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18 months after President Obama authorized a program providing $7.6 billion to states to help homeowners escape foreclosure, fund have been awarded to only about 7500 homeowners. In the same time period, banks have foreclosed on 1.5 million homes.

Stories like this one fuel disgust with government. What they really highlight is that we're trying to manage 21st century problems with 19th century methods.

Rather than building a government bureaucracy to award funds, the program should have set goals for number of homeowners whose mortgages would be relieved (or even better, the conditions that would justify loan modification) and left it to the banks to meet those expectations.

The regulatory overhead should have been in testing outcomes, not managing process.

Let me be clear by analogy. Imagine that Google's search quality team wrote a set of rules for sites to be approved for inclusion in Google, and had a bureaucracy to allow sites into search results. Instead, Google tests the quality of search results, and uses algorithmic regulation to remove results that are deemed bogus.

The analogy in this case isn't exact, but the idea of algorithmic regulation is central to all internet platforms, and provides a fruitful area for investigation in the design of 21st century government.
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There is an analogy in paying for outcomes in health care as well.
True. Now lets elect 400 software developers to congress so they understand this kind of thing. Currently there are zero.
i told my brother to give his house back to the bank like he bought it at wal mart, but he didn't listen to me. now it's costing him money
Oh sure, let's reward the banks with even more of our tax dollars. Sure, this program clearly has issues, but to think that the banks would have done better is crazy. Bureaucrats may not be the answer, but banks aren't either. Oh, and when Diebold writes the program for us, would you be just as upset when you find out only republicans get their mortgages fixed?
+Thomas Limoncelli Design review dynamics tend to imply that 400 software developers in a room would be pretty dysfunctional as well.
+Chanchal Bhatia - While you have a point, it's irrelevant to this conversation. The government, in fact, did make the decision to bail out homeowners, but somehow that money never made it to homeowners. Whether or not the fund should've been created in the first place is an interesting question. But once it was created, it seems a little silly and wrong for it to not be used.

Additionally, the government has spent 100s of billions bailing out the banks that made stupid decisions. So it seems like spending a few billion to help homeowners deal with stupid decisions is more than reasonable.
Someone borrows money in order to buy a house and puts up said house as collateral. If they default on the loan the house should be forclosed on and resold. These are the rules of the game. By bailing out all sorts of entities we merely increase the pain long term. Having to leave "one's" house (it's arguably the bank's house really) and move into an apartment is a first-world problem. Let the market clear as it was meant to do and stop gumming up the works. Sounds cold-hearted I know, but in the end, it's the way to minimize not maximize the overall pain. People who get "bailed out" are simply going to repeat the behavior and the vicious cycle will start anew.
We already have extremely sophisticated algorithmic regulation in place. It's called a "market."
If the government had not forced banks to make manifestly bad loans in the first place, we wouldn't have to squander taxpayer dollars propping them up.
Okay, +Tim O'Reilly, so say we did or had done what you proposed. How would we check the outcome? And... what if banks failed expectations? What sanctions would you propose? Because, without sanctions, there wouldn't be an incentive for banks to do a good job (a job that helps homeowners, instead of the banks).
From the article...

"The states developed their own foreclosure-prevention programs targeting assistance to lower-income jobless and underemployed homeowners."

So in effect, the bureaucratic obstacle to the fund was replicated in different ways 18 times.
+John Glotzer - I would be perfectly happy to agree with you if you were willing to apply the same logic to the banks that made the poor decisions too. Unfortunately, you would now have to apply that decision in the past as the decision to spend 100s of billions helping them out has already made.

