Disqus - Latest Comments for seancarmody

Re: Why Central Banks Should Offer Bank Accounts to Everyone

seancarmody — Sun, 30 Apr 2017 06:52:06 -0000

Thanks for the reply. As you say, I have dug into the nuts and bolts here. In doing so I don't intend to suggest that there are not alternative approaches to many of the operational processes I've touched on. Also, I am not particularly concerned about the costs of these processes: after all, these costs are covered today by fees and margins associated with existing banking products, so they could equally be covered by fees levied by different providers, including the RBA. Rather the reason I raise all of these details is that the impression I took from reading the article was that you were arguing that, as the RBA is currently a wholesaler of banking services, in this internet enabled age it would be relatively straightforward for the RBA to move beyond wholesaling to retailing. While I don't think this is impossible, I do think it would be an enormously challenging and complex transition which would require significant regulatory as well as operational changes. While you have the view that at least some of this regulation is unnecessary (anti-money laundering) and perhaps somewhat paternalistic (responsible lending), it is the regulation of the day and changing it is no mean feat. Likewise establishing new providers and processes for interacting with retail customers in financial products is a very significant undertaking. It's not that it can't be done, but the enormity of the challenge in this proposal should not be underestimated.

Finally, I know you said you don't want to know what the LPI is, but I can't help telling you: it's Land & Property Information - formerly known as the Land Titles Office. It has a very important role in any mortgage lending, so it's actually worth knowing what it is, but apologies for assuming you were familiar with the shorthand.

Re: Why Central Banks Should Offer Bank Accounts to Everyone

seancarmody — Tue, 18 Apr 2017 06:51:39 -0000

Thanks Nicholas,

A few thoughts in response:

1. I think this is a bit more complicated than you suggest. First it doesn't really make sense to talk about an unencumbered mortgage: it is the property that is encumbered and the mortgage is the means of encumbrance. For the RBA to have a secured loan, it would have to be the mortgagee rather than EzyBank (and, as an aside, in NSW taking a mortgage requires a lawyer to act for the RBA, but not necessarily for the borrower http://rgdirections.lpi.nsw.... It would be possible for EzyBank to initially take a mortgage over the property and then transfer it to the RBA, although then there would have to be a settlement at that when taking the mortgage which either means that EzyBank would have to fund that for an interim period of time or, if the RBA provided these fund, there would be an initial (short) period where the RBA was lending unsecured. So, that probably means that the RBA would have to participate in the initial settlement. Second, I'm not sure that under current legislation that it would be possible for the RBA to provide the loan without undertaking some due diligence to know its customer (the borrower). Under current anti-money laundering (AML) legislation, if the RBA were to become involved in retail banking it would be providing a "designated service" and would be responsible for maintaining an AML program, including adequate customer identification. While the legislation could be amended to carve the RBA out of these obligations, if that happened and it turned out that an RBA account was used for money laundering, it would not be a good look! http://www.austrac.gov.au/d...

2. Whether or not the RBA were to become involved in retail banking, modernising the activities of the LPI would be a good step forward in this internet world, so I think we are agreed here. Without this sort of modification, I do think that, as per point 1, even the origination of the loans would involve significant activity for which the RBA is currently not resourced.

3. Again agreed here (and I'll read the more detailed paper too). It's worth noting that maintaining an AML program is a significant undertaking for banks today, which maintain dedicated teams to run the programs. Again, without an AUSTRAC-sanctioned third party service providing much of this program, this again would involve going significantly beyond current RBA capability and infrastructure. http://www.austrac.gov.au/c...

4. The reason I ask is that, as any bank or telco will attest, there is a lot of work involved in providing any service to a large retail customer base. Even with a sophisticated automated system for maintaining customer accounts, statements, etc (which the RBA does not currently have - the operation of wholesale exchange settlement accounts is a very different undertaking), it is still necessary to have staff in call centres and the like to respond to customer queries (email, phone, etc). This can be outsourced (for an ongoing fee), of course, but then that involves ongoing due diligence by the RBA on the outsourced provided and, most likely, maintaining what is known as a "stand-by servicer" to step in should the primary servicer fail. It would also be possible to leave this to each intermediary (such as EzyBank to continue that hypothetical), but the ongoing due diligence would be even more complex and would make customer transferability more complicated as fees would have to be moved from one provider to another (and they may not all charge the same rates - unless the RBA insisted on a flat rate, which would make sense).

