The Housing Bubble

The Las Cruces Sun News reports from New Mexico. “Verde Realty has scrapped plans for a city-size residential and commercial development on almost 24,000 acres it owns in Santa Teresa. In 2005, Verde announced plans for the 25,000-home master-planned community on mostly vacant desert at the edge of West El Paso. ‘We previously developed a small portion of the Santa Teresa property, but we no longer intend to pursue large-scale development of this land,’ Verde stated in documents filed last week with the SEC.”

“Other developers may be interested in that land, but ‘I don’t see a demand for it now - maybe in five to 10 years,’ said Charles de Wetter, president of one of El Paso’s largest real estate companies.”

“Randy O’Leary, president of El Paso’s largest homebuilder, and president of the El Paso Association of Builders, said he did expect El Paso-area developers to show interest in that land. ‘Everyone has enough land’ to develop for several years, he said. ‘We (Desert View) have as much land as we need for the next five to seven years.’”

“This is the second big proposed master-planned community project to collapse in this area in recent years. In 2008, Hunt Communities of El Paso decided not to buy 4,833 acres in Northeast El Paso from the El Paso Public Service Board to build a master-planned community with more than 14,000 homes. Hunt said the nation’s financial crisis prevented it from getting financing for the project.”

The Denver Post in Colorado. “The state’s chief regulators sought to defend their oversight of New Frontier Bank during a legislative hearing Wednesday, saying its $1 billion failure last year had nothing to do with poor regulation. Asked by state Rep. Joe Rice, chairman of the House Business Affairs and Labor Committee, what lessons are evident from New Frontier’s failure, acting banking Commissioner Fred Joseph suggested that the state could improve its monitoring of rapid growth.”

“The bank quadrupled its assets in less than three years, surging from $500 million in 2005 to $2 billion in 2007. ‘If that happens, we should require them to put more capital in the bank,’ Joseph said.”

“Greeley-based New Frontier was shut down in April by the state Banking Division because it was bleeding cash. The bank failure caused havoc in the agriculture and real-estate communities of northern Colorado. A Denver Post investigation published in December found that the state Banking Division under DORA failed to detect or punish potentially fraudulent accounting maneuvers by New Frontier managers.”

The Post Independent in Colorado. “The developer of a stalled condominium-hotel project in Basalt wants to overhaul the plan and build something more likely to secure financing in the current economic climate. A Chicago-based firm called Snow River Lodge Inc. wants to convert the condo-hotel project into a traditional hotel, representative Jim Richmond told Basalt officials in a recent meeting.”

“His company has approval to build 54 lodge rooms and two affordable housing units on vacant land. The project stalled 18 months ago after the concrete foundation was poured. The owners ‘lost financing’ during the recession, according to Basalt Assistant Planning Director James Lindt. Financing to build fractional ownership projects has nearly dried up, and loans for buyers of the units are virtually non-existent, according to sources in the real estate development industry.”

“The town planning department supports the change. ‘Staff feels that the request to convert the approved condominium hotel to a standard hotel will further the Town’s goal of creating a balanced economy and sustainable economic growth,’ a memo to the council said. ‘A standard hotel will better promote ‘hot beds’ and tourism than will a condominium hotel.’”

The Arizona Republic. “Arizona State University professor Karl Guntermann said preliminary data for December show the median price for a foreclosed home was down just 2 percent from December 2008. The index for non-foreclosed homes showed a very different trend in December, indicating that the Valley housing market continues to follow two distinct paths: one for bank-owned home sales and the other for more traditional sales.”

“The median sale price for non-foreclosures continued on a steady decline that barely has budged in more than a year. ‘By October 2008, non-foreclosures were declining at an annual rate of 20 percent, and they still are,’ Guntermann said.”

The East Valley Tribune in Arizona. “For the year, Phoenix-Mesa-Scottsdale ranked as the eighth-worst metropolitan area nationally in terms of foreclosure filings - default notices, auction sale notices and bank repossessions. In 2009, foreclosure filings were reported on 133,809 houses, or more than 8 percent of all houses, up 39 percent from 2008 and 343 percent from 2007.”

“The majority of foreclosures are not homeowners who can no longer afford their mortgages, but instead are unhappy because their mortgages are higher than the value of their homes, said Eric Bowlby, president of Amerifirst Financial in Mesa. ‘It may be their (mortgage interest) rate is adjusting and they can’t refinance and get on a fixed rate because they’re upside-down on the house, and that causes frustration and they get mad, and they just walk away,’ he said.”

Inside Tucson Business in Arizona. “Until jobs return and “we put people in foreclosed homes,” recovery of Southern Arizona’s real estate, home building and overall economy will lag behind most of the rest of the nation. The process will be slow and steady, with a full recovery not expected until late 2013 or early 2014. That was the sobering message from economist Marshall Vest of the University of Arizona speaking to about 300 otherwise upbeat attendees at the Tucson Association of Realtors Annual Forecast.”

“Vest said he could make a case that Arizona ‘is the nation’s hardest hit state.’ Arizona ranks last in job growth, 43rd in revenue growth, fourth in home foreclosures, and second in homeowners with negative equity. ‘Since the economy peaked in March 2007, Arizona has lost 275,000 jobs. Tucson has lost 26,000 jobs. The declines are just stunning,’ he said.”

“As this year’s president of the National Association of Realtors (NAR), Tucson Realtor Vicki Cox Golder’s ‘Washington Outlook’ is focused on reform and preservation. Because Congress has approved so many new programs, ‘we’re going to have some heavy-duty tax reform to pay for them,’ she said.”

“The national association is most concerned about preserving the mortgage interest deduction on homes. The Obama Administration views it as a new source of revenue for the government. ‘The deduction is the Holy Grail to anybody with a mortgage. We are going to fight this tooth and nail,’ Golder said.”

“Vest told the Realtors ‘we must put people in foreclosed homes before building more new ones.’ According to U.S. Postal Service officials, there are currently 25,000 vacant homes in the Tucson region.”

The Verde Independent in Arizona. “The latest version of Cottonwood’s proposed annexation master plan for 10-square miles of Arizona State Trust Land is starting to draw more compliments then the previous hail of ‘boos.’ The re-designed plan, according to Curt Johnson of consultant Coe and Van Loo, provides more open space and trails, a larger wildlife corridor and responds to local interests to give the entire development more variety and flexibility. The number of potential homes that might be built has been reduced from 23,000 identified in the last plan to a range of from 12,000 to 19,000.”

The Salt Lake Tribune in Utah. ” Home sales are up, but prices are still going down. That’s the focus of the Salt Lake Board of Realtors’ newest report out covering the housing market along the Wasatch Front. ‘It’s a tough time to be a seller,’ said Realtor Scott Colemere. ‘But with prices down and rates down and the government giving you money to buy, I don’t think there’s a better time to buy.’”

“Justin Lloret and wife Kristi have qualified for a federal home-buying incentive of $6,500, locked in at a mortgage rate of 5.5 percent and got a great deal on a 3,100-square-foot home on nearly one acre in Taylorsville they plan to close on within days. The couple had been looking for a for about a year and a half. ‘Compared to a couple of years ago, we got a really great price,’ Justin Lloret said.”

