Tuesday, December 20, 2011

An Essay: on the Fifth Day of Christmas ... by gimleteye


(The following essay is based on unpublished work. Scroll down for the earlier parts. This is Part Seven. The essay, to be concluded on Christmas Day.)  From the Chamber of Commerce to the National Association of Realtors, from the National Association of Homebuilders to other lobbying groups for the Growth Machine; its standard bearers were held up as paragons of virtue during the housing boom that topped in 2006, then crashed and burned.

Where better place to promote these paragons than in Florida – where speculation is ingrained in the nature of the economy—and in South Florida where the politics of zoning and permitting had been finely meshed to the gears of finance?

For skeptics and dissenters, Florida was also a state with a capitol ringed by a virtual moat protecting big land owners, like the Fanjul billionaire sugar growers, who understood perfectly well that to enhance speculative land values meant constantly tweaking at the edges of rules and regulations nominally intended to slow growth and protect the value and integrity of the public commons. Now we sift through the cinders.


"You can't stop it," said Al Hoffman, the most politically influential developer in a state crowded with influential developers to the Washington Post in 2002. At the time, Hoffman was the top money man for Gov. Jeb Bush and chairman of an exclusive council of CEOs who advised the governor on economic policy, the Council of 100. The purpose of the council was to funnel up schematics for Florida’s infrastructure future. Hoffman had been co-chair of George W. Bush's presidential campaign and the Republican National Committee's finance chair. "There's no power on earth that can stop it!", Hoffman told the Post.

"The unstoppable force Hoffman was talking about is the runaway development marching from southwest Florida toward the Everglades. The Naples area was the second-fastest-growing in America in the 1990s." (Washington Post, June 25, 2002) In 2003 homeownership in America stood at 68 percent and a record $3.84 trillion mortgages were written, triple the amount originated just three years earlier.” (“Reckless Endangerment”, Gretchen Morgensen, page 168, 2011)

By February 2010, Naples and its environs had the second highest foreclosure rate in the nation. (April 15, 2010, "Cape Coral-Fort Myers foreclosure rate drops to sixth in US", Naples Daily News). In 2008, WCI, the company from which Hoffman derived wealth and power—an ambassadorship and a direct line to the Oval Office—filed for bankruptcy with more than $1.8 billion in debt.

Citizens were powerless, naturally, to stand in the way of 20 year depreciation schedules of big electric utilities or the highway lobby laying out future highways and suburbs or the trillions in collateral debt obligations issued by Wall Street financiers. Buried in this legacy is the agitation of Occupy Wall Street though few have made the connections.

“Relax, we’ll be fine” (April 6, 2010), conservative writer David Brooks advised in The New York Times. Never mind public opinion polls showing a big majority believing the nation to be off-track, Brooks offered good news, “The initial wave of suburbanization was sprawling and featureless. Tom Wolfe once observed that you only knew you were in a new town when you began to see a new set of 7-Elevens. But humans need meaningful places, so developers have been filling in with neo-downtowns — suburban gathering spots where people can dine, work, go to the movies and enjoy public space.”

Understanding and untangling the realities, however, require finer tools; a microscope and not a magnifying glass. Close examination shows—in details such as those provided by the fierce competition to breach the Urban Development Boundary in Miami-Dade and restore value to speculative land purchases burning craters in shareholders’ net worth statements—that the purposes of Wall Street finance and insurance to deploy maximum leverage and extract maximum compensation is twinned to the purposes of land use zoning and permitting processes at the state and municipal levels of government. Both created vast wealth for the extractors and dismal results for wetlands, farmland, and waterfront real estate. In other words, exactly the form of socialized risk and privatized profit that destabilized the US economy.

WCI Communities, Lennar, the Latin Builders Association and their teams of lobbyists from downtown law firms, earning $750 an hour, needed willing accomplices to effect land use zoning changes to build more sprawl and permits to cram more condos on the South Florida coast: they needed elected officials – partners molded and shaped through campaign finance practices—to override what limited regulations had been put in place by past generations of officials. In Miami-Dade, a small cadre of citizens, environmentalists and community activists attempted to stand up to the juggernaut; organizing community associations, neighbors and businesses that opposed the leap-frog developments and condo canyons.

The 2004 Christmas edition of the now defunct Sunpost captured the giddy euphoria in “Power Developers of Real Estate”. “What is a developer?”, the Sun Post asks. “According to the Second College Edition of the American Heritage Dictionary, a developer is "one that develops. More specifically, it is a "person who develops real estate." A developer can also be "a chemical used to render visible the image recorded on a photosensitive surface." In hindsight, it is also a fixative to the law of intended and unintended consequences.

“Lennar Developers is a subsidiary of Lennar Corporation, a $7 billion multidivisional, home-building company with projects all over these United States. One of those states happens to be Florida. So there is a lot of responsibility being placed on the shoulders of Anthony Seijas and Carlos Gonzalez, the two men chosen to lead Lennar's expansion into South Florida's condominium market.”