I find concern with the responsibility of individuals over the responsibility of corporations to be a really interesting pathology.
+John Glotzer Good, so let the banks fail because they gave money to people that they (the banks) were quite aware of couldn't pay the mortgages back. \o/ Equal hardship for all, good idea (no, seriously, good idea... and the repercussion due to big banks failing would be a good lessons in "capitalism")
+David Young - What? That portion of the problem is very small. If you actually bothered to pay attention, it's quite clear that there were obviously bad and overly optimistic risk assessments all the way around. It wasn't the 'government' forcing this on banks, it was their own greed and short-sightedness.
+Eric Hopper Agree... especially since in the US, corporations are in the process of becoming "individuals" (with rights like privacy etc). So... they get rights, but not duties. Good deal! For them...
+Michael Durwin Disgust in the government is due to to poor handling of my money. The government didn't stand up on behalf of it's citizens. It took it's citizens money and gave it to failed businesses without any requirement on what they did with the money. The dear Gov could have given everyone $100,000 to pay off / down their mortgages. People would have their houses, banks would get their money.
And if you'd bother to pay attention +Eric Hopper, you'd know that the government did indeed force lenders to give mortgages to unqualified borrowers. Sober-minded economists at the time maee the easy prediction that such a contortion of the market would lead inevitably to massive numbers of foreclosures. And people losing what little capital they put up for down payment. Now, compounding one bad public policy with another, the government is spending tax dollars trying to prop up mortgages that will inevitably fail. Let the market control who gets mortgages and we won't face this dilemma over and over and over...
As long as politicians continue to campaign as being able to fix short term issues we'll have this sort of disgust. It's a case of impedance mismatch: our political system is designed to affect change slowly with long-term benefits.
I've been preaching the same for a while now. Congress and politics have been doing the same things they did 20-30 years ago. Technology and advances in business practices have evolved multiple times since then, yet we're still not looking at how to do things different. With the government, it's either regulate and tax or cut taxes, spending and regulation. Throwing money at the problem doesn't help, nor does cutting essential programs because somebody said it doesn't work. And I'm probably not the only one to notice that the housing market seems to be the main reason the economy is dragging....maybe we should focus our efforts (and intelligence (?) ) there??
+Chanchal Bhatia Is it a dangerous way to think... or just reality? Of course, both politicians and private sector pushed for consolidation. I wonder if they were really (all) that stupid not to see the potential consequences. Or maybe they thought "too big too fail" would mean "they are so big, too big to be able to fail". But of course they are too big to be permitted to fail... for a variety of reasons.
Obama wants to create jobs, but not in the private sector, just bureaucratic jobs in a colossal government.

He wants to be a Super CEO, where the government is the Single Employer. But he has no leadership or management skills, so everything he touches turns to crap.
Agree with all those who said that the banks got a sweetheart deal and have no accountability. Lots of bad actors in the tragicomedy better known as our economy.
One of the hottest scams going is claiming to be representatives of mortgage bailout funds.
And over 1,300 waivers for Obamacare, but no info on how those waivers were awarded and who was turned down. Gangster style government. Jesus help us!
We need to reduce the number of states through consolidation. There are just too many middlemen!
If a company is deemed to be "too big to fail", they should be broken up, so the risk is spread out. Else, they should be allowed to fail.
Now we're seeing "too big to bail out" as in European Union. But you better believe Obama will take money out of your wallets to bail them out. Stimulus plan is just payback to states and companies who supported Obama.
+Rich McGirr Thanks! Very interesting facts... well, depending on who you believe ("Truthiness > Facts" (not for me))
A better analogy is the welfare goals. First it was measuring how many people we've helped by putting them on welfare, it didn't solve the problem. The correct measurement is how many got OFF welfare and into new jobs becoming paying taxpayers.

But really, there has been only four times where we have had workers get the most bang for their work: 1920s ("Roaring Twenties," Harding, read Mellon's FREE book "Taxation: The People's Business" ), 1960s (Kennedy, dropped the tax rate), 1980s (Reagan, dropped taxes, but spent too much), and the 1990s (Clinton under the GOP). Each of those eras were when workers owned the market (because of less government) as businesses could invest and owners could not find enough workers and thus paid higher wages to make more money.
The US may have caught a european disease.

Hollywood was successful with american adaptions of british shows. Perhaps some politicians believe that importing european political memes can do wonders - for them, not for you. Tax rates are much higher in Europe, gas costs much more, yet it all looks so pretty, so how bad could it really be? More money into "the system".

What our lawyer politicians do not seem to comprehend is that there is no innovation coming out of europe and buildings are built over multiple generations because one generation cannot afford to build a house by itself. Europe has perfected an inheritance system, not an innovation system. What superficially looks similar is not at all alike.

