta Police license and permit unit. “We're seeing quite a few that have lost their jobs and are now making career changes.â€
Those who do wind up working in the business soon learn that even nude dancers have to work harder these days, as patrons spend less and don't return as often. The cyber-savvy dancers have turned to social media to hold customers' interest.
And for good reason. Even in this tough economy, a dancer can clear about $50,000 a year, and that beats working in a dentist's office or selling homes right now.
Like it or not, sex sells in Atlanta, where there are still more exotic and nude dance clubs in and around the city than anywhere else in the country, according to the Association of Club Executives, an industry trade group. Club work can be a strong draw in an economy that has shed 8 million jobs nationwide and propelled more women into the role of chief breadwinner.
“Women who may not have ever thought about working in the industry are rethinking†the idea, said Angelina Spencer, manager of the Washington, D.C.-based trade group. “Unfortunately, mortgages, car payments and groceries don't go away in a bad economy.â€
While city and development officials prefer not to talk about it publicly, Atlanta's erotic economy has long been a major financial force in the city, helping draw conventioneers and high-rolling celebrities alike.
Spencer, a former stripper turned lobbyist who has been tracking the adult-entertainment industry for seven years, estimates metro Atlanta's exotic and nude clubs generate $240 million annually, more than the city's three major sports teams combined.
While economists challenge Spencer's assessment, they do agree the adult-entertainment industry is a major economic engine in Atlanta.
“There's no question the business is fairly substantial; whether it's grown or shrunk I don't know,†said Atlanta economics consultant Don Ratajczak, who analyzed the industry about a decade ago while he was director of Georgia State University's Economic Forecasting Center. “When I did my estimates†on that industry, “we had a vibrant convention business and people winked at the adult entertainment. Since then, there's been some crackdowns.â€
Despite its enormous presence, the industry prefers to keep a low profile. A number of clubs contacted for the story — The Cheetah Lounge, Gold Rush, Onyx, Foxy Lady, Doll House and Tattletales — declined to comment or never responded. Clubs like Magic City and Cheetah have built a following over the years, and while the money doesn't flow as freely thse days, patrons still make their way to the clubs. So do the women looking to dance.
‘Steady, easy money'
By day, they're dental hygienists, college students, office workers. At night, they dance under stage names such as Prada, Safari and Diamond. Most are reluctant to give their real names, worried about the stigma it could bring Sunday morning at church or losing the free baby-sitting grandma provides.
“You can use the industry one of two ways — as a stepping stone or tombstone,†said trade group rep Spencer. “Usually the industry is a pass-through so women can go on to bigger and better things.â€
At Magic City, Michael Barney oversees an operation that includes 150 dancers, 12 waitresses, four bartenders, three DJs, two busboys and one “house mother†who looks after dancers' needs, as well as a security contingent to protect his dancers. He views them as family. “I'm a brother or daddy to some, and an uncle to others,†Barney said. Its a family whose members are there for different reasons.
B.K., a 25-year-old dancer at Magic City, began relying more on the club income when her job as a physical therapist was cut to one day a week six months ago. “It's been steady. It's easy money,†she said. “There's a stereotype people have of dancers. That we're prostitutes because we take our clothes off. But I go to work and go right home.â€
Prada, a 21-year-old dancer at Magic City, said she plans to use the money she makes dancing to open an eyebrow and lash boutique. For Simone Neal, another Magic City dancer, club work is her ticket to becoming the first in her family to go to college. Essentially working as an independent contractor, she estimates she earns $50,000 after paying a nightly fee to the club and tips to DJs and the house mother.
“I love to dance,†said Neal, a petite 27-year-old who drives four hours from Florida to dance in Atlanta. “I thank God for everything I make.â€
Then there are those like Leilani Burkhead, who is working to get out of the business. For now, the single mother is working a lot of 18-hour days: from 7:45 a.m. to 6 p.m. at an orthodontist's office, then 8:30 p.m. to 3 a.m. at Magic City. She receives no child support, so both jobs help pay bills and her 9-year-old son's school tuition.