5. I think you are underestimating how important managing collections is in ensuring the performance of lending portfolios, even where initial loan to value ratios are low. Currently in Australia there is a market for buying defaulted (i.e. more than 3 months in arrears) debt, but typically this market is for credit cards, personal loans and auto loans. I am not aware of any debt sales market for home loans, but I'm sure there would be takers. This would involve selling the debt at a price less than 100 cents in the dollar. Given the good security, this price would be fairly high - probably around 90c in the dollar - but it would certainly not be 100 cents in the dollar. This would mean that even by focusing on very low LVR mortgages, the RBA could easily find itself losing about as much on this portfolio as banks lose on theirs (typical default rates at the moment for Aussie banks are around 0.5% or so, with lower risk portfolios the RBA's portfolio may be closer to 0.2% - even low LVR borrowers lose their jobs, get sick, etc - and loss rates of around 10% in a debt sale would result in 0.02% in losses which is about what the large banks lose). Alternatively, instead of a sale, there could be some kind of outsourced collections arrangement for a fee. This does not exist today in Australia as far as I know, but to get into this business the fee would have to be quite high and, as it would not really be possible to charge the borrower this fee, it would also result in losses for the RBA. Overall, the importance of collections management should not be underestimated!

6. I thought this was the intent - the relevance of the question goes back to the importance of setting up the servicing arrangements cleanly, as per 4.

7. You may not be aware that a valuation by a valuer has not been standard for a long time. Particularly for low LVRs, there is extensive reliance on "e-valuations" based on models developed by the likes of Core Logic. These models have an inherent uncertainty so, in setting the maximum of 65%, it's important to be aware that some of the loans originated make actually have higher LVRs. It would be possible to insist on a full valuation, but this would add to costs and time involved.

8. What I was referring to here is that there is currently significant investment under way by numerous banks at the direction of the RBA to develop the "New Payments Platform" http://www.apca.com.au/abou.... This will facilitate near real-time transfers between banks using aliases (i.e. I can pay you only knowing your mobile number or email address not your BSB and account number). It will also provide richer metadata than the current "pay anyone" transfer messages can provide. I don't think that the RBA would want to have an inferior offering for payments between accounts, but that would mean that the RBA would have to invest in the sort of infrastructure that the banks themselves are currently building. Even if the RBA was content with something more basic, to work online there would still be development required: it's not infrastructure that the RBA has today.

Overall, the thrust of these points is that your proposition is that a move of the RBA from "wholesaling" to "retailing" could be done fairly easily using existing infrastructure. I think you are significantly underestimating the complexity of the idea in practice and the extent of new infrastructure that would be required.

Re: Why Central Banks Should Offer Bank Accounts to Everyone

seancarmody — Mon, 17 Apr 2017 04:32:45 -0000

I have a few questions:
1. Using an API approach, is there any verification of the end user? For example, if a putative EzyBanking company provided me with a 65% LVR home loan, would the RBA verify my identify or leave that to EzyBanking?
2. Presumably the RBA would take a mortgage over properties provided as security. Is there a proposal to do this in a way that bypasses lawyers (maybe the LPI can provide an API as well?)
3. Linked to 1 and 2 are there additional utilities (potentially government provided) that would be ideal (perhaps even necessary) to make the proposal work - for example a central identity verification agency (beefing up DVS), enhancing the online management of land title, valuation, etc?
4. Would the parties using the RBA API that originate a loan be responsible for servicing the debt (e.g. providing statements, etc) or would that be part of the RBA's API offering?
5. Who would be responsible for chasing up borrowers that fall behind in their payments?
6. Would customers be free to transfer their relationships between providers, moving the same deposit or loan account between providers?
7. How would the valuation be performed to ensure that the LVRs were within the maximum level?
8. Would the RBA be responsible for managing transfers at the back-end between accounts?
Sean.

