UPDATE: To prove that local Molalla citizens are eager for facts, the “hits” on the original Molalla Blog just passed the 50,000 mark. Add that 50,000+ to the almost 9,000 hits this site has gotten in less than a year and it is apparent that citizens want to know facts so they can understand and influence local issues!
Sunday’s lead headline in the Oregonian business section was “ Financial crisis was no freak accident”; the web version, posted below was retitled “Portland brokers saw mortgage meltdown loom; federal report hints it could happen again“.
I had to laugh about that headline, because way back in May 2006 there was an amazing article in Harpers Magazine called “The New Road to Serfdom” by Michael Hudson (link: http://www.scribd.com/doc/20337262/Road-to-Serfdom-Michael-Hudson ).
Hudson outlined in detail what turned out to be the current real estate crash. Over a year AFTER this telling prediction, the Molalla City Council met in summer of 2007 with expensive consultants, cackling about “high-end mansions come to Molalla”. The “manager” even announced the plans for mansions on land far from the city limits in fall of 2007! So much for “keeping up with the trends”. It seems the “manager” can only “manage” fantasy, because the “high-end” dreams crashed like our worst nightmares.
How’s that “high end” lookin’ these days, “manager” Atkins?
Since then, there have been many ugly accounts of how officials in the first Bush term sat around and joked in the early 2000’s about how they all knew that the crash would finally come. Pretty funny, huh? Government officials failed to step in early on and stop the madness! And now the “little guys” are left holding the bankruptcy bag on deflated real estate and underwater mortgages.
Speaking of “little guys” taking a financial hit on a SURE TO FAIL “process”, take a look at Molalla’s “manager” who is failing to “manage” the deficit spending of the incompetent plannin’ dude. The “manager” shows zero respect for public monies as he allows incompetent plannin’ dude to KEEP RACKING UP LEGAL BILLS to defend the legally indefensible urban reserve.
Guess what? Just this week the “manager” let the incompetent plannin’ dude waste more PUBLIC MONEY on legal bills so the “I get paid after YEARS OF FAILURE” lawyer could write to snivel to the head of DLCD.
That pathetic, bottom feeding, loser of a “I get paid by the minute” lawyer is now obviously only “working” for the land speculators. That “lawyer” (choke!) is likely trying to make a name for himself on the state land use stage using YOUR HARD EARNED TAX DOLLARS! PHEW!
The parallel to all these financial crash stories is this: When government leaders and elected officials know better and don’t stop the waste and abuse of public monies then you can look ahead to disaster.
Molalla’s fake plannin’ ( remember: there is NO comp plan, only an amendment to the old comp plan for a map for speculators that Molalla has been told repeatedly isn’t defensible) has already produced a DEFICIT OF ABOUT FOUR HUNDRED THOUSAND DOLLARS, yet the “I don’t live here” manager allows MORE LEGAL BILLS TO PILE UP for a LEGALLY INDEFENSIBLE map to nowhere? What kind of “management” is THAT?
Hey City Council: You have the FACTS, your incompetent planner has NOT produced a new comp plan. It is up to you, the elected leaders, to decide if you will allow more public tax dollars to be spent on a quest that is clearly ONLY to help private land speculators.
Word has it that the “manager” now admits that the ONLY reason the city continues to waste time, money and the good will of the taxpayers and the County on the LEGALLY INDEFENSIBLE MAP is because a few people outside the city limits spent “too much” trying to get in for the city to quit helping them! Is he kidding? Don’t you wish he WERE KIDDING? That’s a travesty and an unethical use of public monies! YOUR MONIES!
DO YOU GET THAT YET? The LEGAL BILLS WILL CONTINUE TO PILE UP TO HELP PRIVATE SPECULATORS AT THE PUBLIC’S EXPENSE. And no amount of YOUR money will produce winning results. Spend a million, spend two million – it is still GARBAGE!
How is that responsible government? We can’t afford to waste a cent further on proven fool’s quests like the Molalla urban reserve crap. I hope next election all citizens will carefully look at which “leaders” took the time to decry the deficit spending on a losing venture. Maybe enough City Councilors will learn the facts and stop the madness so Molalla isn’t led down another “Road to Serfdom” like the housing boom and bust.