“Kelly and Elizabeth Callister plan to claim the $6,500 incentive. The Callisters sold their previous home in January 2009 and settled in the fall on their new home in Davis County, where they were able to buy at $15,000 below the already-low asking price for a newer house on a large lot. Kelly Callister said the home-buying incentive, lower prices and his 4.75 percent mortgage rate vastly outweighed the specter of more price declines.”

“‘It’s in the back of my mind, but this is our long-term home, this is where we want to be, so I’m OK with it. We’re thrilled.’”

“Home Savings Bank has until the end of March to increase its capital to at least 11 percent of assets, according to the Federal Deposit Insurance Corp. The order is part of a broader consent agreement between state and federal regulators and the bank requiring Home Savings to also cleanse its books of bad loans.”

“‘The FDIC and the Utah Department of Financial Institutions desires to have all banks increase their capital, reduce nonperforming loans and reduce their concentrations in commercial real estate loans,’ said John Sorensen, Home Savings president and chairman. ‘Recognizing the economic downturn, we took action.’”

“Right now, commercial real estate loans are 529 percent of the bank’s capital. The peak was 1,150 percent in 2006, when the housing slump began. Sorensen said the bank expects to reach its goal of 450 percent within six months. Because Home Federal would lend no more than 75 percent of a project’s value, the bank was comfortable with loan-to-value ratios that exceeded 1,000 percent of its capital. Other banks were willing to lend as much as 110 percent, Sorensen said.”

“With the collapse of real estate, that thinking has gone out the window, he said. ‘I would say I wouldn’t feel comfortable with that level now. It was a different environment,’ he said ‘So that 1,150 percent, that’s a different time. That’s a different era.’”

The Pahrump Valley Times in Nevada. “Lenders last week assumed ownership through foreclosure of a 20-acre tract of land where Jerry Wang, CEO of the Forum Group Ltd., had plans for an ambitious resort complex. There were no buyers at the trustee sale on the courthouse steps in Tonopah.”

“Wang planned to begin construction in January 2000. When the project was completed in five to seven years, Wang predicted 18,000 jobs would be created. His project, The Oasis at Shangri-la, would include an Oriental-themed hotel, casino, retail shopping complex, recreational vehicle park, convenience store and the St. Thomas Place condominium project, for which a sign stood for many years at the site. In November 1999, Wang told an audience of 200 people, ‘At least every other household will have something to do with this project.’”

The Reno News & Review in Nevada. “The unemployment rate in California stayed the same—12.4 percent—only because it did not reflect thousands who have dropped out of the job market altogether, meaning the figures do not reflect their numbers. ‘It hurts us,’ said Nevada economist Glen Atkinson. ‘We’re connected, totally connected to the California economy. … Some of our major sectors, including gaming, tourism and warehousing [are dependent on California’s economy].’”

“‘A lot of the construction industry here in the housing boom was highly correlated with what was going on in California,’ said economist Thomas Cargill. ‘In fact, a great many construction workers were from California, and one of the reasons why the labor force has declined is those people have packed their bags and gone somewhere else.’”

“‘Of the 30 biggest occupational categories in Northern Nevada, only 15 percent require a baccalaureate degree,’ Atkinson said. ‘It means we have a low-skilled labor force here. And it means that the people who go to university here, most of them will have to go someplace else for a good job. … There are not a lot of high-paying, high-skilled jobs in the region. … One of our big growing sectors has been retail, for example—you know, cashiers and so forth.’”

“‘Even though tourism’s been declining, we’re not growing enough in other industries—manufacturing, whatever—to make up for that,’ Atkinson said.”

“Nevada has always been something of an adjunct of California. The wealth of the state’s early mining booms was shipped to California. A former California governor was president of the second Nevada constitutional convention, which drafted the new constitution by using a copy of the California Constitution as a model. Since the revival of legal Nevada gambling in 1931, Californians have been the largest customer base of Nevada casinos.”

“But even now, with Nevada casinos losing customers to California tribal casinos, Nevada—particularly the populous south and west that contain most of the population—shares overlapping trade and media markets with California. The dependence of Nevada on California has been so pronounced that the late scholar Hal Rothman suggested that Nevada is in a colonial relationship to California. He noted that at Hoover Dam, Los Angeles Municipal Utility District vehicles have Nevada license plates.”

“‘The fundamental relationship between Nevada and California is as clear as the insignia on the side of these cars: California runs Nevada, so completely and brazenly the most needed resource in the desert state, water, is stored there for consumption in the great economic engine to the west,’ Rothman wrote in 2002 in a book of essays about Las Vegas—published by the University of California. ‘The control is so complete that the relationship seems natural: California entities wear Nevada license plates and no one notices, proof positive of the vast power of the Golden State in the Silver State. Nevadans need look no farther to see where their bread is buttered. … [D]esolate Nevada has survived by catering to the needs of outsiders, in particular Californians.’”

“When Nevada economic development officials last year started running ads touting the benefits of Californians moving their businesses to Nevada, Fresno Bee writer Jim Boren warned, ‘So here’s what you won’t hear in those ads: Nevada had the nation’s highest home foreclosure rate for the 31st-straight month. U-Haul dealerships in Nevada can hardly keep moving trucks on their lots as residents fishtail out of the once-booming state. Nevada casino revenues report double-digit revenue declines because of the sour economy and the beating they are taking from California’s Indian casinos. Nevada’s unemployment rate of 12 percent was fifth-worse in the nation—even worse than California’s 11.6 percent rate. … Readers know that I don’t defend California very often. State government is a mess. Our infrastructure is falling apart. We’re taxed every time we turn around. But in this comparison, Nevada is the competition, and California wins hands down. In fact, I’d double down on California’s economic future compared with Nevada.’”

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It’s Friday desk clearing time for this blogger. “Spanish Trail, one of Las Vegas’ most affluent gated communities, is starting to feel the pinch of the recession. Some residents are outraged that Spanish Trail association directors have started a $4.1 million remake of the landscaping and plan to collect a $3,350 special assessment from each homeowner over the next two years to pay for it. Alex Forgette, a retired California lawyer, said he would like to buy a new Mercedes but is driving a 4-year-old Lexus because of the hard times. ‘The economic downturn has hit Spanish Trail just like it would anybody else,’ Forgette said.”

“Roughly 60 percent of existing home sales in Polk last year were distressed properties, and the county’s current median price of $107,600 is off 16 percent from the year before. Twila Jarvis purchased her home after moving here from the Seattle area in 2005. Earlier this month, Jarvis found herself packing the contents of her mobile home at Lakeland Harbor. She had fallen short on payments after two years without steady work. ‘It’s emotionally draining,’ she said. ‘This kind of lifestyle makes you want to take a long walk off a short pier.’”

“Foreclosed homes can still be found all across Merced. RealtyTrac reports nearly 8400 properties here received a foreclosure filing in 2009. ‘It doesn’t surprise me, just what I’ve seen since I’ve been here with UC Merced and the investors coming from outside, buying then losing, it doesn’t surprise me,’ said Spence Boelter, Merced Homeowner.”

“Boelter bought his home in 2007 and has watched its value plummet in the past few years. ‘It’s not, maybe I don’t know, might be worth half what it was when we bought it, so we don’t feel real good about that,’ Boelter said.”

