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The International Olympic Committee has rejected Chicago in the first round. A delegation of President Obama, Michelle Obama, Oprah, Mayor Daley and others failed to convince the IOC. President Obama made an impassioned plea to the IOC:

"Chicago is a city where the practical and the inspirational exist in harmony; where visionaries who made no small plans rebuilt after a great fire and taught the world to reach new heights," Obama told the IOC's members. "I urge you to choose Chicago."

This fell on deaf ears representing a major defeat for President Obama, Mayor Daley, and powerful Alderman Ed Burke (who was the point man to hand out the money).

Veteran Chicago journalist Ben Joravsky summarized the negative concerning Chicago:

the city hasn't completed a major construction project on time or on budget in recent memory. Pick a project, any project: the reconstruction of Soldier Field, the creation of Millennium Park, the redevelopment of the prime downtown land at Block 37, the expansion of O'Hare airport—they were all finished way over budget if they were finished at all. In Chicago, people know that the question isn't whether city projects will go over budget, but by how much.

Even though Chicago’s City Council voted 49-0 in a guarantee to support the 2016, public support has been on the decline all year. A recent Chicago Tribune poll suggested half the public didn’t want the Olympics. The IOC, undoubtedly, had to be concerned the lack of public support in Chicago when making the final decision.

The grass roots organization No Games Chicago deserves much credit for taking on the Chicago Machine with meager funds. Thomas Tesser of No Games ran an effective campaign in the media against the powerful Chicago interests. The Chicago Sun Times ran this Tesser attack which was quite effective:

The City Council voted to give oversight of the City's Olympic commitments to Ald. Ed Burke, chairman of the Finance Committee. This is the final cruel joke played by the Council on the taxpayers. Burke has become a millionaire doing deals with firms that have business with the city and has collected millions in campaign contributions from firms doing business with the city. Pat Ryan, the chairman of the 2016 effort, contributed $3,000 to Burke. Burke didn't mention that he has ten clients who are major donors to the

Will Chicago come back for another try in 2020? Only time will tell.

I’ve been following this for a while and writing about it on NewGeography.com since March – not all mortgage-backed securities (MBS) are actually backed by mortgages. So when the homeowner goes into bankruptcy, there’s no way for the MBS holder to prove a lien on the house and the judge awards the bondholder bupkus. In April, a bankruptcy judge in California wrote that as many as one-third of all MBS didn’t have mortgages. No “M” in the “BS,” as I like to put it!

Well, this story just gets better and better. It turns out that even when the MBS has an actual mortgage underneath it, the same mortgage is backing more than one security. Last week I talked to Matt Taibbi, who wrote in Rolling Stone magazine (The Great American Bubble Machine) that 58 percent of an MBS issued by Goldman Sachs had nothing but a list of zip codes where the mortgages should have been. He told me about a lawyer in Florida who has a list of cases where two MBS holders showed up at the bankruptcy proceedings, both claiming that they owned the same mortgage. You can expect to read more on that here as the story develops.

Then it gets worse! Gretchen Morgenson reported in the New York Times on Sunday that there are about 60 million mortgages registered with the Mortgage Electronic Registration System (MERS) to keep track of who owns which loans and which MBS. Problem was that MERS, created by Fannie Mae, Freddie Mac and the mortgage industry, thought they were too good to have to register liens against land at the county level – real estate 101 for any sober realtor. The Kansas Supreme Court has now ruled that changes in mortgage ownership registered with MERS – and not registered with the local land authority – have no legal standing.

Don’t forget – MBS are the junk that Treasury Secretary Geithner wants purchase with tax-payer dollars; and Federal Reserve Chairman Ben Bernanke committed $1.25 trillion of freshly-printed dollars to buy up out of the marketplace this year. Here’s the math made easy – the median house costs $177,000, figure an 80% mortgage, times 60 million mortgages: it looks like $8.5 trillion worth of mortgages could have no real estate underneath them! If the repo man comes knocking on your door, remember these four words: Show Me The Paper!

Set aside for a minute whether high-speed rail (HSR) makes sense or not on a cost-benefit basis. Regardless of whether it does or not (and some smart people are arguing not), I'd like to make the argument that federal funding has no place in HSR. Instead, it should be left to individual states or regional state coalitions.

The federally-funded interstate system was originally conceived for defense purposes - rapid mobilization - after Ike saw the German autobahns. Freight and people movement were obvious beneficiaries, over short, medium, and long distances. It is a comprehensive network that crosses state lines, which argues for federal involvement. The government made the minimal investment it had to make - road beds - and people/companies paid for vehicles and fuel. Fuel was taxed to pay for it all. If EZ-tag technology had been available at the time, I suspect they would have tolled it all instead to pay for it.

Airports followed a similar arrangement: government provides the landing strips and terminals while private companies provide the vehicles and fuel. Passenger ticket taxes pay for the infrastructure. As airports are a local decision, they are (mostly) paid for locally, although regulated federally for standardization and safety.

HSR is targeted at medium distances only, making it more of a state/regional decision (i.e. a small collection of states). It also requires huge subsidies, as the government provides the track, cars, and energy. There is nothing directly related that can be taxed to pay for it (like fuel taxes for roads and passenger ticket taxes for airports). You could try to tax the rail tickets, but if they were fully priced they would not attract nearly enough riders. So no matter how you slice it, in the end the government (i.e. taxpayers) will be paying the majority of the cost of moving each passenger. The infrastructure cost cannot be covered by direct user fees, as demonstrated in other countries.

Rather than compare HSR to the interstate highway system, the better analogy would be airports. Imagine if California said, "Feds, give us money to build a few airports in key CA cities and provide a subsidized government-run airline to provide frequent intra-state service where tickets are priced way below cost." Put that way, people would recognize the idea as absurd, and tell California to do it themselves if they think it's such a good idea.

The problem is that a simple program that made sense at the time - a federal gas tax to build an interstate highway system - has evolved into a Frankenstein monster of massive federal involvement in enlarged urban freeways, local rail transit, and now high-speed rail - areas where they simply do not belong. Local transportation planners have shifted decision making from "What are the best cost-benefit investments we can make to move people in our area?" to "How to do we grab our 'fair' share of the federal pie, regardless of whether or not the project is something we would consider with our own money?" And that is leading to a lot of boondoggles being built around the country, culminating recently in the famous Bridge to Nowhere in Alaska.

The answer? The feds need to get out of the transportation business beyond minimal maintenance of the interstate highway system (the basic four lanes - not the expanded urban freeways). Let local entities make local decisions on transportation investments, including funding, and a whole lot of waste will magically disappear.

This post originally appeared at Houston Strategies.

According to Railway Technology, Taiwan’s struggling high speed rail line, the only fully private and commercial high speed rail system in the world, will be taken over by the government his week. The line has been plagued by disappointing ridership levels totaling approximately one-third projected levels. The company has generated insufficient revenues to meet its debt obligations and had previously renegotiated its bank credit to substantially lower interest rates. The company lost $770 million in 2008 and has a debt of approximately $10 billion. The cost of the system was approximately $15 billion.

Not every local official is smitten with the romance of high-speed rail. Graphic evidence of this was provided by Springfield, Illinois mayor Tim Davlin, who expressed his concern that the proposed rail overpasses would slice the city in half. Davlin told the State Journal Register that the “Whole city would look like crap.” This is a problem faced not only by historic Springfield, the state’s capital and location of many Abraham Lincoln sites. Citizens and cities on the San Francisco peninsula are concerned that a proposed “Berlin Wall” will divide their communities if construction of an elevated high speed rail wall proceeds through their communities.