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Richard Green:

Is housing the best way for low-income people to build wealth?, by Richard Green:
I was thrilled to be invited to the Future of Housing Finance conference held at
the Treasury Department and co-sponsored by HUD this week. It was particularly
nice to be seated next to Self-Help's Martin Eakes, whom I have admired for some
time. Like Elizabeth Warren, Eakes long ago had insights into sub-prime lending
that I wish more of us had taken seriously.

At the conference, Martin worried about a conversation that emphasized the
need for robust underwriting standards for the mortgage market going forward.
The three most important standards are loan-to-value ratio, payment-to-income
ratio, and credit history. As Martin pointed out, African-Americans have less
wealth available for down-payment than others (even after controlling for
income), and have lower FICO scores than others, and therefore will be denied
access to credit at a greater rate than others if underwriting standards are
tough and uniform. Because much of the reason that African-Americans lack wealth
is because they have been systematically stripped of wealth for many
generations, policies that reduce access to credit disproportionately for
African-Americans violate fairness.

The events of the past six or seven years show that loose underwriting does
nobody any favors, either. Foreclosures are terrible things for the families who
experience them and for the communities that have large numbers of them. The
whole point of underwriting is to prevent default and foreclosure, and the
unpleasant fact is that downpayment and FICO are predictors of likelihood of
default.

In the era where almost all mortgages were self-amortizing, housing allowed
families to build wealth because mortgages were a form of forced saving. Those
who got a 20 year mortgage in 1960 owned their house free and clear in 1980;
households gained wealth not because housing was such a great investment, but
because they built equity, month after month. Housing was a particularly
attractive way for those of modest means to save, because they could live in the
very piggy bank they were building. In principle, however, these households
could have rented and taken the difference between a mortgage payment and a
rental payment and put it in another investment (a small business or the stock
market). But we know that in the absence of

nudges, people tend to save less.

Perhaps, then, the government could come at the savings issue more directly
by giving low-income people a nudge toward saving. Suppose it developed a 401(k)
type plan that matched the savings of those with below-median incomes at 2 to 1.
This would encourage savings that then could be used for a down payment or a
host of other investments (say a Vanguard index fund). This would cost taxpayers
money, but perhaps less than mortgage programs built on thin underwriting
standards. At the same time, getting people into the habit of savings could
produce other social benefits as well. I am not sure such a plan is practical,
but I think we do need to think about how we can help people who have been
denied wealth for generations how to start accumulating assets without relying
entirely on the housing finance system to do it.

We also need to ensure that when people with limited experience in such markets do participate in financial markets by buying houses, investing their savings, etc., they aren't steered toward products that are highly profitable for the originator, but not the best fit for the borrower/investor. It's my understanding that such behavior -- steering people into the wrong products -- explain part of the problems observed in subprime markets. Perhaps we need a consumer finance protection agency? And someone to lead it who understands these issues? However, it's not enough to simply provide advice about financial products. That will help, but some of this was fraud that needs to be prosecuted -- it won't stop otherwise.

As investors search for yield anywhere and everywhere, bonds are trading in uncharted territory. Please consider Obama Wins Low Yield as Markets Shrink Aiding Deficit

Bond investors seeking top-rated securities face fewer alternatives to Treasuries, allowing President Barack Obama to sell unprecedented sums of debt at ever lower rates to finance a $1.47 trillion deficit.

Shrinking credit markets help explain why some Treasury yields are at record lows even after the amount of marketable government debt outstanding increased by 21 percent from a year earlier to $8.18 trillion. Last week, the U.S. government auctioned $34 billion of three-year notes at a yield of 0.844 percent, the lowest ever for that maturity.

Spending by companies and consumers has slowed as the economy has shown signs of weakening. Companies in the Standard & Poor’s 500 Index have stockpiled a record $2.3 trillion of cash and equivalents. Company borrowing slid 29 percent in the first half of the year to $528 billion amid a dearth of business investment, Bloomberg data shows.

Piles of Cash Equates to Piles of Debt

Companies are piling up cash alright. However, the flip side of that cash is debt.

Moreover, analysts mistake that cash for willingness to expand. The reality is corporations do not want to get trapped like they did in 2008, unable to borrow.

For more on corporate cash levels, please see Are Corporations Sitting on Piles of Cash?

