Separate But Equal Sub-Prime Crises

“Jump up–hold on tight / Can’t trust the promise or a guarantee
‘Cause the man ’round the curve says that he’s never heard / Of you or me”
–Elvis Costello

The issue of sub-prime loans has been around for years. It never entered the pubic consciousness when groups like SUN framed the issue as one of financial justice–a new form of redlining. Looking at Home Mortgage Disclosure Act data supplied annually by the banks, the pattern was obvious in Central N.Y.: good loans for suburbanites, sub-primes for the inner city. It worked out well for everyone, supposedly. Despite the wide gap in home values between city and suburb, sub-prime loans were profitable.

Now we know that many of the sub-prime loans were profitable because of the people lined up at the banks’ back doors–the folks buying up these loans on the secondary market. With an alchemist’s wave of the hand these loans were turned into financial products that were further sliced and diced on Wall Street. Billions of dollars sloshed through our national and international monetary system, all based on a fleeting promise by a family to pay back their original mortgage loan.

SUN has dealt with the impact sub-prime lending has had on our neighborhoods for many years, convincing the city to create a successful mortgage foreclosure counseling program and working with a national coalition of neighborhood groups to negotiate loan repair programs with several large sub-prime lenders: Citifinancial, Ocwen, Chase. SUN has helped hundreds of families keep their homes.

But this is a tale of two sub-prime loan crises. The crisis SUN’s neighborhoods have faced and the one playing itself out in the international monetary system and the media. The local version is called predatory lending. Target families with a valuable asset, but are cash poor. Hook them up with a mortgage refinance loan that gives them a moderate amount of cash to deal with a pressing emergency like a loss of job, medical catrastrophe. The terms are onerous, larded with fees and charges that accrue to the lender immediately. Eventually, the loan will result in default and the the lender can then seize and liquidate the asset: foreclosure. Often the borrower would go through a couple of refinances with the same lender, enough to shake a little more cash from the target until they are bled dry.

The national version of the sub-prime crisis is a lot more sophisticated than our neighborhoods’ fight against loan sharking schemes. There are many more actors involved, all with different agendas. The home is often not a consideration, at least not for the lender. They just want to make more loans, once you buy they are on to the next score. Companies like Countrywide, New Century and Ameriquest had their marching orders. Sell the loans and the money would pour in from the insatiable secondary market. The lenders are like the lab mice in a famous scientific experiment. Trained to press levers that release food and narcotics, in a short time the mice are constantly pressing the drug lever, neglecting even basic nourishment.

So, given all the handwringing in the media and the real crunch to financial markets, how many people are being threatened by foreclosure? There has been a 75% increase in foreclosures between 2006 and 2007. But that number is just a shade over 1% of all mortgage holders in the U.S. 99% of all mortgages are being paid. The tumult is a result of the spectacular ruin to one of America’s newest innovations: the exurb.

Tim Egan writes about the American west on his NY Times blog, and his post The Pools Of Riverside County points out the hard times: “if you want to find some of the highest foreclosure rates in the country, you go the places where exurban America is pushing into farm fields and forests.” George W. Bush carried almost all of the 100 fastest growing counties in America in the 2004 election. The exurb was the distilled essence of the new America: deracinated, auto-dependent sprawl, few public services. A bunch of McMansions plopped down in the middle of old farms or deep in the desert. Now, these boomtowns are home to thousands of vacant houses and undrained pools turning green with algae, breeding mosquitos.

The states with the highest rates of foreclosures are Nevada, California, Michigan and Florida. While Micigan is being hammered by the loss of manufacturing, the other states have been hammered by investors bidding up home prices to astronomic levels–all looking for a killing. 3.4% of the properties in Nevada are in foreclosure–three times the national average.

People seem to be desensitized to pictures of urban decline. SUN neighborhoods on the south and near west sides of Syracuse have borne the brunt of this decline for years. Our neighborhoods lost 25% of its population between the 1990 and 2000 census. SUN neighborhoods make up 15% of the city’s households, yet harbor 45% of the city’s vacant houses. For over a decade, 5% of the properties in our neighborhoods have been vacant and abandoned. But this media-friendly crisis is happening in middle class neighborhoods, neighborhoods with pools for god’s sake!

