Transplanting a Seattleite

There’s so much good stuff. I really liked the bit about the Saudis. After noting that they were all mad that they got zero’d out (fantastic quote from I believe FT coverage quoting someone: “You make fun of dictatorships and then you can change the law over the weekend. What’s the difference between Saudi Arabia and Switzerland now? It’s really bad”), Levine remarks:

“One difference is that the Swiss regulators did not bring the chairmen of Credit Suisse and UBS to a hotel and torture them until they agreed to the deal. (This is in part because the chairmen of Credit Suisse and UBS are experienced bankers who know how this is supposed to go, though also for other reasons.) Still I mean you can see their point.”

A. wanted to know what I was laughing about and I just went, too hard to explain!

But really, I live for moments like this, both in history AND in Matt Levine columns:

“And now it is apparently falling apart for reasons that have nothing to do with its own audacity. Oh, I mean. It is possible that there is some characteristic of Credit Suisse that made it unusually likely to (1) do this First Boston deal, (2) have the Archegos, Greensill, tuna-bond, garden-party-spying, etc. scandals and (3) ultimately fail and be sold to UBS. Possibly the problem is that the overall level of audacity at Credit Suisse was too high, and eventually that caught up to it.”

Truly, at the crossroads of Fuck Around and Find Out and Oh You Just Now Noticed.

http://www.ad.nl/ad/nl/1012/Nederland/article/detail/4212723/2015/12/22/NS-houdt-oude-treinen-in-de-running-tegen-de-drukte.dhtml

So the next time you're sitting around complaining about how we haven't kept up on maintenance on the train system or how full public transit is or whatever, and you want to say, "In Europe ...", well, the trains are full in the Netherlands, they are deferring less needed maintenance and pulling old trains back into use in an effort to keep up with demand, as well as trying to get people to travel other than at peak travel times.

Looked at one way, this is an indication of economic distress: people aren't driving, they are riding. Looked at another way, this is an indication of economic boom times: more people are going to work. I'm not sure which is the the case, altho I suspect more of the latter than the former.

I have already noted in some trip reports that I got sort of screwed this year. We based our planning on crowd predictions that were revised upward the day we arrived in Florida, and then ultimately still undershot the reality. TouringPlans is not unaware of what happened.

http://blog.touringplans.com/2015/11/18/disney-world-crowd-calendar-report-november-8-to-14-2015/

"Again last week we saw record breaking wait times for this time of year. On Monday for example, At Magic Kingdom we saw a crowd level ‘9’. The same day last year was a crowd level ‘1’."

The Monday being discussed was November 9, 2015; the weather was in the 80s, with a low in the mid 80s and a high of 90.

http://www.wunderground.com/history/airport/KORL/2015/11/9/DailyHistory.html?req_city=Orlando&req_state=FL&req_statename=Florida&reqdb.zip=32801&reqdb.magic=1&reqdb.wmo=99999

The previous year's weather:

http://www.wunderground.com/history/airport/KORL/2015/11/9/DailyHistory.html?req_city=Orlando&req_state=FL&req_statename=Florida&reqdb.zip=32801&reqdb.magic=1&reqdb.wmo=99999

Solidly 60s, never breaking to 70 degrees.

While obvs the Florida unemployment rate for November is not yet available, the unemployment rate for September 2014 can be compared to the unemployment rate for September 2015: 6.2 vs. 53. (Have fun digging around in this! http://www.floridajobs.org/labor-market-information/data-center/statistical-programs/local-area-unemployment-statistics.)

A glance at the calendar says that in 2015, November 9 was on a MONDAY, whereas in 2014, it was on a SUNDAY.

To sum up: lower visitation on a cold weekend day with higher statewide unemployment; higher visitation on a warm to hot weekday with lower statewide unemployment. Both dates fell within Food and Wine. Both dates fell within the school year.