There is a real cost to having a political class that is number illiterate and sees everything through the lens of conflict, i.e. lawyers. Trying software engineers might not be such a bad idea, if it results in algorithmic thinking and measured outcomes.
+Dirk Harms-Merbitz Yeah, the European Union is a great example of success and prosperity -- or will be once the USA taxpayers bail them out.
+Steven Streight I'm afraid bailouts will be left for China to do. USA is in no position to bail anyone out anymore.
What's the world going to do when China forecloses?
My point exactly +Michael Durwin and honestly there are so many problems carried over from 8 years we should all be very careful and check our facts. People, no matter where you stand on the issues do not fall into step of political fear tactics and bullying. It makes you and all of America ignorant.
+Tim O'Reilly Has anyone developed an algorithmic regulation system to improve the signal-to-kook ratio on G+? If so, you should really look into it.
+Randall Elliott +Michael Durwin We're getting tired of Obama blaming everything on Bush. We were told by Obama that he was going to usher in Hope and Change. But Obama is McSame. He inherited a mess from idiot Bush, and Obama made it even worse.
+Steven Streight I did not say nor imply "everything" and in fact you make a perfect example of my point.
Fac +Tim O'Reilly You were close "we're trying to manage 21st century problems with 19th century methods", but it's actually 18th century methods. E-gov has been reactionary and expensive to implement; usually with pretty poor results. The National CIO has no clout and doesn't seem to effectively work with legislators, the Executive or private industry to make meaningful change.

I would love to see an O'Reilly-Gov or SWSX-Gov conference where tools and methods are discussed by top industry leaders. Not digressing into the my side is better than your side on all of the various issues at that level. The technology and methods should facilitate discussion of those political arguments into meaningful dialog and legislation. If tech leaders came together and focused on re-inventing Government from the perspective of leveraging what exists now with a forward looking view into the future and then opensourced the ideas to Government It would be exciting to see what would happen.

Politicians are good at what they do, but they don't and can't understand the technology world, especially with the rapid changes. Tech leaders have to have the conversation first and share their ideas.

A lot could be done with transparency, easy of communication and collaboration. I remember over a decade ago Cisco was touting it could close the financial books in 24 hours. What if our Federal and State Governments could "close" the books for an easy audit in 24-hours; nationwide? Think of the awesome power of financial transparency gained at that level. If we can do facetime, skype and G+ hangouts at the consumer level why is it still the most effective way for me to voice my political views to my representatives by sending a letter or a personal one to one fax? Largely ignoring auto-faxes and bulk emails is not a valid technological solution to the volume of communication the Government now receives. Technology could solution a lot of these and other issues. Great topic!
I'm giving up and moving to one of those Libertarian islands...
+Trey Ratcliff I was thinking of those islands when I just wrote those posts. Did someone say those islands could think up their own forms of government and ultimately compete with each other, like in an open market, for the best ways that government could be run. Those ideas were very inspiring.
+Steven Streight , you obviously have no grasp of the facts. Public sector jobs under Obama have actually dropped, while on the other hand they increased severely under Bush.
Those islands better have nuclear weapons if they are to survive as independent nations.
A longer time horizon may be useful.

Notice how none of this feels right? Is this the european upper classes undoing the american revolution with the help of others? It started in earnest in the early part of the 19th century. The main benefit of income taxes is not just a steady cash-flow for congress but also the slowing of the accumulation of capital by individuals. Nothing scares rich people more then others becoming rich.

Gedanken experiment. If a tailor sells you a $2000 suit for $200 dollars and loans you the rest, does he really have $1800+$200? The suit only cost $150 to make and you would never have bought it for more then $200. Are the various schemes that result in foreign governments buying treasury bonds a form of indirect taxation? A retro active import tariff could wipe them out.

China is a country roughly the size of the US with 5 times the population and a failed one child policy. The US next door looks empty in comparison. Lebensraum has driven many in history. They must also be looking at Africa. It is only logical.
I'm also wondering how President Obama authorized a program that constitutionally is the responsibility of Congress. Or is the reality that Congress authorized the program and the executive branch is responsible for its implementation?
What we seem to be seeing is the end of an era in which individuals can represent complex governance models. Period. At the end. Bankrupt. That is why Michelle Bachmann has more significance than a bashing-ninny for the media. She represents the very human tendency to simplify when things get too complicated. Unfortunately, or obviously, her nostrums are not the answer.

Those who can, should be working on the foundations of a post-political and post-personality governance that can be mediated, but not determined by, discipline formalisms: self-equilibriating systems whose parameters are nonetheless under very human control..