“But there are some signs that the market is improving. Realtor Andky Krotik said more people are having success selling their homes now than a year ago. ‘It’s typical that new homes on the market are shown within 2 hours of being listed and are usually in contract within 2-4 days after they’re listed. It’s not uncommon. In addition to that for houses to sell for anywhere from 13-15 percent over the list price, said Krotik.”

“But Krotik says that’s largely because banks have artificially caused a lack of inventory as they face more government pressure to delay foreclosures. “In the past it would take 4 months, and now some are letting them sit there before they confiscate them for up to a year,” Krotik said.”

“He says more than a thousand homes are sitting empty in Merced County, but most are not available to sell.”

“Last year, there were foreclosure filings on 8,174 metro Birmingham properties, according to RealtyTrac. And along with new foreclosures hitting the market, there’s also the problem of shadow inventory — houses that have been foreclosed on but have not been listed yet. ‘There’s a lot of this foreclosure inventory out there, and it has the potential to erode home values further,’ said David Higginbotham, VP of Alabama Title Co. Inc. and the author of a monthly report on local foreclosures.”

“Linda Rheinberger, president of the Nevada Association of Realtors, said it appears short sales are the future as banks and asset managers catch on ways to avoid letting homes go into foreclosure. ‘There is a lot of political and social pressure on banks, especially those that received stimulus money, and they have been highly encouraged to do this,’ Rheinberger said.”

“President Barack Obama’s efforts to bolster the U.S. housing market, the trigger of the worst recession since the 1930s, may be undone by record unemployment and repossessions by lenders. ‘We’re working to lift the value of a family’s single largest investment — their home,’ Obama said in his Jan. 27 State of the Union speech to Congress.”

“The Federal Reserve said Jan. 27 it will keep the target rate for overnight bank lending near zero to help nurture the recovery. ‘Household spending is expanding at a moderate rate but remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit,’ the Federal Open Market Committee said this week in a statement.”

“The statement dropped the previous reference to real estate that said housing ‘has shown some signs of improvement.’”

“U.S. Federal Reserve Chairman Ben Bernanke Thursday won confirmation from the Senate for a second term at the helm of the central bank. But he faced more opposition in the chamber than any previous Fed chief. President Barack Obama congratulated Bernanke on his confirmation and said he looked forward to working with him.”

“‘As the nation continues to face the consequences of the worst recession in a generation, Ben Bernanke has provided wisdom and steady leadership in the midst of the financial and economic crisis,’ Obama said in a statement.”

“Sen. Bernie Sanders, the Independent from Vermont who has led the opposition against Bernanke, said the Senate sent a clear signal to the Federal Reserve with a historic number of ‘no’ votes. ‘Start representing the needs of the middle-class and working families, not just Wall Street CEOs,’ Sanders said. ‘Break up big banks, and stop the secrecy surrounding trillions of dollars in blind loans,’ he added.”

“Critics say he helped fuel the housing bubble at the root of the financial crisis by endorsing low interest rates in the early 2000s, when he was Fed governor and Alan Greenspan headed the central bank. ‘I’m troubled that Bernanke refuses to take responsibility for the housing bubble,’ said Jon Kyl from Arizona, the No. 2 Republican in the Senate.”

“Despite the criticism, Kyl voted in favor of Bernanke, fearing President Obama might pick somebody worse in his place.”

“‘He allowed the Fed to become the lender of the nation. Nobody had ever done that,’ said Sen. Judd Gregg (R) of New Hampshire on Thursday.”

“Sen. Shelby voted against Bernanke, adding that the Fed chief’s actions in helping feed the housing bubble led to the economic melt-down in the first place. ‘I believe it is far more important to consider the facts surrounding Chairman Bernanke’s record than it is to speculate about the impact of his departure,’ said Shelby.”

“Housing markets appear to have stabilized for the moment, with Case-Shiller price indexes rising for six consecutive months and sales stimulated by federal tax credits and fixed interest rates below 5 percent. The Case-Shiller index for November was up 0.2 percent.”

“There is a wave of adjustable rate mortgages on which rates will reset in 2010 and 2011, said economist Kevin Gillen, vice president of Econsult in Philadelphia. ‘It was the reset of subprime ARMs in 2007 that was the specific trigger for the market’s downturn,’ Gillen said. ‘Will this coming wave cause us to double-dip?’”

“It appeared to the housing industry that the tax credit was a panacea, but Gillen suggested that ‘the true effect of the home-buyer tax credit is still unknown.’ ‘Did it truly halt the market’s decline, or just give us a temporary reprieve? We won’t know until after its expiration in April,’ he said.”

“What the tax credit might have done is pushed people who had been planning to buy in the first half of 2010 into the market in the last quarter of 2009 - meaning that sales will actually decline in 2010 as ‘payback.’”

“Another major factor is high unemployment. ‘People need to feel comfortable about buying a home again,’ Gillen said. ‘They not only need to know that they’ll be able to support their home’s value, but that their neighbors will be able to also.’”

“Although Honolulu finished 2009 with fewer foreclosures per household than the national average, the city’s foreclosure activity increased at more than six times the national pace over the last 12 months and is expected to worsen this year. On Oahu, Ewa Beach was the hardest-hit market followed by Waikiki, Kapolei, Waianae, Waipahu, Mililani, Kaneohe, Hawaii Kai, Kailua and Pearl City.”

“‘We had so many military buyers that gravitated to Ewa Beach in 2005 and 2006 that were on three- to five-year tours of duty,’ said David Kucic, a Realtor-associate with RE/MAX Honolulu. ‘Now that they’ve been transferred, they can’t afford to keep those houses and the rents aren’t covering the payments.’”

“As a result, certain neighborhoods such as Gentry’s Tuscany/Montecito have many listings that are in short sale or foreclosure, Kucic said. Ewa Beach homes that sold for $430,000 to $500,000 during the previous boom are now selling for around $390,000, he said.”

“Baby boomer buyers fueled a big run-up in U.S. home construction and sales in the 1970s and 1980s. Now beleaguered homebuilders say they’re hoping aging boomers, who are just entering retirement age, will once again give them robust housing sales. ‘The number of people in that age group is increasing, and there is a lot of promise out there,’ builders’ association economist David Crowe said. ‘The good news is they usually have a lot of home equity and can get a mortgage. The bad news is they have to sell a house.’”

“Most older homebuyers surveyed are holding down their cost expectations, industry research shows. ‘When we asked the consumer, ‘What are you willing to pay?’ they said $190,000,’ Crowe said. ‘And when we asked the builders, ‘What are you building [for this market]?’ they said $287,000. Obviously, there’s a real big problem there.’”

“The City Council voted Tuesday night to allow a developer to drop an age-restriction clause from a planned condominium project in a rural part of the city. The 9-1 vote gave Home Associates of Virginia Inc. permission to build 54 traditional townhouses, amending an earlier plan to build 60 condominium units restricted to people older than 55.”

“The market for upscale age-restricted housing is saturated, Eddie Bourdon, the company’s lawyer, told City Council members. ‘In our view, it doesn’t make sense to build a product for which there is no market,’ he said.”

“BankAtlantic Bancorp., set aside a $76.8 million provision for loan losses for the fourth quarter, which amounted to double the loan-loss provision it booked for the year-ago quarter. The banking company has posted 10 consecutive quarterly losses, putting its last profitable quarter at June 30, 2007.”