Factors increasing visitation: higher temperatures, lower unemployment in Florida.
Factors decreasing visitation: Monday vs. Sunday

You actually _can_ argue that Mondays are busier than Sundays at WDW -- people have -- but it always makes me chuckle when people make that argument, so, you know, I'm gonna laugh at you. (People have also tried to argue that Sundays are busier than Saturdays; again, ha ha ha ha ha.)

We've been going to WDW since Xmas week 2009 (I think). We've been going twice a year since 2012 (I think). While we don't always go at exactly the same time of year, we've been going during the first half of November for most of that time, and our spring trip is usually, but not always, during April vacation break. I feel like by this point, we have a pretty good "feel" for what the place feels like during the times that we are there. And this year, I feel like we turned a hockey stick corner.

It's time for the Fed to start raising rates. Not by much. Not very fast. Just 25 basis points at a time, to reassure everyone that, yes, the economy is healthy enough to start crawling off of Zero. Not only do I believe this won't in any way discourage lending to the consumers who could really benefit from easier access to credit. It think it will _encourage_ lending to those consumers, because we'll finally be able to convince ourselves there is a path forward.

ETA: Map of unemployment in the US by state.

http://www.businessinsider.com/october-2015-state-unemployment-rates-map-2015-11

We rely on our credentialing system every day. We assume the nurse at the doctor's office has the training and license that is required by law for that job. If we are hiring for a position, and we look up a company's website, call a number on that website to verify employment for a person who says they worked there, we assume that the company is real and the person we are talking to is telling us the truth. If someone applying for a job has educational credentials from a country we are not familiar with, and a certificate from our government authenticating that educational credential, we assume that the person has the degree and the school is real and competent.

What if that stops working?

The Washington Navy Yard shooting exposed one problematic credentialing system: a contracting firm hired to keep track of pesky little things like people with security clearances that maybe shouldn't have them any more wasn't really doing its job.

This was in the Boston Globe recently:

https://www.bostonglobe.com/metro/2015/09/25/two-more-fake-nurses-identified-state/liKYp52qGJC9LvKXpmTbrI/story.html

"A Globe review of the documents in the initial 13 cases found common patterns. For example, four filed forms indicating they had licenses from Hawaii, all supposedly signed recently by the same person — a person who, Massachusetts officials later learned, had retired five years earlier. Three claimed to have Oklahoma licenses, each purportedly signed by “Kimberly Glazier”; Oklahoma officials told Massachusetts investigators that Kimberly Glazier does not sign verification forms."

There is now a massive review going on across the state.

It is a global problem, as this NYT article describes:

http://www.nytimes.com/2015/05/18/world/asia/fake-diplomas-real-cash-pakistani-company-axact-reaps-millions-columbiana-barkley.html

I started to notice it after a friend told me she knew of places that claimed to get you any job you want: they fake up diplomas from other countries, create websites of fake companies, staff phone lines to supply references and confirm employment and coach customers how to apply for the Position They Desire successfully. This was told in the context of The Squish getting gunshy about applicants from one particular country, because they always look good on paper but then can't actually do the job they are hired for.

If you think that INS would catch this, well, INS may be concerned that they aren't catching it. From the NYT article above: "But the proliferation of Internet-based degree schemes has raised concerns about their possible use in immigration fraud".

When a job requires a certain amount of training, and the pool of qualified applicants has been largely worked over, a would-be employer can either offer more money to attract people who already have jobs, or they can attempt to expand the pool of applicants. A variety of tech companies have been working the latter approach for a long while now. Perhaps more importantly, so have hospitals and nursing homes. What happens when we run out of people with the right training _globally_ to do a job? Especially, what happens when employers decline to hired the truly trained and skilled, in favor of those whose credentials are not what they seem?

The experience with VW (it's cheaper to lie, than to implement) suggests that we had probably better be diligent about enforcement, if we want our regulatory scheme of credentialing to continue to be useful in the future.