Individuals are also hoarding cash. The U.S. savings rate reached 6.4 percent in June, up from 1.7 percent in August 2007, the start of the financial crisis.

Are Individuals Hoarding Cash?

Individuals are not really "hoarding cash" either. Instead they are paying down debt. Most do not realize that by definition, paying down debt constitutes "saving".

For most wage earners, the savings rate is after-tax salary minus personal consumption expenditures (PCE). For a more precise definition, please see What's Behind The Soaring Savings Rate?

“There’s been a collapse in both consumer and business credit demand,” said James Kochan, the chief fixed-income strategist at Menomonee Falls, Wisconsin-based Wells Fargo Fund Management, which oversees $179 billion. “To see both categories so weak for such an extended period of time, you’d probably have to go back to the Depression.”

Food Stamps and Unemployment Insurance Mask Depression

I believe we are in a depression now. The key difference is food stamps and unemployment checks have replaced bread lines.

We also have hundreds of thousands of people living in their homes without making payments on their mortgage or home equity lines. The slow foreclosure process encourages more to do the same.

“The diminishing supply” of alternatives to Treasuries “is giving Washington an opportunity to continue with its fiscal irresponsibilities,” said Mark MacQueen, partner and portfolio manager at Austin, Texas-based Sage Advisory Services, which oversees $8.5 billion. “The only way to tell Washington and America ‘no more’ is a weak dollar, which eventually leads to higher interest rates.”

“We are slowly playing a fool’s game as rates go further down to unsustainably low levels,” said Dan Shackelford, a money manager who helps oversee $15 billion in fixed-income assets at T. Rowe Price Group Inc. in Baltimore.

Thoughts on the Fool's Game

If you are managing $15 billion thinking it is a "fool's game", then in my opinion you ought not be doing it. It seems to me there is a lack of fiduciary responsibility if one is investing client money in a "fool's game".

What the hell - Anything for a fee!

I do think corporate bonds, especially most junk is playing for the greater fool. In regards to treasuries, there is going to be an exit problem for sure, but that could be years away. In Japan, yields stayed low for a decade. Why can't it happen here?

Yields certainly might stay low for an extended period. Whether or not they do remains to be seen. I happen to like long-term treasuries right now, but certainly not as much as when the 10-year was at 3.75% and bears were foolishly shorting treasuries like mad.

The government isn’t the only one getting a good deal. Armonk, New York-based International Business Machines Corp., the world’s biggest computer services provider, sold $1.5 billion of three-year notes on Aug. 2 with a coupon of 1 percent, the lowest of the more than 3,400 securities in the Barclays Capital U.S. Corporate Index of investment-grade company debt.

Portland, Oregon, sold about $408 million in sewer-system revenue debt on Aug. 11, with utility bond yields at the lowest level on record. Yields on 10-year, AA rated tax-exempts backed by utility revenue stood at 3.02 percent on Aug. 10, according to Bloomberg Fair Market Value data. That’s the lowest since the index was created in November 1993.

“We are in unchartered territory,” said [William Larkin, a fixed-income money manager in Salem, Massachusetts at Cabot Money Management]. “We are pushing and pulling levers that we don’t understand the full implications.”

Uncharted Territory

This is indeed uncharted territory thanks to the Fed pushing and pulling levers in a manner it does not understand. William Black, a former bank regulator, is one person who does understand. Black says U.S. Using "Rally Stupid Strategy" to Hide Bank Losses - Will Produce Japanese Style Lost Decade.

I agree with his assessment.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

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An Introduction to Insurance

Insurance is a way to manage risk. As you go through your life, there’s always a chance that you’ll be in a car accident, twist your knee, or that your home will burn down. The risk of these accidents is small, but if one of them were to happen, the effects could be catastrophic. Without insurance, you’d have to come up with the money on your own to repair your car, have knee surgery, or rebuild your home.

Although these things happen to some people, they don’t happen to everyone. With enough data, it’s possible to know roughly how many people are likely to experience these setbacks — and how much it will cost to recover from them. Using this info, an insurance company can spread the risk among all its customers.