“‘We are still not seeing improvements in the local Florida economy,’ said Alan B. Levan, CEO of the parent company. ‘BankAtlantic’s losses are coming exclusively from continued writedowns on real estate, and we anticipate these losses will continue until the Florida economy turns to improvement.”’

“Much of troubled loan portfolio is on land parcels around the state ‘that were spoke for by national homebuilders, who walked away from options or obligations to buy the real estate’ amid the collapse in the housing market, Levan said. ‘Most of the losses come from reappraisals of real estate [the bank has loaned money on] for the second or third time, with continued reductions in valuation,’ he said.”

“During a meeting yesterday, Neil Chrystal, CEO of Polygon Homes Ltd. gave his take on the local real estate market, noting he was surprised by some of the incongruencies between this city and Vancouver. While both hit a wall in terms of real estate sales by November of 2008, consumer demand has long since returned in Vancouver, spiking prices and sales volume above the highs of 2008.”

“In Kelowna, however, that’s far from the case. ‘Vancouver bounded back and Kelowna got nothing,’ said Chrystal, adding he’s wondered what the difference could be and landed on the lack of appeal to the Asian consumer. ‘You are a resort market — a secondary home market a bit like Whistler— and that market continues to be dead. (The Albertans) left town and they aren’t coming back for awhile.”

“Condominiums are contending with weak pricing because there’s still an over-supply in the valley, and the more than 400 complete, empty and as of yet purchased units sitting on the market will act as an economic hangover.’”

“The House of Representatives has approved a bill to stimulate economic development by cutting taxes and creating new incentives for businesses, despite complaints from critics that the measure was rushed through before it could be understood completely. Democrats who opposed the bill said legislative budget staff hasn’t even had a chance to analyze what impact the tax cuts would have on the state’s general fund. They said the bill was a ‘corporate bailout’ because large companies will benefit most from the incentives and tax cuts.”

“It also will hurt homeowners by shifting more of the property tax burden to them because of the business property tax cuts, said Rep. Tom Chabin, a Flagstaff Democrat. ‘It is very clear that homeowners today cannot sustain this kind of burden,’ Chabin said.”

“Arizona has based its economy on the housing industry for decades, said House Speaker Kirk Adams. That makes the state particularly vulnerable to economic swings. ‘It’s well past time that we get serious in this state about attracting jobs,’ he said.”

On October 27, 2009, Gayle Broadbent-Ferris passed away after an accident near her home. On this blog, we knew her as OlympiaGal. Her sister wrote this to me: “Gayle was such a lively writer, we all loved to get any letters or emails from her. I am glad that you also got to experience her wit and humor. I apologize for such a belated notice, when she passed we didn’t know all her contacts and associations to apprise them of her death. We miss her, but are grateful for her being a VERY lively part of our lives.”

She also suggested any donations be given to this group, which Gayle loved.

Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum.

The San Francisco Chronicle reports from California. “Banks are under pressure from the Obama administration to participate in its Making Home Affordable program to rewrite mortgage terms. But only about 7 percent of the 850,000 homeowners enrolled have received permanent modifications. More commonly, homeowners say they spend months pleading with their lender and end up with suggested new payments that are not sustainable. Steve and Sue Alparone of Pittsburg first contacted their servicer in December 2008 to request a loan modification after reductions in their income and a reset of their adjustable-rate mortgage to $4,400. Steve Alparone had to leave his IT job due to health reasons and ended up with a lower-paying job at Trader Joe’s, while the retailer where Sue Alparone worked went out of business.”

“After several months of fruitlessly asking for lower payments, the couple skipped several payments, then finally got a verbal offer for a new payment of $1,944 this fall. They have made that payment since Oct. 1, but two months ago received notice that they were being given a new loan modification that would raise their payment to $3,500 a month, which they said they can’t afford.”

“Even though they are significantly underwater, the couple want to hang on. ‘We would love to stay in this house,’ said Steve Alparone. ‘We’ve got a lot of sweat equity in it. We’re not looking to make any money on it, just looking to stay.’”

The Marin Independent Journal. “A total of 305 notices of default were recorded in Marin during the October-to-December period, down from 428 in the third quarter of 2009. But compared year to year, default filings in the fourth quarter of 2009 were up 57 percent from the same period in 2008. The number of actual foreclosures jumped from 87 in the fourth quarter of 2008 to 123 in the fourth quarter of 2009.”

“Realtor Greg Browman of Marchant Chapman Realtors of San Anselmo, who specializes in short sales, said he did not see a rebound any time soon. ‘I think we’re not going to see any increase in value,’ he said. ‘Many parts of Novato are at their bottom - there’s nowhere else to go. The first-time homebuyer market is really attractive right now because the prices are so low. I think it’s going to continue like that.’”

“‘I think we’re going to have another couple years of this, but anything can happen,’ Browman said.”

The Mercury News. “Fewer Santa Clara County homeowners received mortgage default notices at the end of last year, but upscale areas are becoming a bigger part of the foreclosure problem. ‘I certainly can attest to the fact that we’re seeing more notices of default in more affluent neighborhoods,’ said Rick Turley, president of Coldwell Banker for the San Francisco Bay Area. But, he said, ‘I don’t necessarily know that we’re out of the woods for the entry level.’”

“Karl Lee, president of the Santa Clara County Association of Realtors, agreed that defaults and foreclosures are trending up in the higher-end neighborhoods. ‘I imagine the increase has to do with the unemployment situation,’ he said. ‘The lower end got hit earlier because, frankly, their reserves were less. In the higher end they were able to put it off a little bit’ by tapping their financial reserves, he said.”

The Press Democrat. “Foreclosures dipped slightly in Sonoma County during the fourth quarter. Analysts, foreclosure counselors and others cautioned that they aren’t seeing a drop in the overall numbers of homeowners in danger of losing their homes. ‘We seem to get new clients constantly and the old ones aren’t going away,’ said Linda Hedstrom, a manager who oversees a homeowner counseling program in Santa Rosa.”

“Even more ominous was a national report released last week by a collection of state attorneys general and banking regulators. ‘Despite efforts of (loan) servicers, homeowners and the government, the foreclosure crisis continues to worsen,’ wrote the State Foreclosure Prevention Working Group, which has tracked the issue for more than two years. ‘These signs point to more foreclosures in 2010 than in 2009.’”

“The attorneys general and banking regulators warned of trouble ahead for those with ‘payment option’ adjustable-rate mortgages, a loan segment estimated at $200 billion. The officials predicted that two-thirds of those mortgages will readjust in the next two years and cause ‘payment shock’ for the homeowners.”

“Madeline Schnapp, director of macroeconomic research for TrimTabs Investment Research of Sausalito, said November estimates suggest there were a record 6.2 million mortgage delinquencies in the United State. She wrote recently that the housing market remains on ‘life support.’ ‘I don’t see things getting substantially better because there’s just not a lot of economic activity generating jobs,’ Schnapp said Wednesday.”

Capital Public Radio. “Sacramento-area homebuilders pulled about 2,300 permits for single-family homes last year, and that is much lower than the previous record low of about 4,000 in 2008. Both are a dramatic drop from the 18,700 permits in 2004, considered the peak of the housing boom. In fact, you would need to add the past three years to even come close to the figure of building permits issued in 2005.”

“The Sacramento region has lost almost 11,000 construction-related jobs during the past year, and about 116,000 statewide.”