ETA: Speaking of catching people in lies, and promises being broken, Bloomberg has a great long piece about bullshit web traffic, the advertising model of the web, etc.:

http://www.bloomberg.com/features/2015-click-fraud/

I was reading some of her remarks over at Calculated Risk:

http://www.calculatedriskblog.com/2015/09/yellen-anticipates-raising-fed-funds.html

I was going to point to one sentence, because it made me chuckle, but then I realized the sentence right after it was _even better_.

"Beyond these considerations, a modest decline in the unemployment rate below its long-run level for a time would, by increasing resource utilization, also have the benefit of speeding the return to 2 percent inflation. Finally, albeit more speculatively, such an environment might help reverse some of the significant supply-side damage that appears to have occurred in recent years, thereby improving Americans' standard of living."

Hey, we can't seem to get off zero. Maybe if everyone had a job that would help and, ya know, a little inflation never killed anyone. Sing it!

I love the second sentence even more, tho. "Don't act like those depression era peeps. You need to consume more. Life is short. Enjoy it."

Right on all counts.

I am serious.

ETA: I can't help but wonder if Yellen is out loudly saying they will probably still do the first rate rise this calendar year in part because the markets reacted so negatively to the lack of a rise in September, on some sort of theory that, if the rate doesn't rise, then the world must truly be coming to an end! Which is a bullshit theory on the face of it, but whatev.

With FOMC coming up (I'm still betting NO on a rate rise in September, and if it happens at all this year, I'd bet drinks but little more that it will be in October; rationale is: by that point, we'll have real data on back to school spending AND we'll have a better idea what the retailers ordered for the holiday season), I'm once again fruitlessly poking around in search of back to school spending data.

NYT has this to say about those insane lists that have become the norm:

http://www.nytimes.com/2015/09/09/business/parents-may-spend-less-this-back-to-school-season-despite-growing-need-for-supplies.html

No actual data about real spending. I think these lists are disguised school fees that, on the one hand, are kinda sorta progressive (the poors don't actually do the list; people who do supply the contents of the list are helping fund those who don't) but on the other hand are just hiding how much school actually costs, which is rarely good for democracy. School fees are anathema in true public education. We need to provide budget for school supplies. But that is not really what I was looking for.

MasterCard SpendingPulse from early in August: http://www.mastercardadvisors.com/modules/news/steady_growth_back_to_school_sales.html

People price shopping on mobile:

http://digiday.com/brands/2015-back-school-spending-season-5-charts/

Lots of _predictions_ that back to school would be less than last year. In practice, when I went to buy A. sneakers at Nordstroms, they were out of a lot of sizes/styles. Which struck me as more than a little odd.

CR says the data points to a rate rise this month, but he notes that most people are now predicting NOT, largely because data everywhere else in the world is so terrible. (Raising rates in this global environment would exacerbate the already strengthening dollar problem, hurting our manufacturing sector, energy sector and trade deficit.)

Well, it took a while, but the news has finally, FINALLY become totally worthless. Usually this happens around the end of June, certainly no later than July 4th weekend. But boy, howdy, between Greece and a few other odds and ends, there was still nuanced, fact-filled (even mostly accurate) coverage all of kinds of interesting stuff right up until this week. And now? Post Fox News Republican debate, it has gotten beyond sketchy (we're actually parsing ideas as ludicrous as Ranking Republican Presidential Candidate Misogyny? Really? You'd sort of think any one of them would just break the meter and that'd be the end of it, but nooooo. We apparently need to spend minutes at a time on this and inches of text. Whatever.) . So I'm going to take a moment to explain how I think about economic cycles, because when the news _does_ get responsible again, one of the items high on the agenda is going to be another Will They/Won't They round about the Fed raising rates at the September meeting.