An Elementary Example

Imagine Eastside Elementary, a school with 100 students. Every year for the past 25 years, one Eastside Elementary student has broken an arm in the schoolyard, resulting in about $5,000 in medical expenses. Without insurance, every family would have to save $5,000 to cope with the odds that their little tyke would be the one with the broken arm. At the end of the year, 99 families would have paid nothing (and have $5,000 left in savings), but one family would have paid $5,000 (and have nothing left).

With insurance, the Eastside Elementary families can join together to spread out the risk. If they created an insurance fund, all 100 families would pay $50 at the start of the school year. This $5,000 total would then go to the family of the child with the broken arm.

By spreading the risk, each family only has to save $50 instead of $5,000. Sure, that $5,000 is gone if it’s not your child who breaks her arm, but for most people, that’s an acceptable trade. Instead of having to scrape together the full $5,000, they’d rather risk losing $50 for a chance to avoid $5,000 in medical bills.

But is it really fair to have every family pay $50 into the insurance fund? Some kids go to the library at lunch to read Harry Potter and Mysterious Benedict Society books; others climb around on the jungle gym and throw stones at each other. The bookworms are much less likely to break an arm, aren’t they? And maybe the 25 years of data show that girls break their arms less often than boys. With enough info, the Eastside Elementary Insurance Fund could charge each family a different rate depending on how likely their child is to break an arm.

I got home a little late tonight. Against my better judgment, I plopped down on the couch with my family to watch cable news. There was Majority Leader McConnell crowing about the Senate's passage of what's been dubbed the "Stop Taxing 'Ur Personal Income, Dude" Act. This extends the Bush tax cuts for dudes earning more than $250,000 per year while piling up the deficit over the next decade and beyond.



Some talking head from the Center on Budget and Policy Priorities explained to Rachel Maddow why the fine print was actually worse. Much of the true $1 trillion ten-year cost wasn't shown on the government's books, since the tax cuts were nominally slated to nominally expire in a few years. Despite such budget shenanigans, Republicans still needed to cut $300 billion to partially finance their favored tax cuts. So a Senate coalition of 53 Republicans and 8 moderate Democrats voted to reduce affordability credits designed to help people buy health insurance, while reducing funding for community health centers, nutrition and unemployment assistance, aid to states and localities.

Although Republicans lacked the votes to overtly reverse health reform, they have already chipped away at the fine print and at the infrastructure of health reform. HHS Secretary Sebelius was blocked from enforcing key provisions designed to deter large insurance rate increases. Funding was cut for the already-stressed temporary high-risk pools that serve uninsured men and women with pre-existing conditions.

Answering Democratic complaints that these policies made insurance even less affordable, Congress eliminated penalties associated with the "individual mandate," causing a significant (though at this writing imperfectly understood) challenge to measures that protect Americans with preexisting conditions buy coverage.

Although the American economy continues its anemic recovery, Republican leaders ruled out the possibility of additional stimulus, arguing: "We already spent $800 billion, and it didn't work," and that was that.

Speaker Boehner has been on TV every night trumpeting Holder-Gate. Joe Barton, Chairman of the House Energy and Commerce Committee, has announced lengthy hearing regarding allegations that Attorney General Eric Holder had failed to recuse himself from an investigation of the New Black Panther Party, whose former Secretary-Treasurer turned out to be one of Holders' distant relatives, Shamika Azziz-Epstein.* Ms. Azziz-Epstein has been called before the Committee for extended testimony. As one self-described Republican strategist put things: "We must know who Ms. Azziz-Epstein really is," slowly pronouncing AZZIZ-EPSTEIN with particular relish. "And What did Mr. Holder know, and when did he know it."

Yeah, it's been a lousy April, 2011.

That's a lousy scenario. It's pretty likely, too. Democrats inherited a bad economy and a series of daunting challenges at home and abroad. Now that we own these problems, voters are responding accordingly. We face an uphill battle in this year's midterms.

What makes this especially frustrating is the lack of intensity and focus among so many people who were so central to the 2008 victory. Political pros across the ideological spectrum expect low midterm turnout. They expect the electorate to be older, whiter, and more conservative than the group that was so fired up and ready to go only two years ago. Younger voters, Latinos, African-Americans, and many progressives are expected to stay home without Barack Obama's name on the ballot. Many of those who fought hard for health reform are expected to stay home, too. Some are complacent now that the bill passed. Others are jaded and alienated because valuable provisions, principally the public option, didn't make it to final passage.