The national crisis will eventually abate, house prices will come down from their investor-inflated levels. But will we have learned anything? The superficial take on this mess seems to absolve the lenders and their Wall Street enablers, focusing on the personal ethical shortcomings of borrowers–how dare they borrow more than they can afford? But what if the game was rigged to turn out exactly this way? Bust follows boom follows bust ad nauseam. Such is the nature of modern capitalism. The current wave is unusual because the financial sector and its increasingly complex structure bumped up against the current governmental concensus against strict oversight and regulation.

That concensus is rapidly disappearing. The recent turnover in Congress has put Rep. Barney Frank at the head of House Financial Services Committee. His recent editorial in the Boston Globe recognized the crisis as a tale of two cities:
“one aspect of the subprime mortgage crisis that deserves special attention is that it was in large part a natural experiment on the role of regulation. And the results are clear: Reasonable regulation of mortgages by the bank and credit union regulators allowed the market to function in an efficient and constructive way, while mortgages made and sold in the unregulated sector led to the crisis.”

However, once the sub-prime lenders searching for a killing through the secondary market are shaken out of the system by increased regulation, who will take on the predatory lenders of the Rust Belt? They are are still operating below the radar and they never needed the more exotic loan products like interest-only and adjustable rates to fleece poor homeowners struggling with declining wages and the increasing costs of basic needs like energy and health care. The mainstream credit markets have not worked for people in the inner cities, creating the niche now dominated by predatory lending. When the picture on the cover of Newsweek goes back to one of an inner-city duplex, rather than an exurb McMansion with a green pool, will anyone still care?

We’re Not Dopers; We Just Can’t Concentrate

While everyone focuses attention on steroids and baseball since the Mitchell report and Roger Clemens’ press conference, they’re missing the more widespread drug problem in baseball: amphetamines.  Remember how Jim Bouton wrote in “Ball Four” that amphetamines were rampant in clubhouses–set out in bowls like M & M’s?  That was in the late 60’s and early 70’s. 

Check out this modern dodge. Since MLB banned amphetamines and started testing in 2006,  103 players have applied for medical exemptions for legal usage.  They claim they suffer from attention deficit disorder.  As blogger Jon Taplin notes: “The mind boggles at the sight of some $2 million a year center fielder staring aimlessly at the Goodyear blimp above while the ball sails over his head. ‘Coach I need that Adderal to concentrate on the game.’ ”  

The NYT quotes Dr. Gary I. Wadler, an internist and antidoping expert, “stimulants help a person concentrate — that is their medical link to attention deficit disorder — but also mask pain and increase energy and reaction time.”  This is a legitimate union issue.  Can players make it through a 162 game schedule without resorting to amphetamines to deal with pain and fatigue?

State Supreme Court Justice Robert Julian: “Help, I’m Being Ravaged!”

State Supreme Court Justice Robert Julian is resigning because the state refuses to raise state judges pay. The Justice makes $137,000 per year and claims that judges “have forsaken their law practice to engage in public service only to be pummeled by the ravages of inflation.” Mr. Julian hasn’t received a pay raise since he was elected to the State Supreme Court bench seven years ago.

I’m having a hard time sympathizing with Mr. Julian. Yes, state judges deserve to have their compensation reviewed and increased where merited. Yes, the state legislators have turned judicial pay raises into a political football.What is irritating is that Julian ran for the judgeship knowing the respective pay rates of a private legal practice and a public servant. You become a judge for reasons other than the money. Complaining about a six-figure income is unseemly and unprofessional.  Try asking the folks thrown out of work at Pennie Curtis bakery or the folks being laid off at New Process Gear if they could get by on $136,700.

I also work at a job where no one in our organization has gotten a raise in many years. We are a small non-profit and have seen our budget drop by 38% in the past 5 years. I wish that my work could be recognized with an increase in pay that I believe I deserve.  But I know that our organization cannot afford it.  I also know that I went into community organizing for reasons other than money.  So I make do. (and I don’t make anywhere near $136,700!)

Times are tough Mr. Julian. Suck it up or scurry back to your comfortable billable hours and country-club lifestyle. Just don’t make yourself out to be a martyr.

