The following was published on August 7, 2008. Four years ago. Wow.
"Blog posts organized by topic are available to readers in the index feature of Eye on Miami. Of all the topics, the one where we have been most consistently ahead of the mainstream media is on the housing market crash and the economy.
The blogsphere is like a very wide river. Our index feature, "housing crash", is useful because the Miami perspective is a unique window on an historic economic dislocation.
Why is Eye on Miami ahead of the mainstream media: for one, because this is an entirely voluntary effort, we have never had the pressure of advertising revenue the way newspapers have-- especially as advertisement from real estate interests became more and more important to the mainstream media's bottom line. Second, the two writers of Eye on Miami have considerable experience as witnesses on the ground of the most salient feature of the market dislocations that are threatening the US economy: the erosion of regulations governing the riskiest of debt piled onto our most fragile assets.
Key sectors of the US economy are insolvent. Most Americans have no idea what this means, because none have seen this scale of economic dislocation. The warning signs were ignored. The contrarians were dismissed.
While some of the elite from commerce and politics in Miami have moved on to greener pastures, we are here to catalogue what is happening.
On the following, check out the dates: the most recent selection was posted about 9 months ago. Working backwards chronologically, the earliest was posted 20 months ago.
October 29, 2007
The housing crash and the disappearing middle class
The Sunday New York Times Magazine disclosed how the base of Christian conservatives is no longer an anchor for the Republican party. Some evangelical leaders are apparently concerned how closely tied the religious right has become to corporate America.
There is an additional aspect, not covered by the Times: the religious right—organized in suburban megachurches—rose exactly in proportion to the false prosperity of a housing bubble that needed constant spiritual renourishment even as discomfort spread about the surrounding strip mall culture and economy pinning wage-earners to long commutes from home to work, while latch-key children languished at home.
August 10, 2007
Battle for the Soul of Florida, Part II
Behind the headlines of turmoil in world financial markets is the story how the growth machine and Florida's political elite drove the massive speculative bubble in housing, whose collapse is threatening to unhinge credit markets around the world.
That's quite an achievement for builders and developers who thought they were doing God's work, plowing platted subdivisions into wetlands.
And it didn't happen by accident. Bush tax cuts that benefited primarily the wealthy required massive stimulus of the economy through historic low interest rate policy established by Alan Greenspan, former chairman of The Federal Reserve.
Those low interest rates, cheered by the Florida building and construction lobby--by the big fundraisers for the Bush brothers like Al Hoffman, now Ambassador to Portugal, primed the growth machine and ran rampant over Florida wetlands, our quality of life, and even public health.
Today the growth machine is bankrupt. WCI Communities, the business that Hoffman built, can't even find a buyer. The footprint of hubris is in ten thousand platted subdivisions, strip malls, and a degraded Florida landscape.
August 9. 2007
No telling where the collateral damage stops
President Bush, again, was at the White House seeking to reassure the world that the US economy is "fundamentally sound". One of the optimistic points, seized by the administration, is employment. The president says, employment is strong.
But as economist Joseph Stiglitz recently noted, "By some reckonings, more than two-thirds of the increase in output and employment over the past six years has been real estate-related, reflecting both new housing and households borrowing against their homes to support a consumption binge.
July 19, 2007
Winners and losers in housing market collapse
In recent weeks, Wall Street's biggest players have all stuck to the same pitch: that the subprime mortgage mess is “contained”.
It is about as contained as inflation. You remember inflation? That's the index that omits food and energy prices because American consumers don't drive cars or eat.
Who would omit the price of food or energy from a core index? Clearly, someone or ones who want Americans to believe the cost of living is nothing compared to the benefits of democracy.
That's how the meaningful is turned to meaning-less.
Along the same lines, today Federal Reserve Chair Ben Bernanke told Congress in his mid-year economic report that he thought "the demand for housing would stabilize "soon".
