Like Mao Said, Real Estate isn’t a Dinner Party

by Carola Von Hoffmannstahl-Solomonoff

Mao as realtor

Ho ho ho! On December 21st, the National Association of Realtors (NAR) will gift the nation with the true number of existing home sales between 2007 and 2010. The NAR’s inflated numbers were flagged earlier this year by CoreLogic, a California based data firm. When confronted, the NAR grumped they’d look into it. Sounding more like dwarfs caught mining fool’s gold than housing helpful elves. Several seasons have passed. Now, a few days before Christmas, when most people pay scant attention to news, the NAR will be giving us a wee bit of truth. How holiday special is that? Scrooge’s transformation pales by comparison.

Like Scrooge, the NAR (rhymes with guar, which when partially hydrolyzed is fully fermentable in the large bowel) had to be coerced into transformation. With CoreLogic its Ghost of Christmas Past.

Speaking of the past, though the Washington/Wall Street nexus (On Fannie, on Freddie, on Banksters and Brokers!) financially powered the housing bubble that led to the economic crash, Realtors were the relentless boots on the ground. Threatening folks that if they didn’t buy now they’d be forever priced out of the housing market. Evoking an eternity of rental serfdom under Landlord Potter. As opposed to an eternity of low or no equity mortgage serfdom under Banker Potter.

Then there were NAR TV ads. Such as the 2007 gem claiming “when you have a family it’s always a good time to buy“. Underwater families are yukking over that one. Or how about the 2008 tout for Uncle Sam’s $8,000 first-time homebuyer tax credit? The break that suckered the last clueless buyers into paying still-inflated housing prices, jacked mortgage fraudsters posing as first-time buyers, and according to many Realtors (now) prolonged the housing crash. And the ads keep coming…

During 2011, reforms limiting government backed housing programs that leave taxpayers holding the bag for mortgage failures and related bailouts have been kicking around Washington. At the same time, the NAR has been blitzing the airwaves with a fear monger pitch featuring a Norman Rockwell grandpa fretting about “the dream of home ownership being threatened“.  Then there’s their “Public Awareness” campaign which champions the housing industry as job creator. What pol with elections looming could resist that?

Not that many pols ever resist the NAR. Its lobbying clout makes pols go all wobbly in the large bowel. For years, the NAR has beat back wave after wave of legislative reforms that threatened to reduce taxpayer exposure to housing-related risk.

Still, NAR concern re job creation is admirable. Many of the jobs that flow from housing are in the unionized construction trades, the last bastions of middle class wages for America’s blue collar workers. The worker-friendly NAR recently made Bill Malkasian, former head of the Wisconsin Realtors Association (WRA), their Vice President of Political Strategic Planning. When head of the WRA, Malkasian threw the group’s full weight behind union-busting Governor Scott Walker. The Koch brothers gave big to Walker, but the Wisconsin Realtors Association gave more. In his new position Bill Malkasian will be in the NAR field, leading political strategic efforts at state and local levels all over the nation.

By the buy, Bill’s new job is part of the NAR’s atta-boy response to the U.S. Supreme Court ruling that corporations and other entities have the same political speech rights as individuals and can spend as much campaign cash as they wish.

The NAR has other reasons to be cheerful. As 2012 draws nigh, its leaders are making their annual Happy Days Are Almost Here Again predictions. Plus, the NAR is based in the USA not the Peoples Republic of China.

In China, underwater homeowners are doing more than seeking interest write downs or living rent free while awaiting foreclosure. The “fang nu” (housing slaves) of China’s housing bubble are storming the gates of real estate heaven.

The Los Angeles Times, in its December 13th article China’s housing bubble is losing air, describes a revolt of the fang nu in Shanghai. Condo buyers who’d been told by salespeople that “prices wouldn’t go down” became enraged when the project’s developer (China Vanke Co.) slashed purchase prices by 25% for later buyers. The condo cadre trashed the sales office and tussled with employees. It took the police three days to quell the protest. Cities including Shanghai and Beijing have had at least seven similar uprisings in three months, in which mobs “destroyed real estate offices and demanded refunds of up to 40%”.

According to the New York Times (Village Revolts Over Inequities of Chinese Life, 12/15/11) as many as 180,000 “mass incidents” have taken place in China over the last year. There are numerous reasons for the uprisings. But a prime cause is another twist on the real estate game–

“…the seizure of land by well-connected private developers or government officials, which invariably involves forced evictions for meager compensation….these seizures are supported by local governments that have come to rely on proceeds of land sales and development to pay for day-to-day operations.”