Again, this is maddening. If Republicans win the House, the most likely outcome, they will capture the committee chairs required to harass the Obama administration with crazy or trivial investigations. They will capture critical leverage over the budget that will allow them to undermine valuable legislation passed over the next two years. They will have an elevated platform to identify every unpopular change in the American health care system with health care reform.

Just this week, I received an email describing a proposed bill that would gut health reform's public health and prevention investments to finance some small-business thing. In dollar terms, that's one of the tiniest items one can expect to see.

From a tactical perspective, you've got to hand it to Republicans. With some exceptions such as the stimulus and health reform, they have profited from their lockstep discipline and their efforts to run out the clock on every Democratic initiative. The need for 60 Senate votes, along with the outsized influence of sparsely populated states, provided the essential tool for Republican resurgence. On issue after issue, working to assemble a wafer-thin supermajority, Democrats were forced to cut unseemly public deals with the most parochial and conservative members of their coalition.

The process didn't look right. It also led Democrats to bicker with each other while Republicans escape much of the blame. Progressives blame the President for missteps. The administration blames progressive legislators for being naively over-optimistic. Both sides of the argument blame apathetic progressive voters for lending too little help. Core Democratic voters became bored and dispirited with the whole thing. Many uninformed voters who gave President Obama the benefit of their doubts to enact better policies and to change the culture of Washington, became even more alienated.

Then there are the many drops of poison that Sarah Palin and company inject to exploit Americans' cultural anxieties about various frightening others. In my adult years, the list of negative icons extends from Willy Horton to undocumented immigrants to Will and Grace and gay people who want to marry, and most recently to an Islamic community center near Ground Zero. As Michael Cohen observes, the Bush years provided a certain welcome and honorable break from this sort of thing. That break is over.

Most recently, Newt Gingrich compared building an Islamic community center to waving a Nazi sign near the Holocaust museum. Jews who find such comments appealing might remember Gingrich's cracks to Georgia voters that Democrats favored Woody Allen family values. It's hard to know what to gasp at first: the ugly regional and religious overtones or Gingrich's monumental chutzpah given his own disgraceful personal life. In the long-run, exclusionist rhetoric risks driving the GOP down to its most conservative base in a relative handful of states. Without a doubt, though, the GOP is deriving some immediate political benefits from anything that makes President Barack Hussein Obama identify publicly with things Islamic.

If you are still reading, you are probably a progressive activist or potential activist. I can't tell you what to do. I would suggest: Find some cause you are passionate about that is helping in the midterm fight. If you are a core Obama supporter, maybe that cause is Organizing for America. If you are in the netroots, maybe MoveOn is your cause. Maybe you support Speaker Pelosi after her leadership in enacting progressive legislation. Maybe you are drawn to nonpartisan advocacy groups concerned with the environment or with health care reform. Whatever the vehicle, get involved.

Your time, money, energy, and talent are really needed. Right now, many progressives are passive. Much of the energy, passion, and organization seem to be on the other side. President Obama's name is not on the ballot. We're all pretty jaded, for good reasons and bad, about the United States Congress. Right now, the prospects of a Republican majority are pretty abstract. Yet I promise you: Progressives will find new energy and enthusiasm at the sight of Republicans assuming House or Senate majorities. If this happens, six months from now we'll be livid with Republicans. We'll be wondering how to undo or minimize the damage.

I hope we won't have to ask ourselves why we were so lazy, complacent, or disorganized this Fall, and, by failing to do our best, made a tough midterm election avoidably worse.

*Yeah, I made up this name.

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Small Business <b>News</b>: Social Media Power!

If you haven't figured it out, gotten on board, jumped on the bandwagon (pick your own expression)...well, we're not going to try to talk you into it. Just be.

A roundup of today&#39;s Apple <b>news</b>

Why has none of these so called "news" sites addressed this question? What's going to happen with all of the Apple TV's in our homes now? I would expect we see an OS update when the new version is released or sooner. 2 stars ↓↑report ...

Stabroek <b>News</b> - Retirement plans caught up in Clico (Guyana) upheaval

Perhaps Stabroek News can shed some light on this issue for me. Was CLICO owned and controlled by the Government of Guyana? Was CLICO insured by the government of Guyana? Did the government of Guyana cause CLICO to fail? ...