You are BUSTED Molalla plannin’. Now it is up to elected officials to stop the deficit spending. Those elected officials have the facts – there is NO COMP PLAN and there is a HUGE GROWING DEFICIT TO DEFEND THE INDEFENSIBLE MAP!
In the future, those elected “leaders” can’t claim this ugly, wasteful plannin’ mess was a “freak accident”: the current financial ruin that is Molalla plannin’ rests squarely at the feet of the current Council. They will either end the money hemorrhage for a failed project that doesn’t benefit anyone but a couple of people who DON’T LIVE IN THE CITY – AND DON’T PAY TAXES TO THE CITY – or they’ll have to admit that they don’t care about the bottom line of the “little guy” city taxpayer who is already suffering because of the short-sighted, disrespectful to citizen “manager” and fake “planner” who failed miserably to provide planning and finances to protect quality of life.
What are you gonna do, City Council? The ball is in your court! Keep spending money for nothing or admit that the “comp plan” is a losing fraud? Are you finally going to show some respect for the bottom line of citizens trying to keep their heads above water?
Will the Council continue to work for a couple of rich people outside the city limits or for the MAJORITY – the citizen investors who took a chance and made the City of Molalla their home? The choice seems pretty clear to me!
And, City Council, once you do the responsible thing and kill the urban reserve quest, then it is time to contract planning with the County. If Molalla had done that LONG AGO it would be a lot richer and a lot more successful. Professional planners don’t produce legally indefensible CRAP!
There is a looming Molalla catastrophe: it is time to change course and end deficit spending on the losing urban reserve plannin’ venture! Or else be ready for some REALLY UGLY county staff feedback. I can hardly wait!
PORTLAND BROKERS SAW MORTGAGE MELTDOWN LOOM; FEDERAL REPORT HINTS IT COULD HAPPEN AGAIN
Published: Saturday, January 29, 2011, 6:21 PM Updated: Saturday, January 29, 2011, 9:09 PM
In February 2004, future Federal Reserve Chairman Ben Bernanke penned a paper titled “The Great Moderation,” a celebration of a sunny new era of economic stability. Deregulation and “increased depth and sophistication of financial markets” were in part responsible for the decline in economic volatility, he wrote.
It’s too bad that Bernanke wasn’t with me at the Elephants Deli on Kruse Way in 2005. I was meeting a mortgage broker on that sun-drenched afternoon. The housing market was running flat-out and the mortgage industry was awash in money. But he was miserable.
The broker talked in apocalyptic tones about frighteningly sloppy lending that had become pervasive. He told me about a new kind of wink-wink, nudge-nudge home loan in which the lender made no effort to verify the applicant’s purported income.
He laid it all out — the whole daisy chain of the modern mortgage industry that had convinced itself, and the outside world, that it could spin garbage into gold.
I didn’t get it. I failed to grasp the destructive potential of the industry’s new go-go mentality. And I blithely walked away.
I offer this anecdote not only as mea culpa, but also to illustrate one of the central truths of the just-issued congressional report from the Financial Crisis Inquiry Commission. The financial meltdown that has ruined so many lives was not caused by an uncontrollable, unanticipated convergence of events. This was a largely predictable and avoidable crisis caused by the breakdown of traditional practices and discipline in the financial industry.
Had Bernanke or his predecessor, Alan Greenspan, bothered to ask, even rank-and-file brokers here in Portland would have given them an earful about the looming catastrophe.
The commission’s 600-plus page report spares no one. The mortgage industry, the big banks, Wall Street, the ratings agencies, Fannie Mae and Freddie Mac and the regulators all take a pounding.
“The captains of finance and the public stewards of our financial system ignored warnings and failed to question, understand and manage evolving risks within a system essential to the well-being of the American public,” the majority report states in its executive summary.
We’re now a poorer country, with diminished expectations to match our diminished buying power. But have we learned anything? Are we in a better position to avoid the next economic bubble?
The answers to those questions are distressingly unclear.
