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What Does the Freddie/Fannie Bailout Mean to You?

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The big bailout of Fannie Mae and Freddie Mac has been big news this week. But what does it mean to you?

GSEs —> TSEs?

Well, the Government Sponsored Entities just became Taxpayer Sponsored Enterprises. The Treasury "bailed" them out, changed their leadership, and is putting Fan & Fred under the management of the Federal Housing Finance Agency. It's the most radical regime change in global economic and financial affairs in decades, and as economist Nouriel Roubini states "the greatest nationalization in the history of humanity." He now likens the USA to the USSRA, The United Socialist State Republic of America.

For you, the borrower:

This could mean (slightly) lower rates and greater availability of credit. F&F will now have the cash to buy mortgages from other banks and create more mortgage backed securities to sell off to investors. That means those other banks will have the money to create more mortgages—that way there's more money moving about the system. So that's good for a borrower. If you're a current mortgage holder with a fixed rate, however, you'll likely see little change.

For you, the homeowner:

Though home prices will continue to fall, the bailout is a potential sign for future stabilization of prices. That's good for the 1 in 3 mortgage holders whose current mortgage is worth more than his home. Some economists project the market to bottom out as early as the first quarter of 2009; most project early-mid 2010.

For you, the F&F shareholder:

We're not sure yet. Though Treasury Secretary Hank Paulson did make it clear that the TSE's "will no longer be managed with a strategy to maximize common shareholder returns." Sure, change the policy now that U.S. taxpayers are the real shareholders...

For you, the national Federal Debt:

The cost of government intervention has yet to be determined, but it will be huge. Upon takeover, we've already immediately injected F&F's $6 trillion into the national debt. Allegedly, a memo that has been recently circulating among economists at the Federal Reserve projects that Federal debt could reach $23 trillion by mid 2010. (It's currently $9.67 trillion.)


For you, the everyday taxpayer:

Uh oh. As a taxpayer, you'll be footing the bill. The bailout basically means Fannie and Freddie will have an unlimited taxpayer-funded credit line. This doesn't mean our taxes will be increased to bail them out—at least not yet. But it does mean that now our government is further in debt—now indebted to hedge funds, domestic and international banks, foreign central banks, etc. The government already put in $1 billion to F&F, and may put in up to $200B more.

And what if the bailout doesn't work?

If the bailout does not succeed—that is, it doesn't help the housing or credit markets—well then we're in big trouble. If our government can't inject liquidity into the market, guess who can?

Be sure to read more of what Diana learned today here.

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iStock // Ekaterina Minaeva
Man Buys Two Metric Tons of LEGO Bricks; Sorts Them Via Machine Learning
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iStock // Ekaterina Minaeva

Jacques Mattheij made a small, but awesome, mistake. He went on eBay one evening and bid on a bunch of bulk LEGO brick auctions, then went to sleep. Upon waking, he discovered that he was the high bidder on many, and was now the proud owner of two tons of LEGO bricks. (This is about 4400 pounds.) He wrote, "[L]esson 1: if you win almost all bids you are bidding too high."

Mattheij had noticed that bulk, unsorted bricks sell for something like €10/kilogram, whereas sets are roughly €40/kg and rare parts go for up to €100/kg. Much of the value of the bricks is in their sorting. If he could reduce the entropy of these bins of unsorted bricks, he could make a tidy profit. While many people do this work by hand, the problem is enormous—just the kind of challenge for a computer. Mattheij writes:

There are 38000+ shapes and there are 100+ possible shades of color (you can roughly tell how old someone is by asking them what lego colors they remember from their youth).

In the following months, Mattheij built a proof-of-concept sorting system using, of course, LEGO. He broke the problem down into a series of sub-problems (including "feeding LEGO reliably from a hopper is surprisingly hard," one of those facts of nature that will stymie even the best system design). After tinkering with the prototype at length, he expanded the system to a surprisingly complex system of conveyer belts (powered by a home treadmill), various pieces of cabinetry, and "copious quantities of crazy glue."

Here's a video showing the current system running at low speed:

The key part of the system was running the bricks past a camera paired with a computer running a neural net-based image classifier. That allows the computer (when sufficiently trained on brick images) to recognize bricks and thus categorize them by color, shape, or other parameters. Remember that as bricks pass by, they can be in any orientation, can be dirty, can even be stuck to other pieces. So having a flexible software system is key to recognizing—in a fraction of a second—what a given brick is, in order to sort it out. When a match is found, a jet of compressed air pops the piece off the conveyer belt and into a waiting bin.

After much experimentation, Mattheij rewrote the software (several times in fact) to accomplish a variety of basic tasks. At its core, the system takes images from a webcam and feeds them to a neural network to do the classification. Of course, the neural net needs to be "trained" by showing it lots of images, and telling it what those images represent. Mattheij's breakthrough was allowing the machine to effectively train itself, with guidance: Running pieces through allows the system to take its own photos, make a guess, and build on that guess. As long as Mattheij corrects the incorrect guesses, he ends up with a decent (and self-reinforcing) corpus of training data. As the machine continues running, it can rack up more training, allowing it to recognize a broad variety of pieces on the fly.

Here's another video, focusing on how the pieces move on conveyer belts (running at slow speed so puny humans can follow). You can also see the air jets in action:

In an email interview, Mattheij told Mental Floss that the system currently sorts LEGO bricks into more than 50 categories. It can also be run in a color-sorting mode to bin the parts across 12 color groups. (Thus at present you'd likely do a two-pass sort on the bricks: once for shape, then a separate pass for color.) He continues to refine the system, with a focus on making its recognition abilities faster. At some point down the line, he plans to make the software portion open source. You're on your own as far as building conveyer belts, bins, and so forth.

Check out Mattheij's writeup in two parts for more information. It starts with an overview of the story, followed up with a deep dive on the software. He's also tweeting about the project (among other things). And if you look around a bit, you'll find bulk LEGO brick auctions online—it's definitely a thing!

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© Nintendo
Nintendo Will Release an $80 Mini SNES in September
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© Nintendo

Retro gamers rejoice: Nintendo just announced that it will be launching a revamped version of its beloved Super Nintendo Classic console, which will allow kids and grown-ups alike to play classic 16-bit games in high-definition.

The new SNES Classic Edition, a miniature version of the original console, comes with an HDMI cable to make it compatible with modern televisions. It also comes pre-loaded with a roster of 21 games, including Super Mario Kart, The Legend of Zelda: A Link to the Past, Donkey Kong Country, and Star Fox 2, an unreleased sequel to the 1993 original.

“While many people from around the world consider the Super NES to be one of the greatest video game systems ever made, many of our younger fans never had a chance to play it,” Doug Bowser, Nintendo's senior vice president of sales and marketing, said in a statement. “With the Super NES Classic Edition, new fans will be introduced to some of the best Nintendo games of all time, while longtime fans can relive some of their favorite retro classics with family and friends.”

The SNES Classic Edition will go on sale on September 29 and retail for $79.99. Nintendo reportedly only plans to manufacture the console “until the end of calendar year 2017,” which means that the competition to get your hands on one will likely be stiff, as anyone who tried to purchase an NES Classic last year will well remember.

In November 2016, Nintendo released a miniature version of its original NES system, which sold out pretty much instantly. After selling 2.3 million units, Nintendo discontinued the NES Classic in April. In a statement to Polygon, the company has pledged to “produce significantly more units of Super NES Classic Edition than we did of NES Classic Edition.”

Nintendo has not yet released information about where gamers will be able to buy the new console, but you may want to start planning to get in line soon.