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Hot Air » Good <b>news</b>: Illegal immigration declines to only several <b>...</b>

Good news: Illegal immigration declines to only several hundred thousand per year.

Some Good <b>News</b> | Talking Points Memo

Over the weekend we brought you the news of the apparent arson attack at the construction site of the future Islamic Center of Murfreesboro, in Murfreesboro, Tennessee. The day after the incident, members of the congregation's board ...

Small Business <b>News</b>: Social Media Power!

If you haven't figured it out, gotten on board, jumped on the bandwagon (pick your own expression)...well, we're not going to try to talk you into it. Just be.

important meal of the day. Surprisingly, the ones who eat breakfast are thinner than the ones who do not. Metabolism can slow down considerably if breakfast is taken during mid-morning or if one waits until the afternoon to eat.
3. Avoid sugar. Sugar enables the body to store fat


fat you may be losing, but all-important muscle tissue as well. This is why exercise and physical activity are just as essential to quick weight loss as eating right, because building muscle helps to burn all those calories away.
There are many other quick weight loss diet plans in existence, precisely because there is no single diet that will work for everyone. Whether low-fat, low-carb, protein-rich, all-vegetarian, or whatnot, it is still up to you to decide which plan you think will suit you best. And remember, when in doubt, always consult your physician first.


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Hot Air » Good <b>news</b>: Illegal immigration declines to only several <b>...</b>

Good news: Illegal immigration declines to only several hundred thousand per year.

Some Good <b>News</b> | Talking Points Memo

Over the weekend we brought you the news of the apparent arson attack at the construction site of the future Islamic Center of Murfreesboro, in Murfreesboro, Tennessee. The day after the incident, members of the congregation's board ...

Small Business <b>News</b>: Social Media Power!

If you haven't figured it out, gotten on board, jumped on the bandwagon (pick your own expression)...well, we're not going to try to talk you into it. Just be.

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Illegal Immigration, human rights and unemployment | World <b>News</b> <b>...</b>

The numbers are disheartening to the average American citizen, but to illegal immigrants this news could be taken as a positive. Employers looking to survive the recession are increasingly tempted by illegal workers who they can pay low ...

Canon develops world&#39;s largest CMOS sensor: Digital Photography Review

Canon develops world's largest CMOS sensor: Canon has announced it has developed the world's largest CMOS sensor measuring 202 x 205mm. Approximately 40 times the size of Canon's largest commercial CMOS sensor, it captures images with ...

Still No Earths, But Getting Closer - Science <b>News</b>

Two newly discovered planetary systems shed light on odds of forming terrestrial planets.

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Back from the gym. Today’s Crossfit workout: Run 800 meters, then jump rope 100 times (or do 30 double-unders, for advanced CFers). Repeat this sequence for 30 minutes. I did six complete rounds. My calves are toast. Now, on to your comments…

@Randy (#44)

We do have a sub-account for travel, but it’s just been depleted to pay for our trip to France and Italy. I should have mentioned that regular contributions to this will add a few hundred dollars by February. Thanks for the suggestion to check out oattravel.com.

@Stephanie (#46)

Though it pains my trainer to hear me say it, I find the scientific and anthropological basis for the paleo diet unconvincing. I don’t want to say it’s hogwash, but I think much of it is wishful thinking and not based on hard evidence. So, no — I don’t follow the paleo diet. I know many people who do, and it works great for some of them. I think that’s awesome. For myself, I practice calorie restriction, and I do try to eat more protein than I would if left to my own devices. (My target is 150 grams a day.) And yes, eating healthfully is expensive. I’ve been eating a lot of fresh fruit, and those prices add up!

@Kevin (#49)

Hm. If you’re sensing “justification” in the post, it may be because I’m being pre-emptively defensive because I’m worried that others will judge my existing spending without being able to see the big picture. I’m confident that the Crossfit and the soccer tickets are reasonable and affordable. And the Africa trip is a sort of case-study. It’s an example of the sort of decisions I’m making lately. Note that I have not made a decision on Africa. It’s likely that we’ll go, but first I’m going to have to find ways to make it feasible. And, as I mentioned, I’d rather not tap the emergency savings, so I have to look at other options. As for separate vacations: Believe me, there’s some of that in the future.