First: What IS an economic cycle and why do we care? Basically, there are months and occasionally years at a time where companies have a really hard time finding people to hire and workers can ask for raises without fear of the consequences and service at fast food restaurants gets beyond terrible and traffic is a nightmare. At any given time, there is probably some place you can point to like this (North Dakota had its moment while the rest of the country groaned from lack of jobs, and commutes were, comparatively, a breeze and everyone at Wendy's was friendly, prompt and could make accurate change). There are, by contrast, months and occasionally years at a time where companies are spoiled for choice -- brilliant, experienced candidates willing to work long hours for cheese sandwiches and the hope of access to terrible health insurance they mostly have to pay for themselves, when asking for a raise is inviting your boss to fire you and the service at McDonald's is beyond amazing. And there are the bits in between. So that's it: the booms are when you wait in line to be treated awful at Carl's Jr., but you're making bank -- altho you still can't afford to buy a house because they went right to the stratosphere before you had your chance. The busts are when you are praying to get hired by Subway, because your however many months of unemployment has run out and it isn't going to get extended.

Second: What is the Fed? The Fed is the banks' bank. It's where banks get money. It's where banks deposit money. And the Fed gets to decide the interest rate charged when banks need money, and what they get paid on their money on deposit. If the Fed thinks that the world has gone apeshit, and all those incompetent idiots working fast food are buying McMansions because the banks are giving money in job lots to all comers, the Fed can charge the banks more money to discourage them from doing this. If the Fed looks around and say, traffic is entirely too light, and I think I was just served by a Nobel Laureate at Papa John's, then the Fed can charge the banks _less_ money to encourage the banks to more freely loan money to enterprising people who know what Ruby on Rails is, and have already used AWS at more than one gig.

Under W., the banks went apeshit, and everybody bought a McMansion, but for a variety of reasons, some good, but mostly bad, the Fed was unable the effectively intervene to put a stop to the lending, in part because a lot of the lending to buy the McMansions was not going through the banks; it was going through another part of the economy. Anyway, the crash happened, and then nobody wanted to do anything except hoard their folding green stuff, dollars, gold, etc., and the Fed reduced rates to effectively zero -- they couldn't GIVE money away, literally -- in the hopes that someone, somewhere, would borrow some money, start a business, hire some people, etc., especially that amazingly brilliant logistics person who was pushing a broom at Sorrento's.

Third: What is the September Meeting? Well, along about the middle of September, the people in charge of the various member banks of the Federal Reserve (you know where Wikipedia is. Go read all about it) will get together and have a convo and then they will put out a press release and Janet Yellen will talk to the press. While Yellen has been ridiculously clear that rates can be changed at any meeting, with or without a pre-schedule press avail, there is this idea that a rate change -- the first in YEARS!!! -- will occur at a meeting with a pre-schedule press conference. And a lot of people are utterly convinced that Yellen will announce a rate rise.

Fourth: The rate rise, whenever it occurs, will be tiny. So tiny that it will have effectively no effect, unless a lot of people who aren't talking decide to throw another Taper Tantrum.

Read about that on your own, say, here: http://www.investopedia.com/articles/personal-finance/060415/what-taper-tantrum-and-should-you-fear-it.asp

Fifth: Wait, what?

Remember that the basic idea behind raising rates is because the economy is On Fire and the service at Burger King has deteriorated unacceptably, plus it takes so fucking long to get to work that road rage incidents are on the rise and businesses are having trouble expanding because when they hire the most competent person they can find (until recently, employed as an assistant manager at Little Caesar's), that person turns out to be unable to get along with anyone, erratic about showing up to work on time and prone to lunches involving a lot of alcohol. Is that how the world is working right now?

Crickets. I hear crickets. Loud, loud crickets.

Now, in favor of the rate rise argument are the lovely people of Mountain View, California, who put a cap on new office space. Also, an organization called Save Our Suburbs in Mercer Island which was formed in response to the possibility that the population of Mercer Island might start to rise as a result of Transit Oriented Development around their Link station. It is clear that the economy of Mountain View, and the quiet, heavily patrolled burbs of Mercer Island (don't drive in Mercer Island while black, or, hell, even if you're in a beater car. They'll escort you off if you even look slightly lost and are white) are enjoying an excellent point on the economic cycle.