Financial Markets Complexity Beyond Our Understanding

OK, here’s a frightening piece of news. Moody’s, one of the main credit rating services, has issued a report stating that the ability to accurately assess risk in modern financial markets has declined, “probably forever.”

The report makes two points:
1) The complexity and increasing interconnectedness of financial systems is making it difficult to adequately assess the risk in the system.

2) Incentives to maximize short-term profits in the financial industry are stronger than the incentives to maintain a stable and long-lasting financial system.

Or as John Leonard writes in Salon.com: This is almost like saying that capitalism, as it is currently constructed, doesn’t work.

First Shot In The Water Wars?

A recent article on Salon.com profiles the problems facing southern and western states rapidly running low on water. Eastern and Mid-Western states are worried that our water is going to be poached by a region that has spent the past decade stealing our jobs and population. The solution proposed by the author of this article Edward McLelland? You can have all the water you want, just move back northeast. He even has some great things to say about the ‘Cuse:

“Syracuse would love to have you, too. They’ve lost a higher proportion of young people than any other city in the U.S., perhaps because they engineered their own demise, being the headquarters of Carrier Air Conditioning, the appliance that made the Sun Belt possible. But they still have Syracuse Orange basketball. And Dinosaur Barbecue, which has the best ribs in Upstate New York, and the funniest bathroom graffiti anywhere.”

One of the first casualties? New Mexico Governnor and Presidential candidate Bill Richardson. His statement about coveting water from the Great Lakes (”states like Wisconsin are awash in water”) was noticed by the Great Lakes states. As Peter Annin, author of “The Great Lakes Water Wars.” states, Richardson’s campaign is essentially dead. “You throw Ohio, Illinois, Michigan, Pennsylvania and New York out of the mix, it’s really hard to win an election.”

The Great Lakes states are trying to get their Great Lakes Compact passed by all eight state legislatures in the region, an attempt to ban all large transfers of water from the Great Lakes. It’s important to get this done now since Congressional approval is also required for approval and the re-apportioning that will happen in 2012 will cost water rich states Congressional seats and see drought states in the south and west gain more influence.

Led Zeppelin: “Enormous, Nasty, Glorious.”

So I’ve been paying more attention to Led Zeppelin lately, a band I never got into during my youth: I had blamed them for heavy metal. My loss. Oh well, I’ve been listening to my only Zep album in my car, a pre-recorded cassette of Houses Of The Holy and planning out which other Zep albums I should buy. For ballast, I sometimes switch over to the Robert Plant/ Allison Krauss CD “Raising Sand.”

“enormous, nasty, glorious.” That’s how the NY Times described Jimmy Page’s guitar during the recent Led Zeppelin reunion show in London. The “Lemon Squeezings” blog has bunches of posts, photos and and YouTube clips on the concert.

Another Zeppelin related gem courtesy of the Professor of Pop blog:
a mash-up by DJ Zebra of the White Stripes and Zep called “Icky Thump, Whole Lotta Funk.” I go and play the tune off the blog every day. I hope I can figure out how to get it into my iTunes library. Just goes to show you–even aging boomers can get into mash-ups and downloads.

Top Syracuse Stories 2007

1) Joanie’s Fresh Start
Joanie Mahoney won the election for County Executive. A 21-vote primary victory over former County Legislature Chair Dale Sweetland was hers when she defiantly stared down the leaders of her party and won the hearts and minds of the rank and file. The GOP’s County party chair got Joanie’s campaign energized when he suggested that Joanie should stay home and mind her 4 young children. Joanie then trounced Bill Magnarelli in the general election, when the incumbent Assembyman ran a singularly inept and unenthusiastic campaign. I believe Joanie won because of, rather than in spite of, her relative lack of experience. No one wanted a grim company man anymore after 20 years of Nick Pirro. Voters wanted young, vibrant and optimistic. It made the election easy, but sets her up for a big fall if her first term is not noticeably different from “business as usual.”

2) Art. Ask For More.
The Everson put their director out on the street in the face of boring programs and a lack of fundraising. S.U.’s Warehouse gallery forced their director out because the programs were too exciting. The city hired a public art coordinator and seemed to focus their sights on reimagining the city’s abandoned parking meter poles. A section of E. Fayette began calling itself an art park, while down the road an art collective is attempting to create a live/work/practice/gallery space in an old warehouse.

