It's not often that a brand new search engine enters the fray against the super search giant Google. But that's what happened Monday, July 28, with the birth and arrival of Cuil (pronounced Cool ), the newest and, according to them, the largest search engine on the internet. Cuil indexes 122 billion web pages; at least that's their goal.
The awkwardly named Cuil is gaelic for knowledge according to founders Tom Costello and Anna Patterson. Cuil is a new business start up funded at the 33 million dollar level mostly by venture capital from Madrone Capital, Tugboat Ventures and Greylock Partners. The founders and their chief associates are all veterans of the search engine wars, having worked on Google's major search indexes, Ebay search, AltaVista and AltaVista's Babelfish ( their translation engine ). The founders believe their contribution to search is a focus on relevance and comprehensive content and not simply page counts. They argue their search results will be more meaningful to users. So far, that remains to be seen.
Announcements of Cuil and its taking on of Google heightened expectations of all trying to use Cuil Monday. Birth of the site was not without considerable pain. The site stalled, often froze, and when results were returned they were often irrelevant and sometimes even bizarre; hardly a notable beginning for a major search engine. The initial response was overwhelming. There were an estimated 50 million hits the first day. Servers had to be upgraded right away to accept the traffic. Inc Magazine staff blogger, Jason Del Rey, reported that a search for "Inc Magazine" could not find its web site ("site not found"). By the time of this posting Inc Magazine returns the correct results, although there are still problems; many of the results are not relevant.
Search results still leave a lot to be desired. We tried searching "fannie mae", knowing that Congress and the President had signed new legislation ostensibly propping up Fannie Mae and Freddie Mac. Cuil's "relevancy" search only returned the Fannie Mae home page, but no news about Fannie Mae or the crisis it was undergoing on a daily basis in the stock market, housing market, or in Congress. Indeed, the results were the "public" face of Fannie Mae on which there was little or no news about what it was going through. In other words if you wanted to know "about Fannie Mae" and its context and problems, you could not find that through Cuil. Hence no knowledge! A Google search on "fannie mae" returned in depth information about the company and what was happening to it. So much for Cuil's "comprehensive" search capacity.
Google has not become the gold standard of search by sitting on its laurels. Throughout the years it has put considerable effort into bettering and expanding its search capacity. But Cuil has identified vulnerability in Google and its data collection sometimes invasive approach. For example Cuil guarantees a non invasive privacy policy, focusing on the search not the searcher. But it will have to get much better in returning relevant search results before it can be considered a first rate contender with Google. Right now it can't be considered a first stop for search. It is a start up with lots of growing pains to be gotten through quickly if it is to be a contender. Beyond search it will have to work on its business model to develop a strong revenue base. Cuil has much talent and promise. It will be worth watching as will be Google's response.
For books on Google and its significance see David A Vise's The Google Story, John Battelle's The Search: How Google and its rivals rewrote the rules of business and transformed our culture, and Building Your Business With Google For Dummies by Brad Hill, all available at the Berkshire Athenaeum or your local library.
Showing posts with label Fannie Mae. Show all posts
Showing posts with label Fannie Mae. Show all posts
Thursday, July 31, 2008
Thursday, July 17, 2008
Fannie Mae, Freddie Mac, IndyMac ( In the News )
Everywhere you turned during the last week, you could not avoid bumping into these acronyms. Just who or what is Fannie Mae, Freddie Mac, and IndyMac? In what ways are they related if any? What is their relation to the current economic crisis? Where can I learn more?
Let's start with Fannie Mae, also known as the Federal National Mortgage Association(FNM on the New York Stock Exchange). The Federal National Mortgage Association was formed in 1938 during President Franklin Roosevelt's second term. From 1938 to 1968 Fannie Mae was a government agency. In 1968 under President Lyndon Johnson, it was privatized, becoming a government sponsored agency( GSE ), owned by private shareholders. From 1938 to 1970 it controlled the secondary mortgage housing market. In 1970 to provide competition congress formed Freddie Mac, also known as the Federal Home Loan Mortgage Association ( FLMA on the New York Stock Exchange). Both Fannie Mae and Freddie Mac are Government Sponsored Enterprises. Together they control the secondary mortgage market in the United States. They are regulated by Housing and Urban Development's Office of Federal Housing Enterprise Oversight.
What is the secondary mortgage market and how does it work? Fannie Mae and Freddie Mac purchase housing loans/mortgages made by US banks. ( They do not deal in individual loans to homebuyers.) They then bundle those loans into securities for sale on Stock Exchanges. Typically banks, national and international investors purchase these securities which represents, currently, 5 trillion dollars of debt. This is the significance of these two large banks. Should they
fail a worldwide economic crisis would be precipated. So Fannie Mae and Freddie Mac promote the American dream of home ownership by purchasing and selling housing debt.
What if the debt that is being sold is bad debt and not secured? An unknown percentage of their holdings is bad debt caused by individual bank's subprime loan practices. These are essentially unsecured mortgages lent to individuals who could not pay their loans as mortgage prices increased. Unpaid mortgages have led to foreclosures, and compounded foreclosures have led to liquidity crises for banks. In the case of the Pasadena, California bank, IndyMac, these bad loans led to a 1.5 billion dollar loss in five days, a run on the bank by panicked depositors, declaration of bank failure by the the Treasury Department's Office of Thrift Supervision and Federal takeover by the Federal Deposit Insurance Corporation ( FDIC ). another Great Depression agency founded under Franklin Roosevelt's auspices 75 years ago in 1933 to restore confidence in banks after their widespread failure.