The Sacramento Bee. “Call it the positive side of the region’s long, painful contraction of housing values since 2005. Though the housing collapse has shredded the fortunes of thousands of existing homeowners, the sudden return of affordability also may help set the stage for an eventual turnaround. Widespread $400,000 and $500,000 price tags for single-family homes ‘used to be a hurdle,’ said Barbara Hayes, who woos companies and jobs as head of the Sacramento Area Commerce and Trade Organization. ‘Now (they’re) not.’”

“In December, the median price for a house in Placer was $275,500, compared with $525,500 at the market peak in 2005.”

“‘We liked where we were, but it was way beyond our reach to own a home,’ said attorney Anthony Cortez, who left Orange County with his family in 2008 for a house in Lincoln. After a year of renting there, the now-Sacramento attorney closed escrow before Christmas on a distress-sale property in Lincoln Crossing.’

“‘We paid literally less than half what the original owners paid for it,’ said Cortez.”

The Record.net. “Up to 2005, Mabini Fuertis was doing pretty well. He earned enough from his job as a train conductor together with a U.S. Postal Service pension to cover the mortgage, credit card and car payments and still put aside $12,000 a year in savings. The problems began when he lost his job but didn’t change his spending habits. Unable to find another full-time job in the intervening years, he exhausted the savings, piled up more than $30,000 in consumer debt and recently stopped making payments on the $430,000 mortgage on his Weston Ranch home.”

“‘Being bullheaded, I thought I could fight through it, but as you can see, I couldn’t,’ he admitted.”

“And while the Fuertises want to remain in their home and hope to get their mortgage reworked, Grant Fletcher, a certified financial planner in Lodi said they should consider alternatives. ‘Homeownership is the American dream, but when the American dream becomes a nightmare, we have to see if there is a better option.’”

The Modesto Bee. “Foreclosure statistics for 2009 show home losses leveled out in Stanislaus, San Joaquin and Merced counties. Far fewer homes were repossessed by lenders last year than in 2008. But housing counselors say record numbers of homeowners are seeking relief from mortgages they can’t afford. ‘We’ve seen no decrease in our counseling activities,’ said Martha Lucey, president of ClearPoint Credit Counseling Solutions’ Pacific region. ‘We had our highest-call-volume day the Monday after Christmas. We were shocked.’”

“University of California at Merced economics Professor Shawn Kantor also questioned whether 2009’s foreclosure statistics accurately reflect homeowner problems. More than 16 percent of Stanislaus County mortgages are 90 days or more delinquent, double the national average, according to First American CoreLogic.”

“Kantor said lenders may be delaying some foreclosures ‘for economic and political reasons.’ ‘They are managing the flow of foreclosed houses so they don’t completely overwhelm the real estate market and further drive down home prices,’ Kantor explained.”

“Patterson real estate agent Heidi Vento said many homes already are empty, and she doesn’t understand why lenders delay putting those homes on the resale market. Vento said there’s a ’shadow inventory’ of bank-owned homes that first-time buyers can afford and are qualified to buy. ‘There is a huge number of people who want to buy homes,’ said Vento, last year’s president of the Central Valley Association of Realtors. ‘But the banks are controlling what goes on the market and when. We’re really just not sure why they’re holding onto all this inventory.’”

“John Karevoll of MDA DataQuick Information Systems, offered an answer: ‘Banks are just trying to minimize their losses.’”

The Union Tribune. “Home foreclosures in San Diego County surged last month, even as default notices dropped to their lowest level in more than a year, MDA DataQuick reported. To real estate agents hungry for inventory of low-cost foreclosures to sell to bargain hunters, the upsurge in foreclosures promises to refill empty lists of homes for sale, although agents have complained in recent months that banks aren’t moving quickly to list those properties for sale — possibly hoping prices will rise.”

“DataQuick analyst Andrew LePage said San Diego had the state’s highest large-county foreclosure spike in December. ‘It’s a mystery,’ he said of the increase.”

“Jeff Shaffer, director of acquisitions and investments at McKinley Partners, a local investment group, said the modifications might work if the economy picks up. But if that doesn’t happen, distress will return and send values back down. ‘The December numbers are giving people confidence that the housing market is recovering to some point of stability and losses due to foreclosure are starring to subside,’ Shaffer said.”

“But he said a new sign of trouble is that lenders aren’t moving to file formal default notices against delinquent owners — both to carry out the Obama administration’s desire to get loans modified and to minimize the troubled assets on their books. ‘We’ll see how it works; it’s not sustainable for banks,’ Shaffer said.”

The LA Times. “So far, thousands of California borrowers have had their mortgages modified through Obama’s Making Home Affordable program, but only 7.8% of those modifications were permanent through Dec. 31, according to government data. If the majority of borrowers who have received temporary loan modifications are unable to make those changes permanent, another surge of foreclosures could follow.”

“‘Given what we see in terms of the number of distressed properties that are in the pipeline, we do expect that foreclosures will mount as borrowers are not able to make it from a trial modification to a permanent modification,’ Celia Chen, senior director of Moody’s Economy.com, said. ‘This will cause home prices to start falling again.’”

“‘If a borrower is deeply underwater, he doesn’t want to be in the home,’ said Laurie Goodman, senior managing director of Amherst Securities. A loan modification would give the borrower more time, she said, ‘but there is no reason to stay in your home, and you save a lot by just walking away.’”

“Agreeing to settle 29 class-action lawsuits alleging predatory lending, the Ameriquest group of subprime lenders has pledged $22 million to repay aggrieved borrowers and their lawyers — a fraction of its payments in previous suits before it shut down as the mortgage meltdown set in. The agreement potentially affects 712,000 borrowers from what once was the nation’s largest subprime lender, based in Orange County.”

“Because nonbank lenders such as Ameriquest sold their loans, they maintained very little capital and had few assets to recover when they closed up shop, said Benjamin G. Diehl, a deputy attorney general for California who helped craft the states’ agreement with Ameriquest. ‘Unfortunately, there isn’t much left for borrowers,’ Diehl said.”

“The settlement includes no payment from the estate of Ameriquest founder Roland E. Arnall, a billionaire who died in 2008, or from the Wall Street firms that funded subprime lenders and transformed the loans into securities that proved toxic when the housing bubble burst. ‘The abettors on Wall Street . . . got away untouched,’ said Christopher L. Peterson, a University of Utah law school associate dean who has testified to Congress about his research into subprime lending.”

The Acorn. “New regulations passed by Sacramento legislators and federal housing leaders will discourage mortgage fraud and make home buying safer, but the laws might also lead to higher borrowing costs and continued sluggish sales, some industry experts believe. One of the bills, introduced by Sen. Fran Pavley (D-Agoura), makes it illegal for California mortgage brokers and lenders to mislead customers on their loan applications. ‘It’s critically important. The crash of the housing market and impact on the local economy when people lose their homes affects all of us,’ Pavley said.”

“Jeanet Moltke is a Calabasas resident and a Realtor who has been involved in real estate for more than 20 years. She said the new laws should have been established years ago to prevent fraud. But mortage fraud wasn’t the only cause of the real estate crash that began in 2008, Moltke said.”

“‘Brokers weren’t alone, there was the supply and the demand. The bubble burst because home values declined and people had taken all the equity out of it,’ Moltke said.”