3) Walsh 2.0
You are an 18 year incumbent, a member of your party’s leadership team and have brought millions of dollars back to your district. However, you almost lose your last election, losing both the city and Onondaga County. So, you adjust–quickly. You change your position on the Iraq War, allying yourself with other electorally-challenged Republicans suggesting the President slowly wind down operations. You reverse your policy on Town Hall meetings, scheduling them all over your far-flung district. You vote against the President on expanding children’s health insurance.

4) The Chiefs Honor Syracuse’s Glorious Railroading Past
Of course, they honored this past the way we have come to expect the Chiefs to honor anything–with incompetence, penny-pinching and above all else, lots of lost ballgames. The name change was a way to acknowledge that the aging fanbase still calls the team the Chiefs and will always use the racist epithet freely and without shame. We discovered that the protection money demanded by the Chiefs cost this town our pro soccer franchise, an operation that embarrassed the stodgy baseballers with their energy and excitement. Now we learn that the team will not pay its NatGrid bill. I‘d love to see the utility shut off the power in the middle of a game. At least next year we’ll be able to see the Chiefs lose on grass.

5) Route 81 Bypass–To Eternity
Common Councilor Van Robinson was a lonely voice suggesting that the city look at not repairing or replacing Rt. 81 when its anticipated lifespan comes up in another decade. But thanks to some public hearings, lots of buzz in the Post Standard and Sean Kirst’s newspaper blog and the key support of folks like Syracuse University and University Hospital, this is now an issue with legs. It is also perhaps the first time we have enough time and publicity to make a community development decision out in the open, with real public participation. Now we just need someone to stand up at a podium on Almond Street and thunder “ Governor Spitzer, tear down this highway!”

6) Excellus Workers Lose Downtown Farmer’s Market, Gain A Food Court
Excellus, the non-profit health insurance firm, moved its local operations (and 800 jobs) out of downtown and out to the old Agway building adjacent to Shoppingtown Mall in Dewitt. While much handwringing and finger pointing ensued, I’m still unconvinced that the move will cost the city much. The region still has the jobs, downtown is looking at several residential and commercial development projects starting up in the next couple of years and Excellus still has to pay their property taxes on the building. Chill out, it really is an opportunity, not a disaster.

7) “Watch Me Pull A Fat Government Grant Out Of This Hat!”
Nancy Cantor, S.U.’s Chancellor and Bob Congel, shopping mall tycoon, continue to prove that an idea need not be any more substantive than a couple of watercolors and some fancy dreams to attract beaucoups bucks from government officials blinded by the magic act. Millions for a freakin’ sidewalk between S.U. and Armory Square? Millions for a fantasy shopping, hotel resort, green technology museum? What about housing, insanely high heating bills and a decent education for all our children? Where are those magic acts?

Purple County, Blue City
The Democrats have carried the County in the past three Presidential elections, four U.S. senate races and the last U.S. Congressional District race. However, they have made no real progress in local county races. District Attorney, Sheriff, Comptroller, Clerk and County Executive have all been Republican since the Ice Age. But things are worse for the Republicans in the city. The County government buildings in downtown Syracuse must feel like West Berlin, surrounded by a hostile enemy. No more city Republicans in the County Legislature or city school board and only one on the city Common Council. While the Democrats found candidates for all offices, and even picked off a couple Republican incumbents, the Republicans had many vacancies on their lineup card.

9) Person Of The Year: Greg Robinson, head football coach Syracuse University.
In these cynical times, it takes a special person to always look on the bright side of life (as Monty Python maintained that Jesus once musically urged his followers.) Well, Coach Robinson, who has won only 7 games in three seasons on the Hill, is just that kind of special person. So relentlessly upbeat, you believe he may be brain damaged. In the the face of relentless pressure from spoiled fans, sadistic sports writers and Type A personalities in the Sports Department, Coach Rob continues to believe. This cynic salutes his favorite Pollyanna. The BCS Bowl is just around the corner in the mind of Greg Robinson. It must be a very cozy place to be.