Joe Boyer is a 28-year veteran of the FBI. The savings and loan crisis occupied much of his early years. Radical deregulation, instituted in hopes of saving the faltering S&L sector, allowed thrifts to diversify into all sorts of wild schemes, some of them fraudulent.
Now, as he nears retirement, he’s combating a new generation of mortgage fraud loosed by the housing boom and the financial industry’s get-rich-quick mentality.
“The common denominator is deregulation,” Boyer said. “I’m chuckling only in the irony of it. It’s unbelievable that we could be so stupid twice.”
The commission wryly notes the anti-regulation sentiment that reigned in the 1990s and early in the 2000s, quoting Greenspan himself. The “Maestro” believed, as did his many followers, that the market was so efficient and so rational that stodgy government regulators would be rendered superfluous.
“The market-stabilizing private regulatory forces should gradually displace many cumbersome, increasingly ineffective government structures,” Greenspan said.
Of course, regulation, even strong, consistent regulation, was not enough in the face of the economic calamity of the past four years.
Oregon regulators told its small flock of state-chartered community banks as early as 2004 that it was concerned about their growing exposure to the housing industry. Community banks made relatively few home mortgage loans. But they lent heavily to homebuilders and land developers, to the point they had 20 percent, even 30 percent or more of their loan portfolio exposed to housing.
Jacob Mundaden, acting program manager for banks and trust companies at the Oregon Division of Finance and Corporate Securities, said it was easy to be reassured. The banks were making big money, very few of the loans were going bad and most had been conservatively underwritten.
That all changed, of course, when the economy crashed. Six Oregon banks failed largely because of failed construction loans. Others survived only because they sold large parts of themselves to outside investors at bargain prices.
“The fact of the matter is maybe we got a little complacent,” Mundaden said. Today, the state regulators have put new emphasis on “forward-looking supervision,” to try to help banks identify and avoid future problems.
The plight of the community banks outraged David Tatman, head of the Oregon Division of Finance and Corporate Securities. The big banks that were integrally involved in creating, funding and spreading toxic mortgages throughout the economy turned to the U.S. Treasury for rescue when times got tough.
Community banks had no such benefactor. When they ran into trouble, federal and regulators shut them down.
“It frustrated me to no end that big banks were bailed out but small banks were left to flounder,” he said. “That was very painful for me.”
Ray Davis, CEO of Umpqua Bank, the largest bank based in Oregon, said the commission’s report is on the money in ascribing widespread blame. The local banks, Umpqua included, saw the huge money available in the booming housing sector and couldn’t help themselves.
“Everybody has responsibility,” he said. “It was the big banks’ excesses and abuses, the community banks’ greed and over-leverage, the regulators … .”
In post-crash Oregon, there is much less to regulate. The number of individual mortgage brokers and lenders licensed with the state has gone from 13,112 in 2006 to 3,771 currently.
The commission’s report does not spare homeowners. The mortgage disaster would have been a shadow of its actual self if thousands of homeowners had not used their home as an ATM.
As the report points out, from 2001 to 2007, national mortgage debt almost doubled, and the amount of mortgage debt per household rose more than 63 percent from $91,500 to $149,900. even while wages were flat.
Locally, bankruptcy attorneys found themselves dealing with clients who had two, three, even four mortgages on their homes.
The whole economic crisis is a nonstarter without those two key players: the homeowner who wants the loan regardless of whether he can afford it and the banker who doesn’t care about the borrower’s ability to pay, said Mark Fovinci, a principal at Ferguson Wellman Capital Management in Portland. “They didn’t care if they made a loan to their pet rock, they just wanted the fee,” Fovinci said.
Mick Elfers, of Irvington Capital in Portland, says Americans need to brace themselves for a future of more booms and busts.
The country has made its choice to free the financial industry in the name of economic growth. Elfers says there’s no political will to radically intervene in the financial industry, even after a disaster as sweeping as the Great Recession.
But a “financialized” economy, to use Elfers’ word, is more prone to booms and busts.
“We’ve created a more complicated, dangerous system that the average person is going to find much more difficult to survive,” he said. “How do you deal with this risk? Wall Street doesn’t know how to tame risk, other than to make as much money as possible in the good times. But where does that leave the rest of us?”
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