The Bakersfield Californian. “Appraiser Kirksey J. Newton Jr., who is fighting to keep his appraiser’s license, on Monday defended his choices in the inexact art of estimating home values, and blasted the media and regulatory authorities for dragging him into the ‘frenzy’ over mortgage fraud allegations against disgraced former real estate agents David Crisp and Carl Cole.”

“Newton insisted that with the exception of some minor errors that did not affect the ultimate valuation, he stood by all but two of the reports prepared by his company, Bakersfield-based San Joaquin Appraisals. The report on the Heaton Street house suggested a valuation of $910,000 in 2006, but did not explain why that figure was 87 percent higher than a February 2004 sale price of $487,500, according to the state’s official accusation. Another report valued the 10,454-square-foot Three Bridges Way property at $785,000 in 2006 based in part on a sale identified as comparable even though the other property was 40 percent larger.”

“‘Knowing what you know now, including this investigation, would you do anything differently?’ defense attorney Ernest Price asked.”

“‘No,’ Newton replied.”

“When California Deputy Attorney General Gillian Friedman asked what Newton did after learning about the alleged misuse of his name, he replied that he said nothing to William Drabick, senior property appraiser and investigator for the state. ‘I wanted Mr. Drabick to do his own investigation,’ he said. ‘It was a frenzy. The media went crazy. It would have been like saying the dog ate my homework.’”

The Fosters Daily Democrat. “Back in 2006, comedian Juston McKinney and his wife were ready to buy their first home. It was at the peak of the housing market and they were living in Los Angeles at the time. They figured they’d start looking around L.A. and then proceed east until they found something they could afford.”

“They checked out Pasadena first. It was beyond their reach. Then they looked into Nevada. Then Arizona. Homes out there were still too pricey. So they continued pressing eastward. How east? They bought a home in New Hampshire.”

“‘We couldn’t afford anything on the coast, though, so we had to retreat west a bit,’ he said.”

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The Great Falls Tribune reports from Montana. “The new owner of a real-estate agency in Great Falls says Central Montana is a far better market than her former home state of Arizona. Kathee Kalthoff recently bought an agency established 10 years ago. ‘The Montana market is consistent, there are not many homes in foreclosure and prices don’t fluctuate very much,’ Kalthoff said.”

“In contrast, she recently took her home in Tucson, Ariz., off the market after two years and will wait until conditions firm up in that area, Kalthoff said.”

The Billings Gazette in Montana. “Construction on hundreds of new Bar Nunn homes is scheduled to begin this spring. Casper businessman Rich Fairservis said the project will consist of more than 300 units. Single-family homes will start at about $160,000, while twin homes and cottages will start in the $120,000-to-$130,000 range.”

“Now is an excellent time to build, he said, because the cost of construction materials has declined dramatically. ‘I believe if the homes are correctly valued and correctly priced, that there’s still a market for it,’ Fairservis said.”

The Bozeman Daily Chronicle in Montana. “Gallatin County’s open lands preservation program officially began in 2000, prompted by booming growth — from 1970 to 1997, Gallatin County’s population grew by 88 percent — and county officials’ desire to preserve rapidly diminishing rural lands. Despite the popularity of the open lands program, its appeal may have soured somewhat in the recession. The federal tax incentives that gave landowners significant breaks for donating conservation easements expired last year and renewal is bogged down in Congress. Donations to land trusts have fallen off past levels. Development pressures have all but disappeared as subdivision projects stalled in the face of tightened lending.”

“Throughout the county, dozens of partially finished subdivisions sit vacant, begun in the construction rush preceding the 2008 bust and temporarily abandoned until their developers can secure the credit necessary to continue construction.”

“County Planner Randy Johnson has been busy fielding requests from developers seeking one-year extensions of their preliminary approvals. Johnson said he’s also seeing changes in the way developers choose to continue their projects. Many want to break their subdivisions into phases, to be developed at different times. Others are looking at smaller divisions, typically lot splits of five or fewer parcels.”

“Johnson said Gallatin County is in a prime position to get more acres for fewer dollars by capitalizing on the down market. It’s too early to know what will happen in the next five or 10 years with the real estate market, Johnson said. ‘For those who want to stay on their land, conservation easements will play an important role for them.’”

The Jackson Hole News & Guide from Wyoming. “In 2009, the number of real estate transactions fell to 223, down from a market peak of 1,122 in 2005 – a drop of 80 percent, according to The Hole Report. The dollar volume of property transactions fell from a peak of $1.57 billion in 2007 to $333 million last year, a drop of 79 percent, the report shows.”

“David Viehman, who is now a principal with Jackson Hole Real Estate Associates…noted that some sellers have dropped their prices to be competitive. Such an attitude is key to moving a property in the current climate. ‘If you must sell right now, ask your Realtor what they think your property is worth under a cold, hard light, but be prepared to move down as fast as you have to in order to remain competitive,’ Viehman said.”

The Magic Valley Times News in Idaho. “Count Mike Crapo of Idaho as one member of the U.S. Senate who won’t back embattled Federal Reserve Chairman Ben Bernanke when the chamber decides whether to grant him a second term. ‘He will vote against him,’ said Crapo’s spokes-man, Lindsay Nothern, to the Times-News. ‘Mostly it’s a lack of faith on where we’ve been going on financial policies.’”

The Oregonian. “Sen. Jeff Merkley would not disagree that Federal Reserve chairman Ben Bernanke has done a solid job in the past year steering the American economy away from complete collapse. But there is, the Oregon Democrat insists, a small complication.”

“‘He helped set the house on fire,’ says Merkley about Bernanke. ‘It burned down, and he turned out to be pretty good with a fire hose. There’s nothing to indicate that he’s the key to rebuilding the house now.’”

“As Merkley points out, during seven years when Bernanke was on the Fed board, he had nothing to say about the housing price bubble, the subprime mortgages that drove it, or the derivatives that almost brought everything down around them. Last July, as Bernanke testified before the Senate banking committee, Merkley asked him if he didn’t think there was a conflict between the Fed’s oversight of banks — guarding their profitability — and protecting the people borrowing from banks.”

“‘He said no,’ recalls Merkley, ‘and I said that response, to me, is frightening.’”

“‘He was Greenspan in philosophy,’ objects Merkley. ‘He felt the banks could regulate themselves. I thought we’d learned that lesson from the savings and loan crisis. He was in a perfect position to say these tricks and traps are not OK. We didn’t hear anything from him. We need someone to take on these issues when it’s not easy.’”

The Outlook in Oregon. “Launched in November, the Come Home to Gresham program provides zero-interest deferred payment loans of $10,000 to qualified homebuyers. The dollars, part of the federal Housing and Economic Recovery Act of 2008, must be granted by the end of September and used in four years. The program’s goal is to mitigate negative effects that foreclosed homes can have on neighborhoods.”

“‘Just so you know, there’s free money out there,’ said Chuck Grant, a mortgage banker with Directors Mortgage Inc. ‘But we have to find you a house first.’”

The Portland Tribune in Oregon. “Legislative committees are considering a bill for the February session that would release $19 million allocated last year but never spent, Nance says. The money derives from the state unemployment insurance trust fund, so it’s unlikely to be affected by the fate of two tax increases being considered by voters.”