“I didn't want to dance, but you've got to do what you have to do,†she said.
On a recent afternoon, about a dozen women lined up at the city's permit office in northwest Atlanta. Most would not identify themselves beyond their club names. But they were all interested in one thing: making money.
Getting into the industry is tougher these days. Would-be dancers must have a job offer from a club before they can get a permit, which involves an extensive background check. The city prohibits anyone convicted of a felony or sex-related crime from dancing, police spokesman Otis Redmond said. The tougher scrutiny has shaved the new permits granted from a decade high of 3,448 in 2007 to 2,642 last year, police say.
Money flows less freely
On a recent Thursday at the Cheetah, a dimly lit club and restaurant known for its $50 steaks, a dozen or so lunchtime patrons were on hand, including two soldiers in fatigues scheduled to ship out to Iraq that afternoon. An Atlanta Hawks player at the bar drank in the applause when patrons cheered an ESPN replay of one of his shots on the giant flat-screens hovering overhead.
With the exception of “stack nights†— when the money rolls in with little effort, as when celebrities and high rollers show up — patrons aren't spending as much. Dancers who could once make $5,000 in a single evening say those nights are increasingly rare. The trickle-down effect hits the pockets of DJs and other support staff.
Among customers, bottles of champagne have been replaced by bottles of beer or a few drinks that are nursed all night. The city's slower convention business has dried up the pool of out-of-towners. As for more frequent visitors?
“The regulars aren't so regular,†said Simone Neal. “I have to watch my money more closely now. I can't spend like I used to.â€
To try to boost their appeal, some adult club dancers have embraced Facebook, Twitter and other social media, a move that appears to be paying off. The idea is that customers will stay connected and return to the club on the next business trip, Barney said. Some dancers now have international followings online.
Sometimes, though, Facebook can't beat face time. Dancers say they are spending more time schmoozing with patrons.
During lunchtime at the Cheetah, a striking blonde spent about 30 minutes hovering at one table, chatting with a businessman about her child's school projects before he opened his wallet for a private dance.
Nearby, a trio of lingerie-clad women swayed to rapper T-Pain's “I'm N Luv With A Stripper.†For $10, the women will display more than just their dancing skills. With a little more financial encouragement, they'll come to a table for conversation and a private dance.
One of the soldiers, intent on making his last few stateside hours memorable, went to the club's ATM and withdrew $200.
The strip club economy
Clubs: U.S.: 3,829
Metro Atlanta: 19
Economic impact: U.S. $15 billion
Metro Atlanta: $240 million-plus
Employment: U.S.: 500,000
Estimated annual earnings of Atlanta dancers: $20 million
Six largest U.S. markets for strip clubs: Dallas, Houston, Atlanta, Miami-Ft. Lauderdale, Orlando, Las Vegas, Los Angeles
Source: “The Erotic Economy†by Angelina Spencer, Association of Club Executives
--------------------
How we got the story
Police reporter Megan Matteucci noticed scores of women lined up at Atlanta Police headquarters every time she went to pick up reports. Detectives there told Matteucci the women were applying for a license to strip. Intrigued, Matteucci made a Freedom of Information Act request for numbers on adult- entertainment permits and talked to veteran business reporter Tammy Joyner, who thought the spike might be connected to the economic downturn. The reporters, along with photographer Bita Honarvar, visited and contacted a number of clubs. Joyner and Matteucci also talked to permit applicants, dancers, club owners, police officials, women's rights groups, economists and adult-entertainment industry officials.
http://www.ajc.com/business/hard-times-p…
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46 comments
A few years ago she would have had other options.
http://en.wikipedia.org/wiki/Post_hoc_er…
Yes he was and it started right when the demoncrats took control of Congress. Since most are ignorant of the workings of our Constitutional government, I'll let you in on a secret. A President can NOT spend a dime or make any law under normal conditions. CONGRESS does that. And even if the President vetoes their idiocy, they may override. Learn how the US government works before you make any more stupid comments!