Starts to sound like Isaac Asimov and Foundation? It won't end up there. But there is a lot of work to be done. #postpoliticalgovernance
+David Kelly I have no idea what they are thinking. Looking at history a desire for another's physical land is certainly nothing new.
And you wonder why Republicans find tax cuts to be so much more effective. 
... and I thought a developing - read third world - country like South Africa is bad on delivery; we surely have numerous examples of state departments and local government agencies NOT using existing or designated channels to get authorised money to those who have been authorised to get it...

in SA's case I can image lack of capacity, lack of skills, lack of planning, lack of more or less anything that has to do with good governement are reasons for lack of spending and good governance -- and often understandable reasons -- we are talking about Africa here... and a country run by a crowd renowned for corruption...

.... but USA... wow... this is a bit much to comprehend... How did they manage to get a man on the moon? And in the face of a financial crisis, people losing their homes etc... ONLY 7500 payouts... that's absolute shocking...
+jeff beddow Do you mean things like removing taxation in favor of government printing money as needed, in other words, taxing everything? That can be self regulating if tied to inflation goals.
Easy to solve problem – Set very clear goals, i.e. the problem to be solved and the measure of success. Provide the necessary resources (including enough time to get the job done.) Protect those doing the job from moving goals or resource reappropriation.

Finally, measure success, thank those who deliver results, and FIRE those who do not.

I see goals, resources, timeline and no results. Who wants to bet that the missing element here is anything other than accountability?

The problem is that there is no pay for performance in the government; it's actually the exact opposite: keep your head down, collect your check, and don't make waves. The near impossibility of firing anyone for non-performance has led to agencies bringing in contractors at three times the rate because they can at least get rid of them if they don't actually produce results -

The idea of letting the Federal government waste any more money, for any purpose whatsoever, is indeed disgusting.
+Michael Durwin I'm referring to the first sentence of Tim's original post, which begins "18 months after President Obama authorized a program..."
Disgust with government? Aha! The plan is working!
I don't understand half of why government work the way they do...It seems that no matter who the president is; government is the same bloated, slow moving entity. This is so disgusting...
+David Kelly Its more complex then that. So many interacting parts. All we can do is look at things from the outside and try to match observations to theories. Is the US government pulling a fast one on China or is China stealthily maneuvering to get our land? I don't think that the fat lady has sung yet, so to speak. What we do know is that it doesn't feel like business as usual.
+Nathan Freeman Effective markets have true algorithmic regulation. Go to a country with no regulation, and you will discover no markets either. The question is how to keep bad actors from taking over markets without also suppressing the activity of good actors.
it's enough to make the bunnies cry :(
I think many Americans confuse regulation and basic laws. Markets need basic laws and police and courts to enforce them. Regulation is what keeps many in the 3rd world in poverty. e.g. they build a £20,000 house but regulation means they have no fungible capital.
+Michael Durwin It never ceases to amaze me that many are still surprised of the outcome. I remember sitting in a dining hall hostel in London about 3 years ago watching the news with a very diverse group of people as the newscaster poked fun at just such irony. It was laughable in the worst of ways.Downright embarrassing for me. Not that the UK does not have it's fill of political scoundrels. So while we are at let's shorten all their terms. They will be forced to execute and demonstrate positive progress like the rest of us private sector blokes;)
Government can't be reformed, just cut !
Many of you have strong feelings on the failings of our government. Instead of complaining about it here, why don't you quit your private sector jobs, transfer to the public sector, and start making changes yourselves. Just a thought...
+Michael Klein I went to work to help transform the public sector 30 years ago and could use a little help here, guys. %^)
+Michael Klein Because the public sector can't be reformed, no profits so no objective test of success or failure. Just endless subjective opinions and an endless cry for ever more spending.

The US is sick because unlike most western countries it has never had to do major public sector cuts because it has the reserve currency and can print money without price inflation.
+Michael Durwin but you are talking about old regulations. Governments come up with thousands of new ones every year and each one is a gift to corporate greed because corporations absorb the costs while small business is driven under. There is a big problem with corporate greed because the government gifts them all kind of special privileges and thus they can ignore their customers.
+Michael Durwin The US government even sets up corporations like Fannie and Freddie to 'help' people (into poverty !). Surely deregulation of US airlines and breaking up the Bell system were good things ? The Pan Am bankruptcy was a beautiful thing - pure schumpeterian creative destruction.
+Michael Durwin You are not talking about deregulation, just removing some laws. Deregulation is when a competitive free market is established e.g. the banking system of Panama (no central bank and no deposit insurance). The reason people were happy to let Wall Street go gambling with their money was FDIC insurance.
+Michael Durwin The risk of failure and personal loss is by far the best regulator and it works for free, can't be captured by special interests, can't be bribed to look the other way !
+John Glotzer Except that we bailed out the banks; they could have "trickled down" that bailout via mortgage modifications. They got bailed out because of the systemic risk to the economy. That's the same reason that we should do mortgage modifications. In fact, there's lots of evidence that adjusting mortgages and keeping people in their homes would have had a better effect on the overall economy than bailing out the bankers.