@Fantasma (#53)

Yes, it makes perfect sense to re-direct savings earmarked for the Mini and other goals toward the Africa trip in the short term. But I will not compromise on the retirement contributions. For me, there are certain minimum financial standards that have to be met on a regular basis. One of those is retirement contributions. Another is a full emergency savings account, which is why I’m reluctant to tap it. (The difference between retirement and emergency savings is that the savings can be replaced; also, the savings is significantly over-funded, in that it could support me for almost a year of regular spending.)

I marked the comment from Shalom (#56) as a great comment simply because it gets to the heart of my thought process on the Africa decision. If you want to know how I’ve been sorting through this, read her comment.

@Raghu (#61 & #63)

Right. So, this is why I’ve been reluctant to share these sorts of things at GRS, and I think it’s a shame. Yes, one of my goals is to help others get out of debt. But it’s also one of my goals to continue my own journey. I’ve stopped writing much about my journey precisely because I’m worried that doing so will cause reactions like yours. But is that the right thing for me to do? Should I hide what’s really going on simply because some people won’t be able to relate? This post is “testing the waters” to see how people react. Most seem okay discussing these topics, and they seem to understand that I’m in a different financial place than I was five years ago…

@GV (#64)

My Crossfit trainer has talked to me about some of the stuff you bring up. He even has people sign up to learn the Crossfit exercises, and then they quit to build their own home gyms because they can do that at a fraction of the cost of sticking with Crossfit. For myself, I’m still getting a lot out of CF, and I love the 6:30 group, so I’m not about to stop. But you have a very valid point.

RE: The tax account

Yes, I pay taxes quarterly. And maybe if I explained my method, that would set some minds at ease. My tax account is actually way ahead of what I need. I’ve already paid my estimated obligation for 2010, for example. Now, over the past couple of years, my estimated obligation has been below my actual obligation, thus the need for the tax account. But even so, I’ve generally had a cash surplus in that account, which was precisely where I got much of the money to purchase the Mini Cooper last year. (After I paid taxes, there was a ton left over in the tax account.) This is why I’m not worried about drawing from it: my 2010 estimated obligation is already fully paid, and I have a nice chunk of change there for any excess taxes.

To everyone

This is a great discussion. I was really worried about sharing some of this stuff, and while I understand that not everyone agrees with my choices, I like that we’re able to have a productive discussion about the whys and wherefors of these expenses. And I especially love the stories from other folks who are in this stage. I don’t do a good enough job of getting those out there at GRS. I’d like to share more of them.

Consumer spending and personal incomes were both unchanged in June after rising 0.1% and 0.3%, respectively, in May, the Commerce Department said today in a statement.

"Consumers are still hunkered down," Ryan Sweet, a senior economist at Moody's Economy.com told Bloomberg News before the report. "The second half of this year we're going to see slower spending." Economists surveyed by Bloomberg forecast a median 0.1% gain in spending and a 0.2% advance in incomes. Personal saving rose to 6.4% of disposable personal income in June, from 6.3% in May.

Federal Reserve Chairman Ben Bernanke said yesterday that consumer spending may "pick up" as wages rise, Bloomberg News reported.


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Calculated Risk: More Negative <b>News</b> Flow Coming

We've definitely entered a period of downbeat economic news. Note: I still think the economy will avoid a technical double-dip recession, but the odds are uncomfortably high - and it will probably feel like a recession to millions of ...

<b>News</b> Chopper Catches Paris Hilton in Her Towel | TMZ.com

With a live KTLA news chopper hovering over her home after a man allegedly tried to break inside, Paris Hilton decided to step out on to her balcony -- in…

Hot Air » Bad <b>news</b>: Chinese commuters stuck in … nine-day traffic jam

Bad news: Chinese commuters stuck in … nine-day traffic jam.

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Stabroek <b>News</b> - Starr to roll out $40000 computer before end of 2011

Daily News, Sports, Business, Entertainment and more from Guyana.

Brad Friedman and Desi Doyen: Green <b>News</b> Report: August 5, 2010 <b>...</b>

IN 'GREEN NEWS EXTRA' (see links below): Why 2 million (promised) green jobs couldn't sell a climate bill; When religious beliefs become dangerous; New state surveys affirm Americans' belief in global warming, gov't action; Fossil fuels ...