I love true history.
This Angelina Spencer used to be in Cleveland and was married to the guy who owned the Circus in the Flats, which eventually became a Larry Flint's Hustler Club (now torm down for a development project). I've heard some people question her educational credentials, but regardless of that, obviously they've funded an economic impact study her trade group can use to advocate for/defend (??) the industry. Seems they could do a better job, given what's going on in Ohio and other places.
clinton signed a balanced budget sent to him by Congress. But if you think that he would have done the same had not the Republicans taken back the House for the first time in four decades, I have some nice land to sell you in South West Florida! :)
Ugh...and the Right-wing lies continue from this proven idiot...
Our most recent recession started in December 2007 & officially ended at the end of 2009. The Dems took back Congress in early 2007.
In this recession, the subprime mortgage crisis (caused by the pushing of ARMs by both the Bush Regime & Alan Greenspan as well as GOP-led deregulation of the financial system) led to the collapse of the U.S. housing bubble. Falling housing-related assets contributed to a global financial crisis. This crisis led to the failure or collapse of many of the U.S.'s largest financial institutions as well as another crisis in the automobile industry. The federal govt. responded with an unprecedented $700 billion bank bailout in late 2008 & a $787 billion fiscal stimulus package in early 2009 which helped, in part, to avert another global depression. As is often the case at the end of a recession, unemployment was still high and/or rising, since it is almost always a lagging economic indicator.
--------------------------------
"Clubber, are you saying Bill Clinton didn't balance the budget but that it was Newt Gingrich and the 104th Congress?"
I wouldn't be surprised if he was (even though he's also tried to deny the simple FACT that the Clinton budget surplus did exist in the first place!), since he's a proven Right-wing liar, but, unfortunately for him, that wouldn't be true either.
"WHY IS THE FEDERAL BUDGET BALANCED?"
"Soon after May surplus projections were released, the Majority Party issued a flurry of press releases making the claim that so-called `Balanced Budget' legislation and other bills enacted by Congress last year are responsible for this turnabout. Such claims are simply not credible. Just as it took years of fiscal imprudence in the 1980's and early 1990's to build up a $290 billion deficit by 1992, it took years of adhering to disciplined and responsible fiscal and monetary policies since 1992 to dig out of this deficit position."
"Conspicuously absent from CBO's analysis of reasons for the 1998 surplus is the fiscal effect of laws enacted by Republican congresses between 1995 and the present date. The reason for this is that the CBO actually totes up legislation enacted in the period that Republican have been in control of Congress as raising the deficit by more than it cut in 1998. The sum total of laws passed by the 104th and 105th Republican congresses will cost the Treasury roughly $11,000,000,000 more in FY 1998 than they saved."
"Despite claims to the contrary, CBO data show that the combined fiscal effect of the laws enacted by the 104th and 105th Republican Congresses is to add $11,000,000,000 more to the deficit than it cut in Fiscal Year 1998.
Clearly the CBO numbers confirm that the major credit for creating the 1998 surplus must go to actions of the 103rd Democratic Congress, which not only produced real net savings of $141 billion, but created the conditions necessary to adopt pro-growth monetary policies that have been very successful. The centerpiece of this effort, the deficit reduction bill passed in 1993, was described as follows by Federal Reserve Chairman Greenspan: `There's no question that the impact of bringing the deficit down [through the 1993 budget bill] set in place a series of events--a virtuous cycle, if I may put it that way--which has led us to where we are.'"
http://thomas.loc.gov/cgi-bin/cpquery/?&…
Of course, we've been over & over & over these FACTS time & again by now, but clubber will never learn to stop making silly, uninformed, drive-by comments in a futile attempt to "drop some knowledge" on the so-called "ignorant". Physician heal thyself...