July 15, 2007
"The end is near. Tomorrow is another day" John from Cincinnati
More and more Americans, persuaded to buy into a speculative housing bubble, assumed far more debt than they could reasonably handle: the yardstick is 30 percent of income for a reason.
In the coming months, many will have to sell their homes into falling real estate markets amidst conditions of tightening credit. Soon enough the mainstream media will capture the distress in the better quality traunches of financial derivates and not just the subprime mess.
April 5, 2007
Miami housing market crash and collective avoidance
It is astonishing that the rising focus by the mainstream media on threats to the subprime mortgage industry—that have already caused the bankruptcy of dozens of major financial institutions and the retrenchment and strategic retreat of quasi governmental agencies like Fannie Mae and Freddie Mac—is omitting entirely the matter of how these mortgage threats have multiplied exponentially through trillions of dollars in financial derivatives that retain their value only by the grace of bond rating agencies.
Their own lax standards for performance allow them (bond rating agencies) to cower in the shadows.
Who owns these derivatives, scrounged from the subprime or Alt-A mortgage business and sold off to distant investors? To what extent has financial liquidity in hedge funds, pension plans, insurance companies and the nation’s largest investment firms multiplied on a foundation as secure as a beachfront in a storm?
We don’t have any of the answers to these questions. We don’t have the facts for a simple reason: the financial industries strong-armed Congress and the Bush White House to “free” the derivatives markets from regulation—regulation that would strengthen both the risk analyses and reporting of the performance of a market that is at least four times the size of the public equity market, $150 trillion in total.
Compared to the requirements of reporting for public corporations, the nature of debt tied to financial derivatives is a literal black hole.
And because it is a black hole, the mainstream media has a perfect excuse to avoid the story, which is probably going to emerge as the biggest economic story since the Great Depression.
March 29, 2007
A River Runs Through It
While the bubble expanded, the mainstream media sat by silently—grateful for the advertising revenue in real estate sections, and unwilling to jeopardize friendships and associations of senior executives with big downtown law firms like Greenberg Traurig in Miami, that built major businesses from zoning and permitting work at the county and city.
All for the greater good of the building boom, and through the boom, a virtually untraceable network of shareholders hidden in shell corporations with interlocking interests all pointing in one direction: more development in more wetlands to satisfy the cravings for wealth, irrespective of social or environmental costs.
March 22, 2007
Building a better economy through liar loans and vacant houses
Why isn’t the mainstream media asking this question: to what extent is the economy threatened by consumers spending down home equity lines of credit, or money pulled out of second or third mortgages, that were given easily and now that underlying home values are declining, cannot be a further source of wealth to sustain consumer spending?
We have a feeling walking through Miami or on Miami Beach today, that the over-hang of risk equity is enormous. It is filling the marinas, the shops, the restaurants: how long can it go on?"
March 13, 2007
The Miami housing crash and lenders gone wild
“I do think the unwind is just starting. The moment of truth is not yet here,” said a real estate professional to Gretchen Morganstern on the front page of the Sunday New York Times.
That moment will come when it becomes clear when consumers who spent far more than is reasonable on housing or housing-related lines of credit realize that their most important asset will not be rising in value and if it has to be sold, will be sold at a loss.
When that happens, all the lenders who commandeered Miami legislatures through their proxies--lobbyists and production home builders—will slink into the shadows, waiting for taxpayer bailouts and the chance to do it all over again.
February 21, 2007
Knock, Knock: Is anybody home?
Mayor Carlos Alvarez should have sounded a warning, in his State of the County speech, about real threats to municipal and county budgets from cratering real estate sales in Miami Dade.
It is not a secret anymore. From the rumblings in the credit derivatives markets for subprime mortgages to newsrooms of major media: do we have to wait for the US Commerce Department to report dismal statistics before anyone in a position of power or authority is willing to speak up?
February 16, 2007
Friday rant, cont.
“The economy may be stronger than we think,” Bernanke tells the world. What if it is weaker than we think?