Against the rate rise argument are BLS statistics indicating absolutely no wage growth whatsoever. Not only are we not at the happy cusp that is NAIRU (look it up -- best reason ever to raise rates, I do in fact worship at the altar of Volcker, while wistfully looking back in nostalgia at how _fast_ runaway inflation ate away at mortgage debt in the 70s that had been priced in the late 1960s), with energy prices plummeting and every other commodity chasing energy downhill, it's not clear we have any kind of inflation at all.

Then why do people expect/want the Fed to raise rates?

I'll tell you why. Our country has a lot of older people in it (you know, like me, only slightly more so). And they are TERRIFIED of investing their money in anything that isn't guaranteed by the US taxpayer six ways or more. And that means that the Fed rate totally determines how much they can take out each year of their retirement (or, if slightly younger, how long they have to wait before they can retire) and they aren't happy about it.

Basically, the olds want the Fed rate to go up, so they can retire. And if that happens on the backs of the middles and the youngs, well, they'll just pretend they don't know that's gonna happen and act all shocked if they get their way and then it does.

Good news! I think the Fed is a lot more clever than they are. But we shall see.

ETA: I have actually left out of this overview an important argument in favor of raising rates. It is important NOT because it is a good argument (it is breathtakingly immoral and also risible) but because the people who emit this argument look like reasonable people and often have business degrees or otherwise look like they might actually know something. Here it is: we should raise rates NOW so that if there's another downturn, we can lower them again.

Of course, given that the single most predictable result of a rate rise or series of rate rises IS another downturn, well, yeah. Immoral. Risible. Now, you might be thinking, wait, they might have a point. To which I will politely refrain from saying, Try, Try Really Hard, To Not Be a Mark, and instead say this. Well, if we have another downturn while rates are effectively at zero, we will just have to resort to ACTUAL stimulus, rather than somehow acting like the central bank is the only person who can possibly do something about a downturn. You know, ACTUALLY FUND INFRASTRUCTURE type of thing. New Deal. Etc. Ideally while avoiding the really bad scenario for jump starting the economy (you remember that one: destroy all the existing everything by having a really comprehensive war. Afterwards, the group with the biggest surviving industrial base makes a ton off of loaning the rest of the world money to buy everything they need to rebuild. Also known as the 1950s).

File under D00M! Possibly.

Apparently, 2% of the State of Vermont's budget comes from the "captive insurance industry", and the industry collectively is one of the state's top 10 employers. You know, that can make it tough to regulate an industry effectively, when there is so much riding on keeping the whole thing rolling along smoothly.

http://www.nytimes.com/2007/04/04/business/04vermont.html

There are a lot of things that make me go, hmmm. Like, waiving safeguards. Reducing costs. Legally limiting the possibility of competition. Having origination be through one company but then having everything immediately sold to other, private, opaque, unrated companies.

http://ww2.cfo.com/regulation/2013/06/will-shadow-insurance-shock-the-system/

It isn't a heavily covered topic, however. But you know, you really have to wonder. I mean if a wide swathe of the nation's pensions, labor insurance, and other insurance and reinsurance is all going through these weird vehicles, and they are all in one state and and and.

If someone doesn't exploit the hell out of this and make it blow up in all of our faces at some point, it would be a miracle. OTOH, I love some D00M, so maybe I'm just being paranoid.

A Priceless Paragraph:

"When there’s no property-casualty insurance on the market, or the premiums are too darned high, a company can set up a captive to self-insure its risks. Captives enable a business to price and underwrite its risks as it knows they should be priced or underwritten — not how the insurance industry says they should."

This is right up there with some of the liquid-alt vehicles out there currently that people are complaining about. There's no trading, but there is a last price quoted -- but in the even you actually need to sell, goddess only knows what price you might really get. The "alt" part of the description is right, but the liquid part is entirely a lie when the market has frozen solid.