Re: Why I use ggplot2 – Variance Explained

seancarmody — Fri, 19 Feb 2016 03:57:08 -0000

The issue I have is that, while I agree that having two axes with different scales is a bad idea, having two with the same scale is not (see my example above). But the restriction in ggplot2 is actually more severe than that: it's also impossible to have a single axis on the right hand side. Try replicating this base plot figure in ggplot2:

> plot(EuStockMarkets[,1], ylab="", yaxt="n")
> Axis(side=4)

Re: Why I use ggplot2 – Variance Explained

seancarmody — Tue, 16 Feb 2016 05:22:47 -0000

Although I am not a fan of secondary axes, I would still really like to be able to place the (primary) axis on the right hand side of a chart. For timeseries data, readers are often focused on the most recent data and so it is useful to be able to read the values more readily from a right hand side axis.

Here's an example using base R:

> plot(EuStockMarkets[,1], ylab="DAX")
> Axis(side=4)

I am yet to be able to work out how to do this in ggplot2 without going in and forking the code.

Re: First-home buyers face a difficult future

seancarmody — Sat, 05 Apr 2014 17:43:34 -0000

Are all of the statistics about investor loans taken from one broker (AFG)? If so, that would seem to be a narrow sample. The article says investors make up 40% of all mortgages, but the latest quarterly figures from APRA (December 2013, http://www.apra.gov.au/adi/... put the figure at 33%, which is the same proportion as a year earlier.

Re: mages' blog: Say it in R with "by", "apply" and friends

seancarmody — Mon, 30 Jan 2012 04:46:34 -0000

Admittedly not quite as neat as the aggregate example, here's another ddply version:

ddply(iris, "Species", colwise(mean))

Re: mages' blog: Say it in R with "by", "apply" and friends

seancarmody — Sun, 29 Jan 2012 05:08:41 -0000

Great overview. I would suggest one minor simplification of the ddply example:

library(plyr)
ddply(iris, "Species", function(x) colMeans(subset(x, select= -Species)))

Re: finish this…

seancarmody — Sun, 14 Nov 2010 15:45:31 -0000

Missing

Re: International Kindle Buyers Surprised With Refund

seancarmody — Sat, 24 Oct 2009 19:05:09 -0000

A good sign that the refund was purely a response the Nook is that only buyers in the US got the discount. Those of us outside the US still have to pay US$279...at least until the Nook goes international. Mind you it took the Kindle two years, so I am not holding my breath.

Re: Psychologist: Wikipedians are close-minded

seancarmody — Tue, 30 Jun 2009 19:45:48 -0000

Even for the obvious, it's nice to have empirical evidence!

Re: Quick Tip - Get Rid of Unwanted Text Field AutoFill Items

seancarmody — Sun, 28 Dec 2008 23:36:58 -0000

Excellent tip, I've often wondered about how to do that!

Re: http://happybirthdayleo.tumblr.com/post/57490438

seancarmody — Sun, 02 Nov 2008 03:48:12 -0000

Happy birthday! Of course, only the best people have their birthday on 29th November (big four-oh for me this year!).

Re: Bill Gates and Seinfield must have a higher IQ than me.

seancarmody — Sat, 06 Sep 2008 09:13:37 -0000

Nice strategy: make PCs edible and people have to buy more of them. Mind you, it probably means they'd have to cost less than $5 each.

Re: No Objects w/o Authors: There’s nothing you can do that can’t be done.

seancarmody — Sat, 06 Sep 2008 01:57:23 -0000

Excellent post. When using email in this way, as I do, it really shows up the fact that not all email clients are created equal. While my corporate email on Outlook has a limit of 250MB, searching is can be a very slow process (don't get me started on the hopeless tagging, sorry categories, in Outlook), while I have filled gigabytes on my personal gmail and search there is lightning fast.

Re: Why Do I See So Many Open Source Advocates Using Twitter?

seancarmody — Thu, 04 Sep 2008 01:03:57 -0000

Jesse: I've also taken the approach of joining a number of different communities, although I suspect I've gone too far. At last count I am on twitter, identi.ca, TWiT Army, kwippy, blip.fm, Brightkite, pownce and plurk. I need to cut back!