Mr. Bernanke and government bean counters report core inflation is low. We think the nation’s chief economist is smoking pot.
Jan 23, 2007
Miami housing crash market bubble
In its recent story disappointing financial results for Lennar, the Miami-based production home builder, the Miami Herald wrote, “For Lennar the earnings announcement concludes one of the toughest stretches in years for home builders.”
We 'conclude' that’s what you will continue to read in the mainstream media until there is so much blood in the streets you can’t side-step it, at which point you will read, “there is blood in the streets” but not a whisper how it got there until it has dried.
December 9, 2006
"B" is for Bullshit
Miami Dade county taxpayers are increasingly restive about overdevelopment and its costs. Miami Herald readers are also restive about erratic reporting on who benefits and who gains from condo mania and suburban sprawl in Everglades wetlands.
For example, instead of hard hitting investigation of who owns land near Krome Avenue in West Miami Dade at the edge of the Everglades, the Herald prints a puff story about Rodney Barreto, a powerful lobbyist turned developer of wetlands, who “deeply cares” for the environment.
His last word: “I think for the most part everyone would give us an ‘A’ for our efforts.” Not us. Not by a long shot.
Friday, December 08, 2006
Hang onto your hats
From today’s Financial Times: “the failure of a small Californian mortgage lender yesterday increased nervousness in the credit derivatives market about the large number of US “subprime” mortgages extended this year… its failure is the latest in a series of ominous developments in the market for subprime mortgages.”
Of condos and homes built by the area’s largest builders—Shoma, Caribe, Century, Lennar, Centex, Horton Homes—what is the percentage of sales based on subprime mortgages? What is the historical foreclosure rate on these mortgages compared to foreclosures in the last three months?
We would like to know because it occurs to us, that the 13 members of the Miami Dade county commission and Miami City Commissioners who facilitate turning the region into a chop shop for condo and production home builders—lead by Natacha Seijas for the county—might take reality into account.
So far, mortgage lenders have been hanging on doggedly with frozen smiles. But you can see the vultures circling.
Little people can’t pawn their debt the way big banks can. If the pain starts spreading to bigger financial institutions—hang onto your hats.
November 26, 2006
Don't shoot the messenger
In the struggling market for production family homes, or, sprawl-- the Miami Herald has been very quiet. There are some simple reasons why.
Underlying ownership of condos is usually distributed to big financial investors. Tract housing is a home grown industry dependent on decisions at County Hall, not city hall.
County Hall exists for zoning and re-zoning so production home builders can plow more houses into green fields abutting the Everglades and Biscayne National Park.
The biggest law firms in South Florida—take Greenberg Traurig for instance—built their practices on these zoning changes, otherwise known as hard currency of political office in south Florida. Top lawyers in this field are pals with Herald executives and always have been. It is an exclusive circle, reinforced by the advertising dollars in the real estate section of the newspaper.
We are not getting the stories we need from the mainstream media: how historic low interests rates, that pumped up the housing bubble, are running straight into the hard reality of a weak dollar, massive federal deficits and the trade imbalance.
In time the story will unfold and many of those real estate brokers now blaming mainstream media will be looking for new lines of work. When that happens, don't shoot the messenger.
November 12, 2006
It's a Parrot Jungle, isn't it?
There is an inverse relationship between the extent to which citizens have a say in zoning and permitting decisions and the degree of influence by speculators and lobbyists.
Right now, in Florida, real estate speculators and lobbyists run the state and county commissions. The degree of harm to the public interest is enormous. Read an honest cost tally in your local paper lately? NYET. ... This is something that the well-to-do should think about, as they sit in traffic on Old Cutler Road while one Shoma or Lennar development after another is built on filled wetlands around the old Burger King headquarters while the housing market sinks. Incentives include upgraded applicances. Great.
The great Miami destruction machine can’t be glossed over by spin masters or public relations firms with close ties to elected officials and the media. It’s a Parrot Jungle, isn’t it?