The Waiting Game, Economic Turmoil and the failed Republican Reformation, by gimleteye

The following is a work-in-process. Over the weekend I will be posting serial parts.

In 2001, Federal Reserve Chief Alan Greenspan began a historic series of cuts in the benchmark interest rate, hoping to stave off a recession by stimulating the housing sector. This much has been repeated a thousand times. Assessing the origin of a world wide credit crisis, a crisis that does not have a name yet or an outcome, requires a more careful investigation of the housing sector itself, its advocates and instigators from Wall Street financiers to local home builders, their associations and lobbyists, from the lowliest county commissioners to zoning and permitting agencies greasing the skids.

This is not an area of inquiry to be found either in analyses by industry or reported by the mainstream media. The full picture the threats to the US economy and national security is not in statistics or charts poured over by economists. What it reveals is this: the Greenspan interest rate cuts meant to secure the US economy helped along the plan for a Republican Reformation that has utterly failed.

It began, not with terrorism in 2001 or its responses including a $3 trillion war, but with housing.

Long before 2001, the top echelon of Bush loyalists had beaten a well-worn path between Miami, Tallahassee and Washington, DC. These were not economists, although they were closely tied to conservative economic think tanks like the American Enterprise Institute or the Cato Institute. They were builders, bankers and mortgage lenders whose campaign contributions propelled Jeb Bush to the Governor’s Mansion in Florida 1998.

They were reflected through the career of the current US Senator from Florida, Republican Mel Martinez, an Orlando land use attorney who had served on the board of directors of a community bank, as chairman of the Orange County Commission, as Chairman of the Orlando Housing Authority, on the state growth management commission, and who had run in 1994 with Family Council President Ken Conner on a Republican gubernatorial slate. Martinez was an elector in Florida and co-chair of the 2000 George W. Bush campaign.

In January, 2001 Martinez was confirmed as Secretary of HUD, the key federal agency overseeing housing and issues related to housing financing.

It is interesting to imagine that Greenspan could not take in one picture the Wall Street inventions in financial derivatives that had proven so lucrative since the 1980’s, their role in the housing market bubble, or the implications for compensation packages with the removal of the Glass-Steagall Act in 1999, that eliminated barriers between investment and commercial banking, and—more to the point—that forces from the housing sector that pushed Florida’s Jeb Bush forward in 1998 were one and the same with those that delivered the White House to George W. Bush in early 2001.

They were not Clinton-era technology entrepreneurs. By the time the dot.com bubble burst, they believed with all their faith that the answer to the US economy was a Republican Reformation grounded in housing. Its ebullient frame, that is of course now mentioned no where; “the ownership society”.

Only two years later, in a 2003 speech to the National Association of Homebuilders, then HUD Secretary Mel Martinez put it clearly enough for anyone to understand, “When the President gathered us together at the White House Conference last fall, he had a simple message: "We want everybody in America to own his or her own home." Our Blueprint for the American Dream Partnership is the right response at the right time. It is unprecedented in scope and sets out to close the minority homeownership gap by harnessing the resources of the federal government to those of the housing industry.”

What the Bush team shared was not so much a concern for minorities as an unshakeable faith in the network of industries that thrived from building platted subdivisions and condos and strip malls in farmland and wetlands and on fragile coastlines. Many of these special interests were from blue (Democrat) states, but the insiders were red to the core.

There was one state where all the pieces lined up, from local legislatures charged with zoning to the state legislature, secure in its members’ incumbency: Florida.

If US Senator Mel Martinez represents the political aspirations of the Republican Reformation, Al Hoffman represents the economic ones. Hoffman, now Ambassador to Portugal and far from the economic devastation he helped to unleash, was then-chairman of Florida based WCI Communities, Inc., a company of soaring fortunes during the Jeb Bush years that struggled to find a vulture to purchase its depressed assets in 2007.

Back in the day, Hoffman bridged Tallahassee and Washington: he had been campaign finance chief for both Jeb and also for George W. Bush. In Florida, Jeb placed Hoffman into the top slot of the premier business organization, The Council of 100 to assess and evaluate infrastructure and future growth.

Jeb talked about diversifying the state’s economy, but when it came to landing new industry, like the Scripps Institute initially planned at Mecca Farms, or higher education, like the 5000 acre Ave Maria College and town, opened in 2003 and funded by right-wing pizza magnate, Tom Monaghan, it was less about technology than placing growth in vast tracts of open space—more likely than not to be fragile environmental lands like those impacting Florida’s Everglades, springs, rivers and bays.

In early 2001, the homebuilders, farmers and land speculators understood the way out. All they needed was a little help from their friends. All that stood in their way was regulation.

Grover Norquist articulated the dominant strain of Republican conservatism as “shrinking the size of government so that it could be drowned in a bathtub”. But neither Norquist nor the Republicans really meant to shrink the size of government. Those were words to win elections, deceptions shaped to short attention spans.

In his 2003 inaugural address, Governor Jeb said, “There will be no greater tribute to our maturity as a society than if we can make these buildings around us empty of workers; as silent monuments to the time when government played a larger role than it deserved or could adequately fill.”

These were just words, too, echoing Norquist and aimed at the economic stakeholders in the front rows who got the point. And what was the central point?

It wasn’t about making government smaller: it was about removing those workers. And who exactly were they? Who threatened those bankers, farmers, and developers laying claim in 2003 to having rescued not just Florida but the US economy?

They were regulators. There are, of course, many areas of regulation to stand as examples of the failed Republican Transformation—health and safety, to name two—but the “free market” in housing and development had two specific areas of regulation that were a clear and present danger: finance and the environment.

(tomorrow, I'll post Part II)