The shadow financial system and the mainstream media, by gimleteye

Here is an interesting report from the far coast, from Oregon Public Broadcasting. A newspaper reporter for the Bend Bulletin is fired for disputing edits on his story about a home builders conference. The reporter questioned the assertion by the home builders that a recovery was around the corner.

When the story emerged from the editor's word processor, it read: “Housing forecast: It’ll only get better.”

The editor contests that the reporter was fired or that the real estate industry exerts undue influence on the newspaper: “A lot of the people who are our advertisers, I know them. We all know them. I’ve been around here, myself, my family, my kids, my boss. We play golf. We go to charity events, we raise money together for causes. So I know them. If they want to talk to me, I am perfectly happy to take calls from them.”

A representative of the real estate industry says, “We want to make sure that the media knows that if things are going bad for the entire industry, it’s going to affect them as well. And it has. We just need balance. We have discussions with any media outlet about that and I think they want to do that.”

Is similar access provided, say, to environmentalists?

Last June Armando Codina, one of Miami's most influential developers, took out a full page ad in the Business Section of the newspaper, “Good urban planning deserves consideration, not mischaracterization”. Codina asked for and received an unprecedented invitation to address the entire newsroom at The Miami Herald. (Before two terms as governor, Jeb Bush worked for Codina's real estate development firm.)

For a long time—measured in decades—environmentalists and community activists found themselves on the other side of the table from newspaper publishers, whose alliance with advertisers from the home and commercial construction industries lead to distorted and unbalanced coverage on the environment.

An example with a connection to a Codina development appears in the Miami alternative newspaper this week, Miami New Times. “Poisoned Well, what was contaminating our drinking water? Who knows—Dade officials stopped looking.”

Codina’s 400 plus acre development in West Dade is not mentioned in this Miami New Times report. Beacon Lakes--the name of the project-- was initially promoted as an industrial development outside the Urban Development Boundary. It was located on the edge of the “cone of influence” defining what government agencies contended was protective of the drinking water wellfield serving more than 2 million residents of Miami-Dade county.

Environmentalists had major concerns about the security of the wellfield. The Miami New Times story details the contamination of the wellfield with benzene from rock mining, separating the Codina development from the wellfield.

But South Florida's underground aquifer is extremely porous-- like a sponge. Relevant details concern the disclosure—through depositions as a consequence of litigation brought by environmental groups—of rampant misconduct by local agency managers, who suppressed scientific inquiry at the time of permitting of Codina's project.

As Beacon Lakes was being considered by the Miami-Dade County environmental quality review board, an environmental attorney submitted the following statement in July, 2001:

“We write on behalf of the Sierra Club in opposition to the variance requested by Edian Corporation, Carlson USA Corp, Interlagos Inc, Dario Restrepo, Talton Enterprises, Steven Robinson, Yale Mosk as Trustee, Saul Rosoff and Susan Rossoff, Trustees, and Shoppyland Enterprises to allow warehouses inside the Northwest Well field Protection Area.

The project is described as a request for a variance to allow development within the Northwest Well field Protection Area, as a mixture of warehouses, office space and retail use. The granting of this request would be a bad precedent... inconsistent with the relevant land use designation for the property under the Comprehensive Development Master Plan. The proposed development would require that the property be re-zoned to Industrial zoning. The entire property is jurisdictional wetlands. ... to our understanding, no variances have ever been granted from the restrictions applicable to the NW wellfield."

The environmental quality review board approved the application, with assurances from the senior managers at local environmental agencies: Bill Brandt and John Renfrow, who are both identified in this week's MIami New Times at the center of the controversy involving the contamination of the West Dade wellfield with benzene.

The story that was not reported, and that the mainstream media could have pursued during the permitting of the Codina development was the effort to limit the impact scientific investigation, underway at the time, designed to expand knowledge relating to the transport of pollutants in the aquifer in the area near the Wellfield.

Finally the issue flushed to the surface, as it were. On April 22, 2003, Miami's water treatment plant suddenly bloomed red with water from dye injected through the test by the United States Geological Survey—that had been in planning stages for years.

The extent to which county managers had delayed scientific inquiry in order to allow development proposals like Beacon Lakes to be approved by the Miami-Dade county commission in November 2001 was never explored by The Miami Herald.