IndyMac as of Monday, July 14, became IndyMac Federal Bank. Shareholders lost everything. Depositors of 100,000 dollars or less and IRAs of 250,000 or less are guaranteed. Uninsured depositors such as mutual funds may receive up to 50% as IndyMac's assets are sold off. IndyBank has billions of dollars in assets much of it gained through their subprime loans. As a side note, Sheila Bair, Chairman of the FDIC, is former professor of financial regulation, Islenberg School of Management, University of Massachusetts, Amherst, with many years of experience as a regulator. She is actively involved in the IndyMac takeover.
On Sunday July 13, the Federal Reserve acted to guarantee support for Fannie Mae and Freddie Mac, whose stocks had fallen below $10 a share. Should they need it Fannie Mae and Freddie Mac will be able to obtain direct assistance from the Reserve. The Berkshire Eagle interviewed several local bankers who saw little or no effect locally.
There has been extensive coverage of the financial crisis in the business media. Particularly noteworthy are thorough reports in Money Magazine online and Business Week. Where these crises are heading is still to be determined. Investigations have started and legislation is being developed.
The Berkshire Athenaeum has several books in its collection that can be helpful in understanding these important trends. Here are some: Surviving Financial Disasters by Tiffany R. Love; The Fed: the inside story of how the world's most powerful financial institutution drives the markets by Martin Mayer; The Foreclosures.com guide to advanced investing techniques you won't learn anywhere else by Alexis McGee; The Everything Guide to Buying Foreclosures by George Sheldon, and, for a historical perspective, Conrad R. Stein's The New Deal: pulling America out of the Great Depression.
Let's start with Fannie Mae, also known as the Federal National Mortgage Association(FNM on the New York Stock Exchange). The Federal National Mortgage Association was formed in 1938 during President Franklin Roosevelt's second term. From 1938 to 1968 Fannie Mae was a government agency. In 1968 under President Lyndon Johnson, it was privatized, becoming a government sponsored agency( GSE ), owned by private shareholders. From 1938 to 1970 it controlled the secondary mortgage housing market. In 1970 to provide competition congress formed Freddie Mac, also known as the Federal Home Loan Mortgage Association ( FLMA on the New York Stock Exchange). Both Fannie Mae and Freddie Mac are Government Sponsored Enterprises. Together they control the secondary mortgage market in the United States. They are regulated by Housing and Urban Development's Office of Federal Housing Enterprise Oversight.
What is the secondary mortgage market and how does it work? Fannie Mae and Freddie Mac purchase housing loans/mortgages made by US banks. ( They do not deal in individual loans to homebuyers.) They then bundle those loans into securities for sale on Stock Exchanges. Typically banks, national and international investors purchase these securities which represents, currently, 5 trillion dollars of debt. This is the significance of these two large banks. Should they
fail a worldwide economic crisis would be precipated. So Fannie Mae and Freddie Mac promote the American dream of home ownership by purchasing and selling housing debt.
What if the debt that is being sold is bad debt and not secured? An unknown percentage of their holdings is bad debt caused by individual bank's subprime loan practices. These are essentially unsecured mortgages lent to individuals who could not pay their loans as mortgage prices increased. Unpaid mortgages have led to foreclosures, and compounded foreclosures have led to liquidity crises for banks. In the case of the Pasadena, California bank, IndyMac, these bad loans led to a 1.5 billion dollar loss in five days, a run on the bank by panicked depositors, declaration of bank failure by the the Treasury Department's Office of Thrift Supervision and Federal takeover by the Federal Deposit Insurance Corporation ( FDIC ). another Great Depression agency founded under Franklin Roosevelt's auspices 75 years ago in 1933 to restore confidence in banks after their widespread failure.
IndyMac as of Monday, July 14, became IndyMac Federal Bank. Shareholders lost everything. Depositors of 100,000 dollars or less and IRAs of 250,000 or less are guaranteed. Uninsured depositors such as mutual funds may receive up to 50% as IndyMac's assets are sold off. IndyBank has billions of dollars in assets much of it gained through their subprime loans. As a side note, Sheila Bair, Chairman of the FDIC, is former professor of financial regulation, Islenberg School of Management, University of Massachusetts, Amherst, with many years of experience as a regulator. She is actively involved in the IndyMac takeover.
On Sunday July 13, the Federal Reserve acted to guarantee support for Fannie Mae and Freddie Mac, whose stocks had fallen below $10 a share. Should they need it Fannie Mae and Freddie Mac will be able to obtain direct assistance from the Reserve. The Berkshire Eagle interviewed several local bankers who saw little or no effect locally.
There has been extensive coverage of the financial crisis in the business media. Particularly noteworthy are thorough reports in Money Magazine online and Business Week. Where these crises are heading is still to be determined. Investigations have started and legislation is being developed.
The Berkshire Athenaeum has several books in its collection that can be helpful in understanding these important trends. Here are some: Surviving Financial Disasters by Tiffany R. Love; The Fed: the inside story of how the world's most powerful financial institutution drives the markets by Martin Mayer; The Foreclosures.com guide to advanced investing techniques you won't learn anywhere else by Alexis McGee; The Everything Guide to Buying Foreclosures by George Sheldon, and, for a historical perspective, Conrad R. Stein's The New Deal: pulling America out of the Great Depression.
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