Spectroscopic science <b>news</b>

These are my links for July 30th from 18:21 to 18:27: Space balls redux - I've reported on this ...

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Week after week, obsessive Mad Men fans call up retired advertising veterans, fashion historians, and businessmen to suss out what it was really like back in the sixites. But when Don Draper, the son of a prostitute, shockingly ended up getting slapped by an escort wearing a red bullet bra in the season-four premiere, did anyone think to call up a dominatrix and get her take on the scene's verisimilitude? Why yes, in fact: Vulture did. The scene raised so many questions: Does Don need a domme? And do dominatrices get to abuse guys as luscious and successful as Don Draper? On the eve of the prostitute's return in episode three, airing this Sunday, we asked professional dominatrix Mistress Pixie to help us understand some of what Don Draper may be in for. Now sit the fuck down and pay attention, slaves!!!

The slapping sex scene takes place on Thanksgiving day. Would you ever work on Thanksgiving?

Fuck yeah, could care less. Money is money.

This woman on the show, who is not a domme but an escort, mentions her family briefly. Do you ever offer any details of your personal life?

Not too much info in the beginning, but yes, after a few sessions, they like to talk; they become like friends, sort of. And they talk about themselves; it's like therapy.

This woman seems to be offering a little S&M along with sex. What do you think about that and do most dommes ever mix sex with domme work?

No, never. You never cross that line. A real domme never has sex with a client.



What if he's as adorable as Don Draper?

You never have sex, ever; you never cross that line. At least I don't — most don't. But it does annoy us when escorts also advertise themselves as dommes, because real dommes don't have sex. They should advertise themselves as escorts with fetish services. Real domme clients don't get off on sex, they get off on being dominated and humiliated: You give them nothing.

So having a client like Don doesn't turn you on?

No, but a gorgeous client is just an added bonus, a fun toy, more fun to torture.

Are your clients successful men like Don Draper?

Definitely. 90 percent of clients are powerful men: They are powerful at work, in their families, socially. They need a balance; S&M is a need. They need to feel weak and let go.

What kind of women are dommes?

Lots of very educated women, lawyers, woman with PhDs. We love what we do. We love to study psychology so we can fuck with their heads even more.

How's business been with the recession and all? Lots of these high-powered guys have lost their jobs. And Don's not doing great on the show: Sterling Cooper Draper Pryce is struggling and his finances are taking a hit because of the divorce.

Yeah, we got hit pretty hard two years ago when the recession started. You know, hiring a domme is a luxury. But business is back. You know, when times are so stressful, I guess the luxury becomes a necessity.

In 2006, recent Harvard grad Alexa von Tobel was headed for a job at Morgan Stanley. But though she would soon be managing the bank’s investments, she realized she didn’t know the first thing about her own finances. Most financial guides seemed to be written for middle-aged readers with millions in assets, rather than recent college grads. "I was reading every book I could find, but none of them spoke to me," she says. So she came up with the idea for LearnVest, an online personal-finance resource for young women like her, and ended up writing an 80-page business plan.

After two years at Morgan Stanley, von Tobel entered Harvard Business School in 2008. But upon winning a business plan competition held by Astia, a non-profit that supports women entrepreneurs, she took a five-year leave of absence and invested $75,000 of her Wall Street earnings to start LearnVest in November. She quickly enlisted advisors, including Betsy Morgan, the former CEO of the Huffington Post, and Catherine Levene, the former COO of DailyCandy, to help develop the site’s content and technology. In January 2009, she secured $1.1 million in seed funding from executives at Goldman Sachs.

LearnVest’s site launched a year later and has since signed up more than 100,000 members. It offers online budgeting calculators, video chats with certified financial planners on the company’s staff, and free e-mail tutorials on topics such as opening an IRA. The company earns revenue from advertising and by referring its users to companies such as TD Ameritrade. In April, after just four weeks of fundraising, von Tobel closed a $4.5 million investment round led by Accel Partners, which has also invested in Facebook and Etsy. (Incidentally, Facebook CEO Mark Zuckerberg lived in the same dorm as von Tobel at Harvard.)

Von Tobel likens LearnVest to an online version of The Suze Orman Show, but with the goal of reinforcing positive finance habits early on. “Suze Orman helps 45-year-old women get out of debt,” she says. “Why not reach 20-year-olds to keep them from getting into debt?”

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