Daily Archives: 12 December 2014

Good for Amazon

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‘Way last July, amazon asked the FAA for expanded outdoor testing permits (Amazon Petition for Exemption – Docket No. FAA-2014-0474) so the company could engage in serious testing of its planned drone-based delivery system. To date, the FAA has chosen not to respond. Amazon has renewed its request and advised the agency that continued unresponsiveness will force amazon to take its development out of the country [emphasis added].

To date, much of our Prime Air research and development efforts, including flight testing operations, have been conducted inside our laboratory and indoor testing facilities in Washington State. However, we must move beyond indoor testing if we are to realize the consumer benefits of Amazon Prime Air. In the absence of timely approval by the FAA to conduct outdoor testing, we have begun utilizing outdoor testing facilities outside the United States. These non-US facilities enable us to quickly build and modify our Prime Air vehicles as we construct new designs and make improvements. It is our continued desire to also pursue fast-paced innovation in the United States, which would include the creation of high-quality jobs and significant investment in the local community.

Their request also has from the jump anticipated risks: they’ve identified a remote area for testing and would conduct their flights within 400 feet of the ground. Other safety precautions are built in, also. The FAA, though, has continued to be unresponsive. Indeed, its disinterest is amply demonstrated by its suggestion that amazon stop bothering them with drone testing applications and go look for an Experimental Aircraft certificate—which aside from starting a wholly unrelated lengthy permitting process from scratch, is a certificate for manned aircraft and so plainly not applicable here.

The FAA’s…disinterest…also is cynically circular. They’ve already determined (under whatever pseudo-logic, but it’s their story and they’re sticking to it) that small drone operation is per force commercial in nature. Experimental aircraft, by legal definition, cannot be operated commercially—they’re for private pilots flying themselves, and maybe a passenger, for fun and no profit. Of course, the FAA knows this; experimental aircraft certificates are FAA-issued certificates.

Amazon now is emphasizing its determination to proceed:

It is also in the public interest for Amazon to keep its small UAS R&D operations in the United States, and help America establish itself as the leader in development of UAS technology. Our continuing innovation through outdoor testing in the United States and, more generally, the competitiveness of the American small UAS industry, can no longer afford to wait.

And their stick to prod the FAA:

We are poised to significantly expand our distinguished team of engineers, scientists, and aeronautical professionals at Amazon’s next-generation R&D lab in Washington State. Amazon Prime Air currently has dozens of United States job openings for highly-skilled professionals including hardware engineers and research scientists.

And

Amazon urges the FAA to swiftly approve our Section 333 petition, submitted nearly five months ago. Without the ability to test outdoors in the Unites States soon, we will have no choice but to divert even more of our UAS research and development resources abroad.

More businesses—especially large ones, which have the heft to make such claims meaningful—should take the government to task for its desultoriness in responding to requests. This would produce a far better business environment and a far better marketplace for American citizens than does big business’ current practice of crony capitalization.

Another Argument for Disbanding Fannie Mae and Freddie Mac

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Fannie Mae and Freddie Mac on Monday announced details of a controversial plan to allow some first-time homeowners to obtain a mortgage while putting down just 3% of the price of the home.

We’ve not finished recovering from the Panic of 2008, and these entities want to resume an underlying component of the last housing bubble and burst that contributed so heavily to that.

But wait:

Fannie Mae said the loans that allow for 3% down payments will be held to the same eligibility requirements as other Fannie loans, including underwriting, income documentation and risk management standards.

That’s a low bar, indeed, as it was during the last bubble.

The problem here is not so much the high leverage of those loans, per se, as it is the lack of skin in the game—the lack of equity, or actual ownership, or what is there for the borrower to lose—a 97% borrower has in the home he’s buying. What does he lose when can’t—or decides he doesn’t want to anymore—continue paying down his loan?

Here’s Andrew Bon Salle, Fannie Mae Executive Vice President for Single Family Underwriting, Pricing and Capital Markets (you can tell he’s important to Fannie Mae from the length of his title):

This option alone will not solve all the challenges around access to credit. Our new 97% LTV [loan to value] offering is simply one way we are working to remove barriers for credit-worthy borrowers to get a mortgage[.]

Which, of course, is only loosely related to reality: if the borrower were credit-worthy, he would have the scratch to put down 10%.

The argument seems to be, also, that it’s too hard for a homeowner wannabe to raise 10% of the house’s purchase price. This, too, is nonsense. The homeowner just needs to save longer and with more diligence. Or look to buying a less expensive house. Or both.

Judgment like this demonstrates the need for these two agencies to disappear and to let the market determine the viability of mortgage packaging and peddling.