AHA! And the Right-wing liar spins on his heels & finally *admits* that the federal budget was, in fact, balanced under Bill Clinton! How sweet it is...lol...pwned again old man...just like always...LMAO!
--------------------------------------------
"Balanced budgets are based on projections, not reality"
...in your own warped mind that is...lol...
The U.S. has basically been operating with a budget deficit for the past 40 years or so. No party has had a balanced budget outside of projections.
No, they really didn't, and there's been ZERO objective evidence of that at all.
"The U.S. has basically been operating with a budget deficit for the past 40 years or so. No party has had a balanced budget outside of projections."
Nonsense. The last two times that the U.S. federal debt has been cut as a percentage of GDP (which is a favorite measure of the GOP BTW) was under a Democratic President (Carter & Clinton). The last two times that the federal budget was balanced was under a Democratic President (Clinton & LBJ). The FACTS of the matter offer a much different story than you are trying to spin, period.
$152.3B from Social Security
$30.9B from Civil Service Retirement Fund
$18.5B from Federal Supplementary Medical insurance Trust Fund
$15.0B from Federal Hospital Insurance Trust Fund
$9.0B from the Federal Unemployment Trust Fund
$8.2B from Military Retirement Fund
$3.8B from Transportation Trust Funds
$1.8B from Employee Life Insurance & Retirement fund
$7.0B from others
Total borrowed from off budget funds $246.5B, meaning that his $230B surplus is actually a $16.5B deficit.
($246.5B borrowed - $230B claimed surplus = $16.5B actual deficit).
The last time the federal government ran a true suplus was 1969, the total surplus was $3.2B and before that was $1960, $.3 B
Pasted from WikiAnswers, and endorsed by hundreds of economists of both party affiliations.
Upset at the concept of a "unified budget"? Then blame LBJ. Other than that, your argument is meaningless. The federal govt. took in more money than it was spending by the end of Clinton's term, period.
"The last time the federal government ran a true suplus was 1969"
...under a budget issued by LBJ.
Thanx for proving my points!
And growth during the early Clinton years was a carry over from the prior Bush years/policies. Barring catastrophe, the economy is like a large ocean tanker, it does not turn on a dime.
And under LBJ, we did not have nearly the liberal wasteful spending the Democrats impose now.
From the author of "the best reviewed book on the bailouts":
http://www.ritholtz.com/blog/2010/02/cau…
Causation Analysis: What “But Fors†Caused the Crisis?
By Barry Ritholtz - February 3rd, 2010, 7:15AM
They’re back!
The usual crowd of ne’er-do-wells are seeking to divert attention from their own roles in the crisis, and shift blame elsewhere. These people make up a big chunk of the Its All Fannie’s Fault! crew. By muddying the waters, they hope to avoid retribution for their own roles in what occurred. As the mid-term election approaches, we should expect to hear more from this crowd.
The reality of crisis causation is far more complex and nuanced. Looking at the many factors that independently contributed to the collapse, and prioritizing them by degree of causation is not easy. A sophisticated approach is required to separate the prime and secondary factors.
Rather, than just repeat my list of factors what were the causal factors, today I want to try a different approach. Let’s do a “Causation Analysis†of the biggest factors to see if we can determine not just the various elements that contributed to the credit collapse, but which factors actually caused it to occur and what merely exacerbated the collapse, making it worse.
Understand that this is a theoretical discussion based on counter-factuals — what is likely to have occurred if various elements leading up to the crisis were different. We are trying to discern the differences between primary and secondary factors, separating the causes from the exacerbators.
Whenever someone asserts as a cause an event or force relative to a particular outcome, you should always ask: “Is this a “BUT FOR cause of that outcome?†In terms of a specific result or outcome, “But for†this factor, how would the outcome have changed? Would the result have been the same or different?