“Walt Nichols has two big worries: his own finances and the state of his Mount Scott/Arleta neighborhood. He’s chairman of the Southeast Portland neighborhood association, and wonders what will happen as residents get more desperate when their unemployment benefits expire. Nichols also is receiving unemployment and is concerned that it might soon end.”

“Mount Scott/ Arleta is one of Portland’s poorer neighborhoods, and Nichols says it’s unwise to leave anything in a car or on a porch, or it could be stolen. He’s accustomed to seeing many neighbors out of work who are alcohol- or drug-dependent. Now he’s noticing a broader swath of people in trouble. ‘What we’re seeing now is more families, more people who have lost their homes,’ he says. One neighbor who lost his condo is living in a car in the neighborhood.”

The Ashland Daily Tidings in Oregon. “The Planning Commission will consider on Tuesday offering a “recession extension” to developers who have secured building permits but have delayed construction due to the economy. The extension would give developers 18 months, on top of the 30 months already offered, to begin construction.”

“The commission was divided over offering the recession extension when the issue first arose last September. Some commissioners called the extension a subsidy for developers, while others said it was an appropriate response to the recession. Commission Vice Chair Michael Dawkins and Commissioner Debbie Miller voiced opposition to the extension, while Commission Chairwoman Pam Marsh and Commissioner Dave Dotterrer spoke in favor of it.”

“Dawkins said he felt that changing the city’s rules now would be catering to large-scale developers, who assumed risk when they began their projects. ‘It’s like, who determines when down is down?’ he said. ‘All development is basically speculative and it’s all just part of the game or what happens.’”

The Gazette Times in Oregon. “Just days before the Witham Oaks property is due to be sold at auction, a group of local residents hoping to preserve the wooded acreage say they’re far short of having enough cash to buy it. But they also say they’re not about to give up their quest.”

“In November, the Friends of Witham Oaks announced plans to buy the 90-acre parcel and donate it to the city as open space. The land had been slated for a 221-unit subdivision, but developer Legend Homes abandoned that project — and the property — when it filed for protection from its creditors in bankruptcy court.”

“Members of the group acknowledge that’s not enough money to make a serious bid on the property. But they’re betting that no one else is waiting in the wings to buy it out from under them. ‘I doubt that anybody’s going to show up with $5 million on the courthouse steps, given the current economic market for that property,’ said Sherri Johnson.”

The Seattle PI in Washington. “The number of single-family homes and condominiums sold in the 19-county Northwest Multiple Listing Service fell 3.7 percent in 2009 and the value of the homes sold was off by 14.6 percent, according to a report from the Northwest MLS. The large drop in dollar value for homes sold can be attributed to lower home prices and more distressed sales, the report said.”

“San Juan County had the highest median home price at $443,500. King County was second at $380,000. For the 19-county system, the median price was $254,000. The median price for condos was $235,000.”

The Bellingham Herald in Washington. “The local commercial lending market has changed with the disappearance of Horizon Bank, and Seattle-based Washington Federal strengthening its presence. ‘In the first two weeks, the transition has been “very smooth,’ said Roy Whitehead, CEO of Washington Federal.”

“As for future lending, some of the standards might be different; Horizon’s aggressive lending practices were considered a factor in getting into trouble. He acknowledged that this is an environment where it is more difficult to get credit, but in some ways it should be because lending got way out of control.”

“‘Like consumers, we all need to work on paying down debt,’ Whitehead said. ‘Being leveraged is wonderful, but it is also a double-edged sword.’”

“With Bellingham-based Horizon Bank being shut down by Washington state government regulators on Friday, Jan. 8 and taken over by Washington Federal Inc., there was a clear signal sent to community banks that the Federal Deposit Insurance Corp. is paying attention to Washington banks struggling with non-performing commercial and residential loans.”

“‘There is so much uncertainty out there; banks don’t know what the rules are and if they will change,’ said Brian Finnegan, a commercial real estate agent. ‘Right now it is much easier to say no (to a commercial loan application) because they are deathly afraid of the FDIC.’”

“‘There are two worlds developing in commercial lending; one is business borrowing, which is still being done. The other is investor and real estate loans, which is seeing continued regulatory pressure,’ said Bruce Clawson, division manager at Banner Bank.”

The Seattle Times in Washington. “The parent company of First Savings Bank Northwest went deeper into the red last quarter. Much of the loss stemmed from the record $51.3 million set aside to cover anticipated loan losses. In 2008, by contrast, the company set aside just $9.4 million. Nonperforming assets — mainly delinquent loans and foreclosed real estate — totaled $132.5 million at year’s end, or 10.1 percent of total assets. Renton-based First Financial Northwest lost $40.7 million in 2009, which CEO Victor Karpiak called ‘a year which has proven to be the most challenging in the history of our company.’”

The Alaskan Daily News. “Alaska Pacific Bancshares has revealed new losses in a filing with the U.S. Securities and Exchange Commission. Craig Dahl, CEO of the Juneau-based bank, said the losses stemmed from a failed high-end real estate development in Telluride, Colo.”

‘Alaska Pacific has been struggling with several problem loans, made in participation with other small banks to finance large developments in Western states. ‘From an accounting and a regulatory point of view, the best thing to do was to charge it off and get it behind us,’ Dahl said.”

The Fairbanks Daily News Miner in Alaska. “Mortgage figures for Alaska confirm what many have said: The mix of low-risk mortgages here has helped protect housing markets from the troubles seen in many states. As of last fall, there were half as many homeowners in Alaska with subprime, adjustable-rate mortgages (2 percent of all homeowners) than in the country as a whole when measured as a percentage of the population, the state Department of Labor reported.”

“The numbers mirror previous comments from many real estate agents in Fairbanks. Federal housing specialists work closely with the state Housing Finance Corp. and local housing agencies, said Eileen Cummings, president of the Greater Fairbanks Board of Realtors. ‘These groups do a great job of screening the potential buyers and limiting the risk,’ she said.”

The Columbian. “Beneath the screaming headlines of bankruptcies, layoffs and foreclosures, fundamental economic shifts are occurring that will affect the growth of the regional economy over the next decade. Unlike past forecasts, I am sharing observations gleaned from the Clark County business community about the economic road ahead.”

“Banking (access to credit), especially for our regional community banks, will not return to normal in the near future. As our financial institutions repair tattered balance sheets, their focus will shift from loan origination/securitization to deposit acquisition, net interest income and fee generation. Credit standards will tighten significantly, loan-to-value ratios will decrease, and the personal guarantee will be the rule, not the exception.”

“I take no pleasure in pointing out the obvious: Residential, commercial and speculative industrial development will not recover within the next five years. The ramifications of this trend will be far-reaching, from the collapse of fee and sales tax revenue for local governments to a significant reduction in construction employment and personal income.”

“We were fully aware that the regional economy was heavily leveraged to residential growth and development. But we did not know how deeply we were dependent (addicted?) on growth-related tax revenues to fund basic services. Growth was to pay for growth, and then some. There is a massive reset under way as local governments ‘right-size.’”

“After reading the above. You may ask if there any positive trends? The trends we’ve mentioned are neither positive nor negative — just trends. Money is made in up and down markets. Profits, job growth and economic expansion can happen under these conditions, but not with traditional economic development or business strategies. Our job is to develop those strategies to ensure the recovery and continued livability of our community in Southwest Washington.”

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It was quite a week in the annals of Legacy Bashing.