A familiar scenario to anyone who followed the rise of eminent domain abuse during the U.S. housing bubble daze. When moderate and low income property owners discovered their neighborhoods had become land-grab goldmines for pols, planners, and developers. Justification? Revitalization by any means necessary.

Like Mao once said, “Real estate is not a dinner party”.

OK. Mao Zedong aka Mao Tse-tung aka the Great Helmsman of the Peoples Republic of China till 1976, didn’t really say that. He said this:

“A revolution is not a dinner party, or writing an essay, or painting a picture, or doing embroidery; it cannot be so refined, so leisurely and gentle, so temperate, kind, courteous, restrained and magnanimous.”*

If you substitute “real estate” for “revolution” Mao’s words could come from a sales motivational speech. One which would wrap with the threat that coffee (or tea) is only for closers.

*From Report on an Investigation of the Peasant Movement in Hunan

 

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Turkey Day at Target: Jim Johnson Carves, Consumers Gobble and Run

by Carola Von Hoffmannstahl-Solomonoff

This year’s hottest Thanksgiving event is being held in Minneapolis at the headquarters of Target Corp. The mega retailer, whose cheap designer duds keep Joe and Jane Doakes looking stylish even during a depression, will be celebrating T-Day in a novel way. Target’s chief execs and board of directors are ditching family gatherings in favor of chowing down together. According to a fly on the wall, the table in the corporate board room has already been set with plastic china. And a bank of big screen TVs has been mounted above the table. More about that in a minute.

Come dinnertime, board member James A. Johnson will be doing the carving. He’s definitely the man for the job. As chief executive of government-sponsored mortgage maven Fannie Mae between 1991 and ’98, Jim Johnson was known for his ability to eviscerate regulators. When congressional number crunchers fretted about taxpayer risk and the danger of consumers carrying too much housing debt, Jim and his fellow bubble chefs at Fannie Mae and Freddie Mac got busy with their long knives. Doing a Benihana on anyone insufficiently convinced re the social benefits of expanded home ownership programs. If profits for the chefs expanded along with the programs, so what? Doing well by doing good was all the rage in that gilded age.

That was then, this is Turkey Day 2011. Great news for consumers carrying too much debt! This year, Target’s Black Friday sales begin on Thursday. Doors open at midnight. Lines will be long. As soon as you’ve choked down the pumpkin pie, grab your credit cards and run. (Tip: time can be gained by skipping grace at the beginning of the meal.)  Leave the dishes in the sink. Heck– don’t even bother to clear the table. Let the dog do the cleanup.

About those TVs in Target’s boardroom– an unnamed source (the fly on the wall wishes to remain anonymous) says the company’s chief execs and board members want to watch– and wager on– consumers racing up and down Target aisles all over the country. Can the hefty gal in the pajama jeans beat the old but spry bald guy to the last marked-down tech toy du jour? Which mom will emerge victorious from the doll scrim in aisle 666? And can Target’s scooters for the disabled roll faster than other shoppers can run?

If not, there will be blood…

After the games are over, T-Day at Target headquarters will conclude on a light note, with execs and board members mugging it up (Jim Johnson allegedly does a hilarious parody of Bob Cratchit) as they read aloud from a petition signed by 190, 000 employees and rogue consumers, requesting that Target move its opening hour back to a leisurely 5 a.m on Black Friday morning.

 

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Corzine to play Two-Face in new Batman!

by Carola Von Hoffmannstahl-Solomonoff

Corzine as Two-Face

This just in from Hollywood– Jon Corzine, who until about a week ago was Top Dog in the tanking Wall Street unreality series My Own Private MF Global has been cast as supervillain Two-Face in the next Batman opus. Buzz sez Bat producer Michael Uslan saw the Reuters piece The Two Faces of Jon Corzine and after reading it, got Jon on the honker. According to sources, what really wowed Uslan were these lines:

…Corzine sounded like a real Wall Street reformer during [a] speech at Princeton in September 2010, titled After the Crash: Regulating the New American Economy.…Corzine said he generally supported much of the financial regulatory law known as Dodd-Frank and believed it would lead to less risk taking on Wall Street…Corzine went on to say it was unacceptable that some of Wall Street’s biggest players were leveraging shareholders’ equity at a ratio above 30 to 1 going into the financial crisis…Yet just before [Corzine’s company] MF Global filed for bankruptcy, the firm was operating with a leverage ratio of 33 to 1…

Like, how Two-Face is that? If anyone needs more proof Corzine is perfect for the part, check this from the Newark Star Ledger:

[Corzine] has also has emerged as a key lobbyist against proposed rules that would have restricted firms such as his from, among other things, borrowing customer money to make investments.