My top 3 list of crisis “BUT FORs†are:
1) Ultra low rates;
2) Unregulated, non bank, subprime lenders;
3) Ratings agencies slapping AAA on junk paper.
Why are these “But Fors?†But for these things occurring, the crisis would not have happened:
-If it wasn’t for ultra low rates, the housing boom would likely have been much more modest; further, bond managers would not have been scrambling for yield, and searching for alternative products to low yielding Treasuries;
-If it wasn’t for the sub-prime lenders, the credit bubble would not have inflated; further, millions of unqualified borrowers would not have been able to purchase homes they could not afford;
-If it wasn’t for the ratings agency fraud, the enormous market for this high yielding junk paper — mislabeled as AAA — would not have existed; further, the primary purchasers were firms that were only permitted to buy investment grade bonds. No A+ or better rating, no sale.
Hence, these factors are huge causative elements — BUT FOR them, there is no boom and bust, no crisis and collapse. Bond managers could not have owned all of these securitized sub-prime mortgages; the credit default swap market would have been much smaller, perhaps 1/10 its size; Sovereign wealth funds around the world could not have purchased all this bad paper; Iceland does not collapse. That is these are the big 3 — why I label them the prime cause of the crisis.
There is a secondary list of things that might or might not be prime causal factors; at the very least, they made the crisis significantly worse:
1) The Commodity Futures Modernization Act of 2000
2) Net Cap Rule Change of 2004 (aka Bear Stearns exemption)
3) Repeal of Glass Steagall (1998)
Lets look at each of these:
1) The Commodity Futures Modernization Act of 2000 (CFMA) exempted derivatives from all oversight and regulation. It allowed derivatives to be traded in the shadows, unreserved for, off exchanges, no disclosures of counter parties, no capital requirements. Did that cause the crisis? I do not think it is the primary cause, but I am not sure.
-It certainly allowed AIG FP to destroy the parent company;
-Did it make things much worse? Definitely!
-Is it a “But For� Would the collapse have happened without this? I believe its inconclusive, and could easily go either way.
We can easily accept that the collapse of AIG was a major cause of the crisis, but if you were to argue that it didn’t cause it, but only served to make mattes much worse, I’m not sure I really disagree with you.
2) The 2004 Net Cap rule exemption that allowed banks to go from 12 to 1 leverage to 25, 35 even 40 to 1 leverage — again, I am unsure if it is a direct causation of the credit freeze. The basic argument pro is that BSC and LEH might not have been in as dire straits BUT FOR this leverage, and each might have survived, this making the crisis more manageable. No doubt that the increased leverage certainly made the damages much greater.
Is it a BUT FOR? I have a hard time deciding, as it can go either way . . .
3) The repeal of Glass Steagall allowed banks to get much bigger than they would have — which made their losses that much bigger; Another maybe/maybe not on whether it is a BUT FOR.
Citi, Bank of America, and the rest of the TARP recipients would have losses — but for Glass Steagall repeal, they most likely would have been much smaller.
~~~
Here’s the kicker — when I do the same BUT FOR analysis on Fannie/Freddie, It get different results.
-Were they an accounting fraud run by weasels? Yes.
-Did they securitze mortgages? Yes, for decades.
-What about securitizing sub-prime mortgages? Primarily after late 2005. By then, the die had been cast.
So are Fannie & Freddie a “BUT FOR†?
I don’t see how. Wall Street had been securitizing most of the sub-prime mortgages for years without the GSEs — Fannie and Freddie jumped in very late because they were losing market share. Their timing was perfect they started doing nonconforming mortgages just as the market peaked.
And if Fannie & Freddie didn’t exist, mortgage securitization would have happened anyway, the way it did in areas where their were no GSEs — securitized credit card receivables, auto loans, small biz loans, etc. took place without GSEs. I assume there would likely have been a private sector version for conforming loans, the way there was a private sector securitizing response to the demand for non-conforming (sub-prime) loans.