First, Edward Kennedy’s forty-year efforts to reform the health insurance industry appear to have come to naught with Scott Brown elected to fill his vacated Senate seat. And two days later, John McCain’s campaign finance laws go down in flames in a 5-4 Supreme Court decision (Citation: Citizens United over the Federal Election Commission (warning, PDF file) striking down spending limits on corporate and union electioneering in candidate elections.

A victory of the philosophical over the practical, the decision hands unionist and corporatist interests a literal blank check for further subverting democracy in America. With virtually unlimited budgets to influence public policy and persuade elected officials into doing their bidding, this ruling guarantees that Congress-members will spend an even bigger majority of their time in fundraising pursuits instead of causing mischief in the legislative chambers. SCOTUS has, in effect, turned K Street into the American electorate, and handed the likes of GE and NewsCorp the right to elect our leaders for us.

In spite of all the wailing and rending of garments, this may not be an entirely bad thing. After all, corporations and unions do represent their membership—unduly influenced though their labor force and shareholders may be by their management. Without the political clout of a powerful parent entity or family empire behind them, the chances of an individual American prospering on the strength their own efforts are hugely diminished—if for no other reason than from anti-competitive strategies employed against them by larger, better-established rivals. After all, these entities are de facto republics, ostensibly using their power of representation to bargain and fundraise on behalf of their shareholders and memberships; the ultimate expression of free market enterprise at its collectivist finest…er, oops.

And let’s face it, when 42% of Americans never buy and read another book after graduating from college, Winston Churchill’s famous dismissal, “All I need to know about democracy can be gleaned from one five-minute conversation with the average member of the electorate,” seems increasingly sage. Just consider how many voters (let alone candidates,) still believe that Saddam Hussein was behind the 9-11 attacks, or could explain why there is a border between North and South Korea. In 1966 the U.S. Supreme Court ruled that states could not levy a poll tax or literacy tests as a prerequisite to voting in state and local elections. Maybe this Supreme Court will want to reconsider those arguments as well?

To people who argue that markets allocate resources better than politics do, I would say that in America, markets are our politics. Markets determine policy—and who gets taxed to pay for what, (and in whose pockets those monies end up.) Wall Street, literally The Market, is in every sense of the word the driver of American policy, both foreign and domestic.

Markets determine social policy. The housing bubble did not come about out of a heightened sense altruism on the part of the credit lending or real estate industries. The American Dream (whatever that may once have meant,) was reconfigured by Finance, Insurance, Real Estate, to mean “owning” a house. Period. Clever manipulation of both credit markets and the mass media combined to pull off the biggest con game of all time; and legitimate issues groups like HBB are left essentially powerless in its wake. Even if every single reader of this blog pledged $10 a month to lobbying efforts, it wouldn’t even make a dent in what a concerted campaign by the NAR could counter—let alone one launched by a privately-held corporation like the Fed. Our best intentions and efforts to the contrary, we’ve all seen what Mozillo’s Money did to the standards and practices of the mortgage lending industry. Now Big Money is free to take over the rest of our public decisions for us too.

Markets determine who gets to make the laws. Mrs. Palin would never have been considered a realistic candidate for elected public office had she not been perceived by the Oiligarchs as an easily-manipulated stooge for the oil industry. Arnold Schwartzenegger would never have been elected to the governorship of California had he not made a pact with Kenny Lay and Michael Milken to drop Gray Davis’s federal lawsuit against Enron and its shadow energy subsidiaries once he reached office. Chris Dodd would never have come to chair the Senate Banking Committee without the explicit backing of the insurance and financial industries headquartered in his home state. Worse for issues groups, markets only tend to strengthen incumbencies. Money buys loyalty–just ask the aforementioned Senator Dodd.

But to some, this Supreme Court decision is a victory for free speech. Such smaller but outspoken issues organizations as Planned Parenthood and gay rights groups, the ACLU, and the NRA are corporations, too. They are now free to raise and spend as much money electing public officials as their supporters– limited only by their consciences and pocketbooks– care to donate. Buying and maintaining a legislator is a time-honored American tradition. Now in the time of internet fund-raising, it’s not outside the realm of possibility for an issues group in, say, Utah to purchase the services of a Congressman in North Dakota. Or an anti-civil rights amendment in California. Conversely, through a well-conducted national email campaign, a wine store in Maine can overturn an interstate ban on wine sales to Massachusetts. The sword cuts both ways.

But herein lies the essential problem. Although free speech is a right guaranteed by the Constitution, equal access to it is not. And equal campaign financing is definitely not. Barack Obama’s Presidential campaign raised over a half a billion dollars from PACs and private individuals– far exceeding the hundred million or so reportedly donated to John McCain. Although by exploiting loopholes in McCain’s own campaign finance reform law, the RNC was able to funnel additional hundreds of millions more to him, he was nonetheless at a disadvantage because he chose to accept his own government public financing option and forego the beneficence of The Market. Now that the RNC’s reserves have been drained in that failed effort and they need a way to replenish them, this SCOTUS ruling in favor of corporations should come as no huge surprise to anyone familiar with the politics behind the power.

Howard Dean’s health reform proposal and Ron Paul’s campaign against the Fed are classic examples of populist causes subsumed by corporate interests. Now that SCOTUS has given unions and corporations free rein to buy out private voices, it remains to be seen whether or not these voices will be stilled completely, or whether the wave of public outrage sweeping our nation will force a reexamination of the inner workings of our judiciary along with those our other national institutions.

It’s not unprecedented. If Congress has the will and the backing of the American people, Supreme Court rulings can indeed be overturned or circumvented. FDR’s 1937 attempts at “court packing” could be revisited. Or it’s possible that Congress could pass a Constitutional amendment overturning the SCOTUS “Prohibition” on campaign finance limitations. But neither of these options is likely, given the number of equally pressing and philosophically less challenging concerns already threatening to overwhelm our Country. With a dead economy, two un-winnable wars, the failed states of Haiti and Mexico at our doorstep, and a generation about to retire bankrupted, such frivolities as whether or not America remains a democratic republic seem almost superfluous.

But some good may yet come out of all of this. In a time of rampaging unemployment, particularly in the creative arts industries, those recent “communications” graduates we all take such delight in disparaging may find their career outlooks vastly improved with the billion$ that are sure to flow into the coffers of the production companies and advertising agencies who bring us the 2010 political season. Certainly pollsters and lobbyists will get a new $hot in the arm, and at least one enterprising politician is taking advantage of this controversy to make himself –or rather, his campaign—a pile o’ money. Congressman Alan Grayson, (D. FL.,) most recently of the successful House campaign to bring daylight into the shrouded inner chambers of the Fed, has already announced a petition and fundraising campaign to protest the ruling. Look for Elliot Spitzer to restart his political career on its coattails, and a host of hopefuls from the run-the-bums-out provinces to jump on the Reform Party bandwagon. Elizabeth Warren comes to mind, as do the rational wings of the Ron Paul Contingency and MoveOnHuffKos. Who knows, when enough “ordinary” Americans get sick of seeing “This Assembly brought to you by Verizon” plastered all over their State Houses, and “The Beer of Proposition 8″ imprinted on their brewskis, this might just be the one issue that finally unites our Country’s disparate politics in favor of a true American Democracy again.

by Allena Hansen

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