Lennar is also the titan of production home building, with deep roots in Miami Dade wetlands edging to the Everglades. In other words, Lennar is at the top of the pyramid. The 2004 Sunpost continues, “Anthony Seijas holds several bragging rights. As president of Lennar Developers Inc., he has already introduced three luxury projects in its first year. He began his career with Lennar in 1993, was awarded with several promotions and, at just 30 years old, became the youngest person at Lennar to hold the title of president of a division. As a testament to his ability to lead in his newest role, The Grand sold out within seven hours. The mid-rise was followed by Colonnade in Downtown Dadeland and 360ยบ in North Bay Village.

Carlos Gonzalez holds the title of vice president of sales and marketing for the Lennar Homes/Lennar Developers Inc., Dade Division. A long title for a job with a lot of responsibility: he is in charge of supervising the sales and marketing department, closings, financial forecasting, land feasibility analysis, acquisitions, product development and operations. On behalf of Lennar he oversees a staff of 50 and is in charge of 7,000 home sites.

Together the pair has made Lennar Developers a major player in the community once again.”

By October 2009, Lennar was reaching into the bottom of the barrel for buyers. "This weekend the Southeast Florida division of Lennar begins its “Be Afraid, Be Very Afraid” sales event campaign. … With the government’s first-time homebuyer tax credit opportunity expiring on November 30, the time for waiting to buy a new home has passed. If you haven’t owned a home in the last three years you may qualify to receive this government tax credit of up to $8,000*. It’s not a loan, there is no re-payment, but this government stimulus offer comes to a close on November 30." (from the Lennar website)

Scare tactics as part of the “proud renaissance”? The homebuilders have only been able to survive because of government subsidies through the tax credit benefiting corporations by allowing them to write off profits from the boom years against losses in recent years on the one hand, and, on the other hand, using individual tax credits to lure buyers back into the game. There is no Plan B for the homebuilders, any more than for BP managers who promised in their permits that they could easily handle a deepsea blowout, any more than Wall Street financiers who contend that whatever Congress and the Obama White House want to do so far as regulating financial derivatives will be bad for business and bad for the American public.

Just consider that Lennar’s 2009 fright campaign, “Be Afraid, Very Afraid”, was followed up by the renewal of the tax credit it; their PR flowed on unstaunched by reality: "… if you haven’t owned a home in the last three years you may qualify to receive a first-time buyer government tax credit of up to $8,000. Current homeowners may even qualify to receive an up to $6,500 tax credit. These tax credits are not loans, but prospective buyers need to act now, as this is one historic opportunity you don’t want to miss. “Most likely the home buyer tax credit will not be extended again,” says Carlos Gonzalez, president of Lennar’s Southeast Florida division. “This means the time to buy is before April 30 or buyers will miss out on these historic opportunities.” (Lennar advertorial in Miami Herald, 3/5/2010)

According to the South Florida Business Journal, “Most of the land where Lennar Corp. has proposed building 7,000 homes for its Parkland project in southwestern Miami-Dade County is tied to a $44.6 million loan that went into default after it matured in October. The loan, from Miami-based City National Bank of Florida to Krome Groves Land Trust, covers 781 of the 961 acres of farmland planned for development by Lennar and several local homebuilders. Located on the northeast corner of Krome Avenue and Coral Reef Drive (Southwest 152nd Street), Parkland still is seeking to move the county’s urban development boundary. Local environmental activist groups have mounted opposition to it based on its potential impact on traffic, water supplies and environmentally sensitive lands.” (South Fl Business Journal, Feb 12, 2010)

Anthony Seijas, former rising star at Lennar, was moved by company executives from Lennar to be president of Rialto, a major real estate management company wholly owned by Lennar. “Rialto is a real estate investment management company focused on distressed real estate asset investment, management and workouts… with a particular emphasis on turnaround situations, particularly during previous real estate market downturns in the United States and overseas.” (Miami Herald, March 8, 2010) 

With scarcely a beat, and nary a whisper from Congress, the key actors in the market crash simply switched from creating the wreck to salvaging the wreckage. Lennar, benefiting from the Obama financial rescue package allowing homebuilders to write off current losses against profits during the boom, has used its tax savings to buy back thousands of acres lost to foreclosure at a lower cost basis.

One does begin to wonder if carnage wasn’t the point, in the first place, and the extent to which the mainstream media has also worked in the magical schemes that have put the US economy at such great risk, fleecing taxpayers and allowing equity regeneration to occur in a way designed to concentrate power, authority and wealth.

Here is how the promise of low cost housing worked out, according to one project by another developer heralded by the 2004 Christmas edition of the Sunpost: Al Piazza.

“Coscan Homes operates as a "fully integrated residential developer and construction company," the Sunpost writes. The company “has built more than 5,000 homes in over 20 communities either as a residential developer or as a construction company.” In Broward County, Piazza’s company Coscan Homes cleared out trailer park residents to build a 33 acre platted subdivision called Arden Park, a named heisted from Shakespeare’s Eden.