Those rules Boys & Girls, are part of the same Dodd-Frank reform law Corzine “supported”!

Weird coincidence: Senator Chris Dodd and Congressman Barney Frank, whose names top the regulatory bill Corzine sought to undermine, were also offered the role of Two-Face (one half Dodd, the other Frank) due to their star turns in Housing Bubble: The Monster that Ate Wall Street. Both turned it down. Citing their busy schedules as financial reformers.

Though not first choice as Two-Face, Corzine jumped at producer Uslan’s offer. Snapping back “Mister, I was made for it.” Demonstrating his film savvy by channeling Tyrone Power as the master con turned chicken-chomping geek in the classic noir, Nightmare Alley.

Talking pop culture history, the original Two-Face, as created by DC Comics in the 1940s, was a good guy gone supervillain wrong. Two-Face was once Harvey Dent, the reformer district attorney of Gotham City. But Dent goes bonkers after a criminal tosses acid on him, hideously deforming one side of his face. Dent embraces his “Two-Face” and becomes a crime boss.

Fans who’ve followed Corzine’s political career know he too once appeared a reformer. In 2000, he shelled out $62 million for the role of senator from New Jersey in Mr. Corzine Goes to Washington. It was a short run; in 2005, Jersey’s political bosses on the D side cast Corzine as governor. Many in the voting audience believed the wealth Corzine garnered as former chairman and CEO of Goldman Sachs (1994-99) would make him immune to sleaze. The myth of the gazillionaire political savior rides again. Hope springs eternal, even in Jersey. Reviewers gave Corzine a Golden Turkey .

Inquiring minds want to know– who tossed acid on Jon Corzine and when did it happen? When he was a Jersey pol or Goldman CEO?* Or way earlier, when Corzine was climbing the Wall Street ladder in the American Psycho ’80s?**

Past is past. Big things are happening here & now for Jon. Thanks to the sudden collapse of MF Global, the mysterious disappearance of roughly $600 million of its customer funds, and the possible co-mingling of customer and company money (a regulatory no no), Corzine will now be starring in a series of federal and state investigations, plus civil litigations produced by some of the hottest firms in the biz.

Corzine has hired Andrew Levander, a former assistant U.S. attorney to help him handle the load. Levander’s celebrity clients have included John Thain, Merrill Lynch’s former boss, and Ezra Merkin, a former associate of Bernie Madoff.

Even with such high-powered assistance, Corzine won’t have much time for his usual social whirl…

Right before MF folded like a cheap Goldman, Jon Corzine was spotted on Wall Street bundling mega campaign donations for President Obama– in hopes of replacing crony capitalist superstar Tim Geithner as Treasury Secretary. (Imagine the boffo box office if MF Global had tanked after Corzine was appointed!) While bundling, Corzine sported full frontal Two-Face. Knowing his fellow players would dig the ironic Lon Chaney.

Though the Treasury appointment is now gone with the wind, don’t cry for Corzine. Being in a Batman beats hanging with the too-big-to-fail. And if the Bat doesn’t fly, there’s always the circus. Buzz sez the geek routine is making a big comeback. New twist; biting the heads off free range chickens. (First you gotta catch ’em.) And my buddy Buzz is always right about trends.

Carola Von Hoffmannstahl-Solomonoff

*Trivia: Corzine’s illustrious co-stars at Goldman included his protégé, mortgage banker and bond trader Kevin Ingram. After racking up mega losses at Deutsche Bank in 1998, Ingram went on to star as a money launderer for a B movie bunch of Jersey-based terror plotters.

**More trivia: the film version of Bret Easton Ellis’ American Psycho starred pre-Batman Christian Bales in the title role. Think Bruce Wayne, through a glass darkly.