That’s how I end up saying they were not a prime cause of the crisis.
Of course, they certainly made things worse — but so did a lot of other entities. But the key question for the blame Fannie/Freddie crowd is “Would the crisis has happened without them?†The answer is yes — FRE/FNM were not BUT FORs, because all of this was happening anyway, prior to their participation in subprimes late 2005.
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And if you liked that, here's what the author made:
Bookonomics (or, why writers barely make min. wage)
By Barry Ritholtz - February 6th, 2010, 12:30PM
One of the questions I get all the time is about the economics of the book: How much did it sell, what was your advance, what did it cost to produce. I was thinking about this as I prepare for April 15th, so I did a quick run down of costs.
Here is the skinny: The initial advance for Bailout Nation from McGraw Hill was $50k. You get half upon signing, and the other half when there is an “accepted manuscript†by the publisher.
Recall that there was a small problem with McGraw Hill over my treatment of their S&P division and the rest of the criminally corrupt rating agencies (gee, why did they object to that?). My publishing contract with them gave me final edit, so when they balked at what I had written, I exercised my right to buy the back my manuscript. Once I signed with another publisher (Wiley), I was obligated to return the $25k (which I of course did).
The Wiley contract was a $100k advance, plus back end royalties. The old joke is your agent should insure you never see royalties (i.e., get it all up front). I think I need to sell another 40 -50,000 copies before any royalties come in.
Now, $100k sounds like a lot of money, but in Bookanomics terms, its not much at all. There are all sorts of costs, and they come right off of the top. I ended up with about a fifth of that.
20%? How does THAT happen? Well, right off the bat the agent takes 15%. (That’s gross; my next book deal will be net). That takes us down to $85k. I had to return $25k to McGraw Hill, bringing the net to $60k.
Aaron, who was much more of a collaborator than an editor, was paid $15k. I paid my team of researchers over $10k for their work. (That brings us down to $35k).
I paid for all the cartoons in the book ($3,000) The artwork for the cover (under $1,000), and a few other small incidentals (also ~$1,000). That doesn’t include all of the blog readers who contributed research, artwork, ideas, notes, editing, reading drafts — all for free.
The final tally:
Revenue:
Advance $100,000
Costs:
Return prior advance $25,000
Agent $15,000
Editor $15,000
Research $10,000
Artwork $4,000
Other $1,000
———————
Pretax net: $30k
After tax: ~$20k
Pretty astonishing when you see it in black and white.
Now consider this: Over the course of the year, I spent nights, weekends, vacations, and towards the final deadlines, days in the office working on this. My best estimate is I put in about 20-30 hours a week for 15 months (not counting promotional tour, which adds another few 100 hours). Let’s ballpark it and say ~2,000 hours.
So, my pay scale for writing what has been called the best reviewed book on the bailouts is a little better than the current minimum wage.
And a few other writers tell me how lucky I am, that very often, its a break even proposition or worse.
Of course, there are other benefits — People who otherwise wouldn’t have thought twice about you (Him? He’s an idiot!) suddenly start to take you seriously. You become “the guy who wrote the book.†Your speaking fees double, your regular business benefits. Other publishers start pitching you book ideas. In general, your personal brand becomes more valuable. My friend (and book agent) Lloyd Jassin says you write a book to “Build your Brand.†And their is much truth to that.
There are many intangible benefits as well (book groupies!). In my case, it was cathartic, as it was a productive outlet for all the righteous fury that had built up watching the whole disaster unfold in slow-motion. It helped to “quiet down the voices in my heads.â€
But Bookonomics means that making a living writing books is something very few people seem to be able to do . . .
>
UPDATE: February 6, 2010, 2:37 pm
As several readers observed, the 1st advance/return was a wash (+$25k -$25k = 0). They are correct.
But as noted above, I am thinking in terms of this years taxes — since I already paid tax on the $25k in 2008, the $25k that went back in 2009 comes off the top of the income statement for this April 15th for 2009.