Further:

"They can provide an opaque means of shifting risk off of the balance sheet"

Reinsurance is cheap, because the idea is that the first line insurance will probably pay, and the reinsurer only has to pay if the first line got blown away -- like tranches in all those you know whats. But if you make up a fake insurance company with no capacity to pay and it goes straight to the reinsurer, then the reinsurer is not charging enough. In the event of a wave of claims, the reinsurers would either have to hike rates to the sky going forward to make good their losses, or they would go under and who knows where the risk goes from there.

ETA: The insurance commissioners are trying to get this back under some semblance of control.

http://www.naic.org/cipr_topics/topic_captives.htm

I'm not finding this as reassuring as I wish I did.

And this, this right here, this just seems evil.

http://www.nytimes.com/2015/04/11/your-money/irs-is-looking-into-captive-insurance-shelters.html

A Priceless Paragraph:

"David Slenn, a lawyer at Quarles & Brady in Naples, Fla., and the chairman of the American Bar Association’s captive insurance committee, said the push to set up small captives had gotten out of hand. The interest in captives is being driven by lawyers and accountants who are seeking additional fees now that the estate tax exemption has been permanently set and there is not as much annual business, he said."

To be fair, things like this:

"People are marketing captives as a possible substitution for estate planning."

sound less like systemic risk and more like idiots looking to get into serious trouble with the IRS, altho at least one guy went to tax court and won. But really? Evading gift taxes and the remaining estate taxes? Bad behavior.

Okay, so let's assume that we've got two separate captives issues going on here. One, the increasing, substantial and fairly blatant attempt to avoid taxes, probably is NOT a systemic risk of any sort. Hopefully, the IRS will plug that hole at some point. I'm not going to lose any sleep over it (don't be an idiot and set up a captive as an estate planning tool, okay? It's not going to go well). Two, the fact that the entire reinsurance industry appears to have sewn itself together into a black hole, mostly located in and around Vermont [ETA: That's not really true. Reinsurance is centered in Europe. Captives are centered in Vermont. They are related, but not the same.], and if something really gnarly happens with any segment of any primary insurance industry (life, property, labor, etc.), there is massive counterparty risk. That is, when the primary insurer has a really horrible string of months and contacts its reinsurer, they may well find out that the reinsurer shrugs and say, hey, I'll get that money to you ... someday. Or, you know, maybe my bank will give you something to tide you over? I have a letter of credit? That really only has to happen, once? publicly, maybe a few times if it is successfully concealed, before the entire reinsurance industry locks up hard, and the primary companies have to hike rates like You Would Not Believe and Cannot Possibly Afford, because they are no longer able to sell off their tail risk.

This definitely seems like it is worth worrying about. I'm still trying to figure out if it qualifies as D00M, or just something that someone should someday fix and maybe not wait too long about it.

https://lawreview.uchicago.edu/sites/lawreview.uchicago.edu/files/uploads/81_4/03%20Schwarcz_ART.pdf

I love that people now write about "model risk" as a thing. Most excellent.

So, in the course of reading that thing at U Chic (shudder), I ran across a financial product I had previously been blissfully unaware of: Contingent Deferred Annuities. Described here, in inappropriately optimistic terms:

http://www.actuary.org/pdf/life/Contingent_Annuities_Intro_to_NCOIL_120225.pdf

(I thought actuaries were supposed to be safe and boring. When did these people become so insane?)

This product is not the most ridiculous financial product I've ever heard of (maybe portfolio insurance, in the late 1970s/1980s?). But no one should sell it. No one should buy it. And we should regulate that fucker right out of existence.

Apparently, AshleyMadison attempted a Canadian IPO, failed, and is gonna try London next.

http://www.bloomberg.com/news/articles/2015-04-15/adultery-website-ashleymadison-seeks-ipo-as-demand-booms

Insert comment about the relative evil of consensual sex vs. selling addictive products to children so they'll keep buying as adults (tobacco companies) vs. gun companies.

Apparently while people like making money off of AshleyMadison, they'd rather you did not know.