 

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Cambodia’s Curse, Mexico’s Manana, Reckless Endangerment Stateside

by Carola Von Hoffmannstahl-Solomonoff

My summer reading this year kicked off with Cambodia’s Curse: the Modern History of a Troubled Land by former New York Times reporter Joel Brinkley. Brinkley won a Pulitzer in 1980 for his coverage (at the Louisville Courier Journal) of the fall of the Khmer Rouge.

The title Cambodia’s Curse bugs me. Though cultures resistant to change create illusions of inevitability, and a genocidal past casts long shadows, no nation or people are truly cursed. Nor do I buy Brinkley’s attempt to place partial blame for Cambodian acceptance of the Khmer Rouge on passivity engendered by the influence of Theravada Buddhism and Hinduism. First, it’s a simplistic take on the two religions, both of which are practiced in numerous countries that never exterminated a quarter of their own people in an effort to create a communist utopia. Second, countries with far different religious heritages have also had totalitarian holocausts. Germany and the Soviet Union most notably, respectively representing the right and the left.

As for Cambodian passivity, it must come and go– judging by the perpetual political turmoil of Cambodia in the 20th Century, and by the recent grass roots resistance to the land grabbing, population displacing, development policies of Prime Minister Hun Sen.

Caveats aside, Curse author Joel Brinkley does a swell job nailing the crony-rich corruption of Cambodia’s current government as headed by Hun Sen. Whose honorary title of “Samdech” (akin to “your excellency”) was awarded him in 1993 by Cambodia’s amazingly tenacious King Norodom Sihanouk. Easy to imagine the retired (sort of) Sihanouk doing Karaoke of I Will Survive. Dubbed the world’s most versatile pol by the Guinness Book of Records, Sihanouk has surfed wave after wave of political change since 1941. Sometimes wearing his crown, sometimes not. Using his royal influence to legitimize the Khmer Rouge in one decade and deep-six them in another. Dancing with ideologies of all stripes, telling foreigners bearing aid and investment whatever they want to hear.

Prime Minister Hun Sen is also a marvel of tenacity. In 1975, as a Khmer Rouge battalion commander, Hun Sen took part in the campaign in the eastern zone of Democratic Kampuchea (Cambodia’s name under the Khmer Rouge) that included the invasion of the capital city of Phnom Penh and the forced evacuation— aka death march– of its entire population to a rural paradise of forced labor. By the late 70’s, Pol Pot and his pals in the upper echelons of the Khmer Rouge were imploding with paranoia. Hun Sen sensed the reaper was turning his way. When Vietnam, after a series of border disputes, invaded Cambodia in 1979 and overthrew the Khmer Rouge, Hun Sen rode in with them and was given a top spot in the government installed by the Vietnamese.

Years of civil war followed. The Cold War shaped the conflict. The Soviet Union backed the repressive Vietnamese government; the USA and China supported the rebel remains of the murderous Khmer Rouge. Arms flowed from all sides. In the early 1990’s, as the Soviet Union waned, the Vietnamese departed. The Khmer Rouge dwindled. Little dictator (compared to Pol Pot) Hun Sen remained in place as prime minister. To placate international good government types bearing financial aid, he was eventually forced to accept a toothless coalition government representing parties other than his own. Dissidents are still persecuted. An independent judiciary? Freedom of speech? Who needs the lies and distortions?

Meanwhile, the handful of elderly Khmer Rouge leaders charged with crimes against humanity will probably keel over before their trials are allowed to conclude and the bureaucrats, speculators, and family members favored by Hun Sen continue to help themselves to Cambodia.

As for Cambodia’s established reformers, the go-to guys when foreign policy players from other countries require an anti-Hun Sen, they seem almost as seasoned, agenda-wise, as Sihanouk and his Samdech.

An aside about my being a mental tourist in flailing states. Yeah, there’s the appeal of the morbidly exotic. But there’s also the illuminating shock of recognition. What past or present resident of a flailing post-industrial city in say, New Jersey or New York, hasn’t seen similar political stasis? With old boys and hoary reformers as the fixed poles of political expression? Old boys rule; reformers wax profitably pious. Both sides (if the two ends of a continuum can be called “sides”) claim revitalization is just around the next public-funded corner. They may squabble over who gets paid but always agree on the need for more more more.

OK. Hun Sen and his cronies in Cambodia make our crowd seem like pikers. But to paraphrase George Bernard Shaw, we’re just haggling over degree. For folks interested in U.S. urban policy (or in improving their looting skills) Cambodia’s Curse is an instructive read.