There's no question that many mortgages should never have been made, and that having been made, are unsalvageable. But there are many cases where small modifications would make a huge difference.
+Tim O'Reilly first off let me say your books have been a big part of my life for the last 15 years or so. Hard to overstate their importance - you've made the world a better place.

Second of all, your above argument to me seems that having thrown money down one toilet we should now throw more money down another. I just don't see how one mistake justifies making another. Sure the intentions were good in all cases but good intentions are not enough. There's always the temptation to just "tweak" the market but I think it's a temptation that should be resisted.
+adrian adrian Indeed true. But many people were misled, effectively victims of bank fraud.

In addition, there are lessons from epidemiology. You could make the same statement about vaccination. But in fact, if only a small minority of people opt out, you lose herd immunity, get new epidemics. This is exactly what happened to our economy. A relatively small number of people did something stupid (and an even smaller number did something immoral), but all of us are hurting. We're figuring out the best way to fix that. It's too late to prevent it.
+Tim O'Reilly Underlying False Assumptions
Even a cursory reading of all of these posts reveals the range of differences among us. Although there were serious human failures in terms of morality; i.e., greed, dishonesty, fraud, etc and such failures could not be limited to the borrowers or the lenders or the regulators. And these human failures created or were borne by a culture of greed, dishonesty, etc. There remains fundamental assumptions about the economy that move in and out of the comments.

To the extent that those assumptions are mistaken, any policy or practice that is based on false assumptions, even if implemented by authentic human persons would fail, if not in the short term, certainly in the long term.

One fundamentally false assumption is that we have an adequate scientific [meaning a set of terms and relationships that are both comprehensive and valid; the most readily recognizable ones tend to be in physics, thus e = mc2] understanding of what an economy is. I think that we cannot eliminate the moral failures that have been a part of human history for as long as there have been any meaningful records of our transactions. But what can change and develop over time is our understanding of the economy. No time seems so ripe for recognizing this with arguments on the left and the right driven more by ideology than evidence; or rather by evidence grasped by their ideology.

Let me suggest one very simplified observation that when investigated with full rigor has enormous implications. The contemporary model rests on the assumption that, however complicated, there is only one flow which moves in a circular fashion from business to household to business, etc. What if there were in fact two separate but related flows? Well how could we even know that there were two, since all the data that is gathers is gathered on the assumption that there is only one. So we have no data on the impact that two flows would have on taxes, trade, fiscal policy, etc.

Now my post has taken any reader of it, far afield from the original one begun by Tim O'Reilly nor am I clear on how to move a conversation from one post to a different one for those who might be interested in following that lead. The only way that I know how [and I certainly would be open to knowing a more effective way] is to submit a post to me that indicates your interest in pursing the course of thought that I am hinting at.
+Tim O'Reilly It's not too late to prevent the crisis ! This wasn't the crisis. The crisis will come when there is a massive panic and the Fed starts really fire hosing cash into the system. The crisis came from a credit boom generated from historically low and totally artificial interest rates. The Fed sets interest rates for the world so everyone was desperate for yield. Small towns in Norway were begging Wall Street for toxic derivatives. Things are much worse now than they were in 2008. The one bright spot is more realistic property prices. The economy isn't an animal it is people and their subjective preferences. The Fed can't create any real lasting demand, all it can do is create fake money. There won't be a USA in 10 years time or a US dollar because there was too much soviet style engineering from the top. Please please please +Tim O'Reilly stop trying to make the Federal government work with computers. Let it fall apart, just like the soviet union fell apart and the EU is now falling apart. Use your powers for good, for the people at the bottom. Help them survive and thrive after the inevitable collapse.
+Nathan Freeman A market is not comparable as a regulatory algorithm that search for a global optimality. Markets only use  greedy strategies which lead to a local optimum. And a Global and a local optimum could be very different.. Capitalism is leading the world to a local optimum which is destroying  our planet.
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