"Avid Life Media, whose investors are wealthy North Americans who prefer to remain anonymous, registered 45 percent sales growth last year and a profit margin between 20 percent and 25 percent, according to Kraemer, who said the company estimates its value at $1 billion."

The Upshot at NYT has this article saying, how come we can't get detailed information about student debt?

http://www.nytimes.com/2015/03/22/upshot/were-frighteningly-in-the-dark-about-student-debt.html

It has a variety of reasons for wanting the detailed information, assertions that privacy can be preserved, it impugns the competency of the Education department, argues we need this data to "help" borrowers before they get into trouble (ha ha ha ha ha -- the way to help most student debt holders who get into trouble would have been _before_ they borrowed that money from that lender to go to that school. Problem is not fixable thereafter). At no point does it get anywhere near suggesting that perhaps the data do not actually exist. However, it has quotes like this:

"David A. Bergeron spent 34 years at the Education Department, ending up as an assistant secretary for postsecondary education. He left in 2013 and is now vice president for postsecondary education at the Center for American Progress, a Washington research organization. Mr. Bergeron says he is frustrated by the incomplete data. “The department releases only very high-level summary statistics, which do not allow us to understand the problems facing individual student borrowers,” he said. “Trying to solve a problem with incomplete information leads you to the wrong solutions.”"

Have we truly forgotten the recent structured debt debacle? Let me tell you my subbasement in the Rainier Bank Building story once again, because I like telling that story and I Am Old so listen up, pups, ya might learn something.

Once upon a time, in the world of paper (gasp! The Horror), every mortgage had a file and that file had to have certain documents meeting certain criteria in that file. When the mortgage moved from the originator (in this case, Rainier Bank) to Someone Else (I have No Fucking Clue), Every Last Freakin' File had to be checked, because That Is Due Diligence. My part of the story involved getting to wear shorts while working in a bank, because (a) there was no AC in these rooms and (b) it was a subbasement, so no customers. I had to painstakingly go through thousands of files that were about to be transferred to make sure they were all right and tight. Did I find errors? Yes! I did. My favorite errors involved neighboring houses in southern California owned by a half dozen or more names. This really did happen more than once, and I assume these were some kind of family business or family compound or extended family occupying two neighboring houses or whatever, but their files were predisposed to confusion and were incredibly difficult to fully disentangle because of similar addresses and similar names.

Or I should say, that _was_ due diligence.

Then, in the early world of electronic documentation, mortgages became entries in spreadsheets and the spreadsheets were transferred _without the files_. But, the law had not caught up with daily practice, so when this stuff landed in court, you had to track back through all the transfers to find the paper. A couple things happened. (1) A bunch of big operations (WaMu, I am looking at your corpse) went under and that made finding paperwork that may or may not have passed through them ... difficult to find and (2) I'm completely convinced that a whole lot of strip mall mortgage brokers just binned the original paperwork and is was never around to be found thereafter. There were efforts to recreate the paperwork, which were generally found to not actually be legal (that was the robosigning part of the scandal, IIRC).

I would like an explanation why this didn't also happen with student loans. Because for damn sure it did. The paperwork is not there to be found, so as long as your loan isn't actually being held by the Feds, you can probably slow-walk all collections attempts and demand the paperwork be produced. They'll never produce it so you never have to pay. (If the Feds have it, they might hold any taxes you were hoping to get back in a refund and do other things, so exercise due caution out there adult children!)

Voila. Problem. Solved. (Not really. But we can dream!)

I am not a lawyer or a financial advisor. This is not advice. This is political speech.

However, other people have been doing this for a while and it seems to work at least part of the time:

http://www.dailykos.com/story/2012/05/27/1095211/-SHOW-ME-THE-PAPERWORK-Are-Many-Student-Loans-Uncollectible

The usual debt collection rules apply: go get good advice from a lawyer who practices in this area before making _any_ payment or signing _anything_, especially if it goes to collection and ESPECIALLY if a debt that was removed gets reinstated. You lose a ton of legal rights to question the validity of the debt claim if you make a payment.