Now Reading: Mexico

I recently started reading Manana Forever? Mexico and the Mexicans by Jorge Castaneda, Mexico’s former foreign minister. Only a few chapters in, so I can’t say much about it. But I have been brushing up on Mexico via other sources. My hitherto casual interest was amped last year by the flap over Secretary of State Hillary Clinton’s comparison of Mexico to Columbia during that country’s narco insurgency days. Hillary’s take was testily denounced by President Obama– and by the Mexican government. As an example of difference in the two situations, Mexico’s national security advisor pointed out that Mexico has never “elected a drug lord such as Pablo Escobar to congress”.

Wags might reply why buy the cow when milk is so cheap.

InSight, a think tank site focused on research, analysis and investigation of organized crime in Latin America and the Caribbean, recently ran an article (Mayor Goes Free, Mexico Fails Again to Prosecute ‘Corrupt’ Politicians) about the growing number of Mexican pols whose arrests on cartel-related charges have dissolved into non-prosecution. Including Gregorio Sanchez, the former mayor of Cancun,  Jorge Hank Rhon, the former mayor of Tijuana, and dozens of state and local officials in the state of Michoacan.

Mexico has 31 states (14 of which are on the U.S. State Department’s travel warning list) and a federal district. In late July, roughly 21 state prosecutors (a job akin to being a United States Attorney) resigned. Leaving the states and Mexico’s federal district temporarily without top cops. No reason given.

Zones of Silence

In June, Mexican reporter Ricardo Chavez Aldana (a native of Ciudad Juarez) spoke at the National Association of Hispanic Journalists’ annual meeting in Florida. Chavez was among several reporters who told of being threatened and of having relatives and/or colleagues murdered by drug cartels. June was a “particularly grim month” for journalists all over Mexico. On June 20th well-known crime reporter Miguel Angel Lopez Velasco and his wife and son were murdered in Veracruz. Another Veracruz journalist had been found in a shallow grave three weeks earlier. On June 7th, armed men abducted an editor of an Acapulco newspaper from a bar and on June 13th, a reporter for two dailies in the state of Sonora (bordering Arizona) was shot to death in an abduction attempt.

Also in June: a report titled Corruption, Impunity, Silence: The War on Mexico’s Journalists, by PEN Canada and the International Human Rights Program (IHRP) at the University of Toronto blasted “the Mexican government’s repeated failure to protect the human rights of journalists, its complicity in a number of rights violations against them, and the web of Mexican laws that limit freedom of expression and effectively gag journalists who seek to expose government corruption”.

During the same month the Committee to Protect Journalists (CPJ) upped Mexico to #8 (among the top 10 countries) on its Impunity Index; the index calculates unsolved journalist murders as a percentage of a country’s population. According to CPI “deadly anti-press violence continued to climb in Mexico, where authorities appear powerless in bringing killers to justice.”

In 2010, Mexico’s own National Human Rights Commission reported that at least 66 journalists had been killed since 2005 and 12 others had disappeared. Mexican officials claim not all murdered or kidnapped reporters are targeted because of journalism activities. Most recently in the case of police reporter Yolanda Ordaz de la Cruz. On July 26th, her decapitated corpse was found on a street in Veracruz. Colleagues say she was investigating the murder of fellow reporter Miguel Angel Lopez Velasco and his family and had received anonymous death threats. The top prosecutor for the state of Veracruz denies her murder was linked to her work.

Boosters for tourism in Mexico often imply only people involved in drugs or those who don’t mind their own business are in danger. But in a country where drug cartel terrorism has created news blackouts in journalistic zones of silence, government corruption is supported by laws that limit speech, and where 70% of all federal arrests dissolve into dropped charges and the overall rate of impunity for criminal activity is eye popping, the true number and nature of victims, be they reporters, average citizens, or foreign tourists and workers, may be difficult to ascertain.

In the meantime, the Mexico Tourism Board, under the leadership of newly appointed Chief Marketing Officer Gerardo Llanes is seeking to tidy up Mexico’s image. Llanes, who in his prior position helped launch Diet Coke in Mexico, is reaching out to U.S. media outlets like Bloomberg, Newsweek, and CNN in order to help them “get the facts straight”. Llanes and the Tourism Board will cite “swimming with whale sharks and camping” as a few of Mexico’s attractions in an upbeat publicity campaign tagged “The Place You Thought You Knew”.