“In the final 11-2 vote for approval by the county in May 2002, only Sorenson and fellow commissioner Dennis Moss opposed the development.… “We found extraordinary opposition from the county's planning department and environmental departments," says Rafael Rodon, president of Codina Consulting. With 12 years as assistant director of DERM, and a background in wellfield protection, Rodon was given the job of seeing that Beacon Lakes met environmental stipulations. "They created committees like I have never seen ... In spite of that undercurrent, the department positions were favorable recommendations." (From South Florida CEO Magazine)

What never made it to the deliberations by the county—or an examination by The Miami Herald—was assessment of work leading up to the infamous red dye test, published in a 2005 edition of The Geological Society of America, “Assessing the Vulnerability of a Municipal Well Field to Contamination in a Karst Aquifer”.

“Miami Dade County has used ground-water flow and particle-tracking models to identify flow path lines and to define time-of-travel protection zones (Camp, Dresser, and McKee, Inc., 1982, 1985; CH2M HILL, 2001.) However, there is an important limitation in an equivalent continuum model when it is applied to triple-porosity aquifers… the aquifer is formed of porous material, in which void space is uniformly distributed. Additionally, the equation assumes laminar flow, which may not be the case in conduits that may behave as pipes or open channels. Therefore, the conventional ground-water flow equation may not be valid for the Biscayne aquifer’s entire flow domain.”

Now that real estate markets are crashing—the worst in Florida since the Great Depression—it may be possible for more people to see what has become a familiar complaint of people exhausted by the rampage of suburban sprawl across the landscape, including wetlands, with stark effect.

The rise of a shadow financial system in the United States that allowed banks and lenders to massively expand their balance sheets through risky leverage passed unnoticed by the mainstream media, not because it was invisible but because to go along, you have to get along.

The same observation applied to how the rampant overdevelopment of Florida required government agencies and managers to ignore or look the other way in respect to the pollution of underground sources of drinking water from contaminated ground water.

In both cases, builders and developers and their lobbyists exerted undue influence on the mainstream media, that was afraid to constrain its advertising base and jeopardize their relations to Wall Street investors.

Put another way: environmentalists in the past two decades had no idea what hit them.

The fact is that the building and development of America’s fast growing suburbs in states like Florida that fattened newspapers advertising revenue originated through the explosion of financial derivatives, in the trillions of dollars, that are now on fire.

No one paid them much mind. No one paid much mind to whether Miami-Dade's wellfield protection zone was really protective, either.

Today, the real estate “Home Guide” in The Miami Herald has dwindled to virtually nothing. Only a few months ago, it was filled with full page ads brimming with good news from production home builders representing the biggest lobbying force in Florida’s most populous county: for instance Lennar, DR Horton, the constituents of the Latin Builders Association.

As real estate revenues to the newspapers grew to outsized influence, coverage of public interest issues—especially the environment—dwindled.

At least part of that equation has changed. The International Herald Tribune reports, (February 7, 2008 “Shrinking ad revenue realigns US newspaper industry") "Yesterday the publisher of the Tampa Tribune, Media General Inc., announced dismal results: in its three large metro papers serving the Southeast, revenue from real estate classified dropped 41%, help-wanted 38%, and automotive fell 34%. ... newspaper profits remain healthy, but they are dropping fast. ... The downturn has coincided with a series of newspaper takeovers, leaving some companies - notably McClatchy and Tribune - with much bigger debt payments and less cash to cover them. Falling stock prices made newspapers look like tempting targets to some buyers in 2006 and early 2007, but even then, the prices of the transactions that did take place were seen as inflated, and there was little interest from other potential bidders."

The shadow financial system is gone. What pumped up the fortunes of Lennar, DR Horton, and others, what trashed wetlands and farmland has vanished like Bear Stearns a raft of hedge funds, and international banks that reached for higher yield without understanding what they were buying and what the debt represented.

Here is what the debt represented in part: political insiders at County Hall in Miami-Dade and the nation's fastest growing cities who dominate regulatory processes, including the repression of science whose disclosure would limit the incursion of roads, power lines, Big Sugar and water supply into open space and farmland bordering environmentally sensitive lands like the Everglades.

Here is what the shadow financial system also represented, in part: publishers and editors too timid to rock the boat of advertisers.

Today, the shadow financial system is in cinders.

“Downtown Doral will integrate all aspects of a traditional city center—residential, office, retail, a school and a park all within a walkable environment,” says Armando Codina, president and CEO of Flagler Development Group. “We are proud to bring this exceptional community to Doral.” That is from the lone paid advertitorial in the "Home Guide" of today's Miami Herald.