Wealth to Flood Protection Ratios (UPDATED); Cost-benefit of Underground, Suburban Electricity Distribution Systems

[New York] has the worst “wealth to flood protection” ratio in the world. Studies by the OECD [Organization for Economic Cooperation and Development] analyzed 136 coastal cities around the world with at least 1 million inhabitants.  .  .  . Greater New York was #2 in terms of assets exposed to coastal flooding, only behind Miami. And more ominously, Amsterdam and Rotterdam are protected to a flood standard of the most severe storm every 10,000 years; Tokyo, Shanghai and London are protected to a 1,000 year standard; Osaka to a 300 year standard; and New York only to a standard of 100 years. If the UK is any example, it takes time to change: the Thames Barrier was 30 years in the making.

While electricity outages in metropolitan areas are mostly a function of coastal flooding, millions of suburban and rural customers are without power due to downed electrical wires. This has always struck me as a 19th-century kind of problem. These instances would be dramatically reduced if power lines and transformers were buried underground. However, the costs of underground electricity distribution systems can be 4-6 times higher than overhead wires. Can these costs be justified by the associated benefits: reduced repair costs after storms, fewer car accidents involving utility poles, reduced tree trimming costs and lower electricity line losses? Not really; in 2005, Virginia estimated the benefits of burying power lines and transformers as being only 40% of the $10 billion cost. Only if you are willing to assume large increases in property values can the numbers be made to work. Most US states that have looked at this have come to similar conclusions.

-from the October 31, 2012 issue of Eye on the Market, published by JP Morgan and written by Michael Cembalest.

UPDATE:  Barrier Plan under discussion for NY Harbor.  Russia's St. Petersburg has a flood protection barrier.

"Yet the Mills of God Grind Slowly, yet . . ."

The federal mortgage task force that was formed in January by the Justice Department filed its first complaint against a big bank on Monday, citing a broad pattern of misconduct in the packaging and sale of mortgage securities during the housing boom. 

*   *   *

The complaint contends that Bear Stearns [now part of JP Morgan] and its lending unit, EMC Mortgage, defrauded investors who purchased mortgage securities packaged by the companies from 2005 through 2007. 

The firms made material misrepresentations about the quality of the loans in the securities, the lawsuit said, and ignored evidence of broad defects among the loans that they pooled and sold to investors.

Moreover, when Bear Stearns identified problematic loans that it had agreed to purchase from a lender, it was required to make the originator buy them back. But Bear Stearns demanded cash payments from the lenders and kept the money, rather than passing it on to investors, the suit contends.

-from an article in today's NYT entitled "JPMorgan Sued Over Mortgage Securities Pools."

(The quote in the title is from Longfellow's "Retribution')

More Potentially Bad Stuff on JP Morgan

Hiding trading losses?

JPMorgan Knowingly Sold Investors Inferior Funds, Report Says

This report strikes close to home, as JPMorgan is a major player in the Miami market and, with many other financial institutions, actively solicits our partners for client referrals and for appointments as a corporate trustee in the estate planning documents we prepare for our clients.

Most major trust companies and banks with trust divisions have their own "captive" mutual funds.  Recently, a client appointed Fiduciary Trust Company as its investment advisor.  The people at the local office are top people and we like them.  FTC is a subsidiary of the Franklin Templeton Group.  They bent over backwards to tell us that FTC will invest clients funds in the Franklin Templeton Group family only if they are equal or superior in all respects to other non-Franklin Templeton funds.  The client will be watching that carefully.  Obviously, there is a huge conflict of interest here.  Frankly, if I were running FTC I would not as a matter of policy invest in Franklin Templeton mutual funds.  This practice of banks and trust companies is so endemic to that industry that it seems "normal" to most people.

Although the client chose FTC, it did not put all its funds there.  It divided its portfolio bewteen FTC and an "indexer," an independent investment company.  This independent company has no mutual funds of its own.  Instead it invests in low-cost index funds, and insists that it gets no kick-back from those funds for investing in them.  Its fees are based on the overall size of the portfolio.  It will be interesting for the client (and us) to see how the two managers compare in performance.