Twinge of recognition: in flailing post-industrial cities stateside, political boosters always claim that the crime afflicting their bailiwick is merely a matter of perception. They also revile and/or try to work the messengers who deliver the perception. And true crime stats are always elusive.

A word about Jorge Castaneda’s Manana Forever. In it Castaneda references (negatively) the Mexican proverb: “El que no transa no avanza”. Whoever doesn’t trick or cheat gets nowhere.

The Last Book of Summer

I’m on a waiting list at my local library (I don’t do tablets– too much like Etch A Sketch) for Reckless Endangerment by Gretchen Morgenson and Joshua Rosner. A nice cozy read about all the folks in the Washington Wall Street nexus who pumped the real estate bubble that distorted our economy and then picked the public pocket when the Ponzi collapsed. I don’t expect Reckless to be a shocker, more like the kind of mystery where you know who-done-it right from the beginning but enjoy seeing how the perp is brought to justice. Oh. Wait. None of the major housing bubble perps were brought to justice. In fact, most are doing better than ever.

El que no transa no avanza!

 

 

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Mortgage Fraud! Mollusks! Taxpayers Rush to Invest

by Carola Von Hoffmannstahl-Solomonoff

Ah, mortgage fraud. The unsung power tool of the housing bubble. Starting around 1999, the FBI issued repeated warnings that mortgage fraud was surging. Few in government listened. Fraudsters ranged from organized cross-country rings of real estate, banking, and investment professionals, to non-profit profiteers and Joe and Joan Doakes lying on mortgage aps ’cause they just had to have that house. Feeling nostalgic about the big grift that sent no major players to jail but left taxpayers holding the Hefty and the landscape blotted with foreclosures? No need. Boom or bust, the impetus for mortgage fraud is a constant. When housing is hot there’s pressure to keep the market booming, in bust mode there’s pressure to jack it back up.

According to Core Logic (a leading provider of business information), after taking a breather in 2009 mortgage fraud increased more than 20% in 2010. (The Mortgage Asset Research Institute reports that Florida and New York lead the nation at number one and two respectively.) With government now owning or insuring 97% of mortgage bonds via Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA), taxpayers are on the hook more than ever. And they’re paying for new twists. Quoting* mortgage fraud attorney L. T. Lafferty, a former federal prosecutor specializing in white collar crime, “fraud is… perpetrated differently when there are different opportunities”.

When one door closes, another opens…

Loan origination fraud, a mortgage fraud staple, is seeing new emphasis on hiding debt and liabilities. (Prior mortgage defaults? No problem.) Due to increased requirements for proof of income, credit, etc., mortgage fraud rings increasingly rely on identity theft rather than fake documents– thereby involving a wider circle of victims. Then there are the homebuilders with a glut of houses or condos who offer buyers financial incentives that aren’t disclosed to lenders. After buyers obtain loans, builders welch on the incentives. Oops, more underwater mortgages. Faked occupancy is on the rise. (Loans for second homes, and for rental properties without an owner in residence require larger down-payments and higher interest rates.) And hey– foreclosure rescue scams are on fire! Loan modification, refinancing, short sales, real estate owned (REO) sales, and government sponsored programs are being mined big time. Of course, almost the entire housing market might now be called a government sponsored program…

To date, taxpayers have kicked in $153 billion just to prop up Fannie Mae and Freddie Mac. Fan and Fred’s oversight agency (an organ of the FHA) estimates that the agencies’ losses through 2013 will require another infusion of between $68 billion to $210 billion. In government speak, a massive transfer of wealth from the general public (roughly one third of whom are renters) to cover a mountain of bad private assets is called an “investment”.

In Washington, the Obama administration and Congress are trying to hammer out a plan for “weaning the $11 trillion mortgage market from its dependence on government”**. The weaning, which will allegedly include the waning of Fannie Mae and Freddie Mac, must be done carefully and slowly so as not to damage the fragile housing market. (When the market was robust, reform was rejected ’cause it might damage the boom.) A time frame of five to sevens years has been mentioned. By then the full wean will be in the hands of the next administration. In the meantime, the real estate lobby is beating down doors in DC, to make sure that nothing (untoward) is accomplished. The National Association of Realtors, the American Bankers Association, the National Association of Home Builders, the National Council of State Housing Agencies, and the National Fair Housing Alliance are united by their determination to protect folks from being cheated out of the American Dream of Home Ownership.