Re: Why Do I See So Many Open Source Advocates Using Twitter?

seancarmody — Wed, 03 Sep 2008 23:55:54 -0000

Jesse: The quick answer to your question about why people are using twitter rather than identi.ca is: first mover advantage. Twitter has been operating for almost two years, while identi.ca only launched a few months ago. For microblogging, the network effect is critical: the more people who use the service, the more valuable it becomes for the users.

Having said that, I agree with you about the importance of an open approach for Microblogging. I would actually distinguish two levels of open-ness here: the protocol and the software. Identi.ca uses both an open protocol (OpenMicroBlogging) and open software (Laconica) that implements that protocol. Although having open source software is great for the sorts of tweaking you describe, I think that the open-ness of the protocol is even more important. As I argued in a recent post of my own, while services like twitter remain closed, they are effectively walled gardens, limiting communication across different networks and theyby limiting the potential of Microblogging as a communication medium.

Having said all that, I still use twitter myself (because of the network effect), but I am conscious of the fact that this leaves me exposed to them pulling the plug on the service (as they recently did for non-US SMS) if it doesn't start to pay their VC backers.

Re: John McCain is Going to Make Me Care

seancarmody — Sat, 30 Aug 2008 04:24:45 -0000

Capitalism is based on private ownership of the means of production rather than more general freedom. It's certainly a common view that capitalism tends to push society in a freer direction, and it will be interesting to watch China in this respect. They are heading step-by-step to a capitalist market economy but, for now, are not moving towards broader democratic freedoms. It was this example I had in mind when I said that China is more a gift of democracy than capitalism. My own view is that while capitalism and democracy work best together, one doesn't necessarily always lead to the other.

Still, I am getting somewhat off topic here, apologies!

Re: John McCain is Going to Make Me Care

seancarmody — Fri, 29 Aug 2008 21:23:40 -0000

I actually don't mind having compulsory voting. In any society there are some limits to the freedom to do whatever you like. For example, in many free, democratic countries you are not allowed to drive a car down a public street without a licence, you must surrender some of your earnings to the Government in the form of tax, you are not allowed to play music at any volume in the middle of the night in your own home and, in some cases, you are not allowed to smoke in public buildings. All of these restrictions on personal freedoms are part of the trade-off of living as part of a society. I'd see compulsory voting as sitting in the same sort of category rather than being a significant restriction on free will. Apart from anything else, while you have to turn up and submit a ballot paper, you are free not to actual register a valid vote on it.

One of the advantages of compulsory voting is that there is no role for "get out the vote" campaigns which tend to favour candidates with large fund-raising warchests.

One other thing: surely free will would be more a gift of democracy rather than capitalism?

Re: John McCain is Going to Make Me Care

seancarmody — Fri, 29 Aug 2008 18:36:29 -0000

Some interesting thoughts there micah. All part of the rich tapestry of the US elections that I am watching from afar. I'd be interested in your thoughts about our voting system here in Australia: it's compulsory to vote and you can be fined if you don't. Of course that doesn't mean you have to vote for one of the candidates on offer if you think that none of them are worthwhile. It's a secret ballot, so you can simply spoil you ballot paper (don't tick anyone, tick everyone, write nonsense on it, etc). Oh, and I should mentioned that we only have simple paper ballots that you write on...no hanging chads!

Re: Chin-dropping photo (Scripting News)

seancarmody — Fri, 25 Jul 2008 08:46:33 -0000

The photo looks somewhat touched up to me.

Re: louisgray.com: Twitter Finding New and More Creative Ways to Fail

seancarmody — Thu, 24 Jul 2008 07:20:23 -0000

I agree that this issue was different in its significance to the fail whale. Twitter is not (yet) an essential service, so unavailability (even regularly) is annoying but not disastrous. The problem here with losing followers is that those affected most were those who had invested the most time in twitter. The sense that much of the effort taken to find and follow (and be followed) was very distressing to many people. No surprise that identi.ca and others experienced yet another numbers boost!