Ignoring the different years tax consequences for a moment, the total income for the book increases if you offset the $25. That makes the gross $125k, leaving me $55k after costs, with a net after NYS and federal taxes a gain of about ~$33k, which is better than a sharp stick in the eye.
This raises my pay scale from under $10 to to $16 per hour.
http://www.ritholtz.com/blog/2010/02/boo…
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...in your own warped mind that is...lol...
"And growth during the early Clinton years was a carry over from the prior Bush years/policies."
Growth?? What growth?? We had just barely come out of a recession when Clinton took over!
"And under LBJ, we did not have nearly the liberal wasteful spending the Democrats impose now."
LOL...yea, because we have a HUGE federal debt & deficit (mostly accumulated when GOPers were in the White House) because of social spending...sure, sure...
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Ritholtz gives a pretty fair description of "how we got here", but I disagree just a tad on his Fannie/Freddie analysis. Subprime lending is basically defined as a loan that does not meet Fannie Mae or Freddie Mac underwriting guidelines in the first place. Also, it's well known by now that the super-vast majority of these kind of loans came from the private sector:
"Private sector loans, not Fannie or Freddie, triggered crisis"
http://www.mcclatchydc.com/251/story/538…
Other than that minor tidbit, he gives a very fair analysis indeed...one, of course, that clubber should actually try & *read* before he apparently "bows" to it...lol...
GK, Thanks! If you want a 'tell', look no further than the senate vote late last fall (November or December) to extend unemployment benefits at a cost of $5 billion. The bill was for $45 billion. Where did $33 billion go? The home builders. What was the senate vote? 98-0. NOT ONE VOTE AGAINST. My guess is everyone got a slice; either to use for a re-election campaign or golden parachute.
If you'd like to read "Bailout Nation", I'm sure your local library can get you a copy for free, or this link has new paperback editions available for $11.53: http://www.amazon.com/Bailout-Nation-Cor…
Mr. G.: I unfortunately do not have time to look into your criticism. Maybe sometime in the future.
Steve, did "The Germans" really bomb Pearl Harbor?!
Hey, that's what Bluto said...lol...
YAWN!
"D-Day: War's over, man. Wormer dropped the big one.
Bluto: Over? Did you say 'over'? Nothing is over until we decide it is! Was it over when the Germans bombed Pearl Harbor? Hell no!
Otter: Germans?
Boon: Forget it, he's rolling.
Bluto: And it ain't over now. 'Cause when the goin' gets tough...
[thinks hard]
Bluto: the tough get goin'! Who's with me? Let's go!"
Hey, that's what Bluto said...lol...""
You are so idiotic, you are an embarrassment to idiots!
Of course it did...you even quoted CT speaking to steve above, moron.
As is usually the case with you (and you'll *never* learn) clubber, you haven't brought ANY "facts" to the table in the first place!
""MisterGuy Send Private Message to MisterGuy says:
[ignore]
Posted: 02/11/10
"Steve, did "The Germans" really bomb Pearl Harbor?!"
Hey, that's what Bluto said...lol...""
OK idiot, try to explain that away when EVERYONE can plainly see I quoted YOU!!!
NOW, I really have to see what idiotic excuse you come up with this time. This should really be good since there is no wiggle room for you!
...when I was quoting CT, moron. You're SO very desperate clubber...it's really a shame to see you spinning out of control, but you've earned it for sure!
As above, I thought not!
...which was whether or not CT was actually referring to "Animal House", which he was, moron...but keep spinning out of control anyways...it's fun to watch!
From the idiots keyboard...
Steve, did "The Germans" really bomb Pearl Harbor?!"
Hey, that's what Bluto said...lol...
DAMN, sure looks like you typed "Hey, that's what Bluto said...lol... ",
but I must be reading wrong according to the village idiot!
Maybe someone else can point out how I read that wrong.