The plan to build 153 single-family homes required a change in zoning, which was achieved through local public officials’ stamp of approval but no construction ever took place. Four years later, it came to an end for Coscan. “Great Florida Bank won a $33.7 million foreclosure judgment over the stalled Arden Park residential project in Hollywood,” the South Florida Business Journal reported. “The Miami Lakes-based bank (NASDAQ: GFLB) won the judgment against Arden Park LLC. … The site, at 3499 Stirling Road, is set for public sale on April 13 at 11 a.m.” (South FL Business Journal, March 5, 2010)

Great Florida Bank spins off another apocryphal tale: In 2006 the bank had been hit by the FDIC with a cease and desist order, “citing unsafe and unsound banking practice and violations of the Bank Secrecy Act.” (FDIC hits Great Florida Bank With Cease and Desist”, Nov. 30, 2006, SFL Business Journal) According to its website, “Great Florida Bank believes in connecting to people, to the communities we serve, to organizations and to ideals. Beyond our balance sheet strength, our most important performance benchmarks are client satisfaction, associate excellence, positive workplace environment, exceptional corporate governance and progressive community involvement.” Today, shares of Great Florida Bank trade at $.15.

What David Brooks misses from his New York Times aerie are the many points where citizens were ground down by politics at the local level of government that had deformed to serve the purposes of Hoffman, Greenberg Traurig, et al. This was also a point missed entirely by mainstream daily media in Florida, threatened by a changing business model from internet-based sources of news.

Miami is such a place, where city leaders and elected officials in the past decade whistled past the graveyard of unsustainable development as the 20th century drew to a close. Development on Florida’s east and west coast, and Big Sugar to the north, bracket the Everglades, where billions of dollars are committed to the most complex environmental restoration in history.

During the boom in South Florida, a new policy guiding growth was called “Eastward Ho!” Tens of thousands of man hours have been applied to planning forums in hotel conference rooms, presentations and awards luncheons touting the features and benefits of concentrating development inside the urban core and around transit hubs. These have been presented as convincingly as any mutual fund salesman or training seminar for Citigroup could ever conceive for junior associates. Go out and sell the new way to a new Florida, the trainers seemed to be saying during the boom, while on the top floors the senior partners divided the spoils gathered the old fashioned way.

The mantra of “Eastward Ho!” could have been mandated as a replacement to the old model of suburban sprawl in wetlands and farmland. Fragmented land use within urban areas would have benefited immensely, as would have taxpayers in urban areas. Instead, the new way forward was gingerly placed alongside, as a complement to, and parallel with the superstructure of sprawl that wielded so much influence. Accordingly, every governmental entity from the US Army Corps of Engineers, to local water and environmental authorities, and cities and counties were encouraged, they weren’t told. They were shown powerpoint presentations; not mandated. 

The grand vision David Brooks celebrates was layed out in Florida nearly fifteen years BEFORE the housing asset bubble. But the push back against rules and regulations has been a continuous mantra of the Growth Machine, cannily transferred as a populist appeal for “limited” government.

No wonder, the American voter is so confused, barely able to distinguish up from down, inside from out. How could they feel when the last version of economic prosperity, encapsulated by the housing boom, bankrupted the US economy? Under what guise of faith should voters believe the current direction is  a momentary tack into the wind, before the ship rights course and steered onto a shipwreck for the second, or third, or fourth time?

In hindsight, the best description for Eastward Ho! is a vast disinformation campaign that succeeded primarily in taking the potential sting from skeptics, environmentalists and government believers. Just as Karl Rove explained to the New York Times in 2003, the Growth Machine and its apparatus shape shifted language and meaning into pablum called “win-win”, “private public partnerships” and the whole constellation of inventions to paper over how much damage was being done to democracy in the name of free markets.

“You can’t stop it,” Al Hoffman said in 2002. A decade later, the Growth Machine that Hoffman represented is busted by the side of the road like a truck flipped on its side, engine roaring and wheels still spinning. According to Bauer Financial, a bank ratings agency, in the 3rd quarter 37 percent of Florida’s banks and thrifts are “problematic and troubled”. From 2008 through 2010, bank failures cost the federal insurance deposit fund $76.8 billion. The FDIC expects another $19 billion in losses between 2011 and 2015. (Business Week, Dec. 16, 2011) A few billion here and there, and pretty soon you are talking about real money.  (to be continued…)

3 comments:

Geniusofdespair said...

What is your word count on this one Gimleteye? A zillion?

Anonymous said...

Whatever it is, I will be buying the book - Hopefully Gimleteye will publish it. Hats off and thank you Gimleteye from one more of the lukewarm residents upset but ignorant about the players of the whole fiasco.

Anonymous said...

All I want for Christmas is for about 300,000 of my neighbors to demolish their houses and move somewhere where there are jobs. I am envisioning red tail lights as they leave. No offense, neighbors.