Do Mollusks Dream of Electric Drills?

Mortgage fraud isn’t the only real estate product backed by taxpayer investment. There’s always (forever and ever) urban revitalization. Point of info: investment in urban revitalization does not put the truly needy in safe, clean public housing and bring industry back to fading blue collar cities. Instead it pumps luxury condo enclaves, twee art and restaurant districts, and political corruption. Perhaps no place exemplifies this type of urban revitalization better than Hoboken, New Jersey. A small (one mile square) waterfront town across the Hudson River from Manhattan, which after biting post-industrial dust was reborn as the jewel of government-backed new urbanism. That almost all of Hoboken’s blue collar residents were pushed out of town in favor of wealthier professionals largely employed by Wall Street mattered not. Gazillion urban planners saw the future and it was Hoboken.

What they didn’t see were the mollusks. More about them in a minute. First, the corruption. Everyone saw the corruption. Over the roughly three decades in which Hoboken became the revitalized gem of Jersey’s “Gold Coast”, developers and public officials from Hoboken and its parent entity Hudson County, went down like nine pins; bowled over by federal and state investigations frequently targeting corruption related to government-backed development projects. The U.S. Department of Housing and Urban Development (HUD) and U.S. Department of Transportation were soaked again and again. As were assorted state agencies. Tax breaks were/are crony candy. Hudson County’s other cities revitalized their historic corruption with equal fervor, inspired by Hoboken’s new urban success.

Hoboken eventually became one of the most valuable chunks of real estate in the country. Yet taxpayers have never stopped investing in its revitalization. The promenade that stretches along the city’s condo-lined waterfront was a mega investment. The walkway and its park areas are open to the public. Hoboken’s master builders would have preferred waterfront access to be restricted to condo dwellers but local green space activists fought not only to keep it open, but to expand the walkway into an unbroken strip running along the entire Gold Coast. Since public largess was powering waterfront development, developers had to bend. Pols scrambled to speed their plow, cutting government red tape re construction. In Hoboken the promenade was largely in place by the 1990’s. New Jersey’s Department of Environmental Protection signed off on it every step of the way.

Now we get to the mollusks.

The first cave-in on Hoboken’s promenade occurred in 2007, at Castle Point Park in mid Hoboken. Just a small collapse. No cause for alarm. But two years later, part of a sports field that had been built atop a pier slid into the Hudson. When the field was developed in the 90’s engineers warned that the pier’s pilings were infested with shipworms, a type of mollusk. Shipworms eat wood. Suggestions were made that the pilings be replaced with something less tasty. The suggestion went into the memory hole.

In early 2010, a section of the walkway in the north, near a cove between Hoboken and Weehawken collapsed. Last October, a fifty foot sinkhole opened on Frank Sinatra Drive. (Sinatra was a Hoboken boy.) The drive, which is 13 years old, runs along the river in front of a strip of luxury condo towers– including one which houses former NJ governor and ex Goldman Sachs boss Jon Corzine. The sinkhole, which was also allegedly caused by mollusks, followed two smaller collapses on Sinatra. Recently, engineers determined that the steel beams supporting Pier A, a popular park on the south end of the promenade near Hoboken’s train and ferry stations, need a makeover. Seems the concrete jackets on the beams aren’t covering all they should. No danger from salt water corrosion yet. Just being proactive. Pier A is like, totally safe.

Despite all the wealth that hangs in Hoboken, the city has severe financial problems. Hoboken isn’t the only entity responsible for repairing the collapsing waterfront (as example, Sinatra Drive was a county project) but the city will have to cover much of the rehab. The cost will be more than the entire city budget. Massive debt will be assumed via bonding. According to the New York Times***, Mayor Dawn Zimmer (elected in 2009) is holding out “hope for state and federal aid”. And Hudson County is hoping to obtain federal grants to repair the Sinatra sinkhole. As for the mollusks, they have high hopes for more wood.

*Mortgage Fraud: Worse Before Better, Expect More Schemes and More Regulatory Oversight in 2011, Tracy Kitten, Managing Editor, Bank Info Security, 02/04/11

**Obama Administration Calls for Winding Down Fannie, Freddie, Lorraine Woellert and Rebecca Christie, Bloomberg News, 02/11/11

***As Hoboken’s Riverfront Crumbles, the Cost for Repairs Soars, Richard Perez-Pena, New York Times, 02/08/11

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