NewGeography.com blogs

After several days in New York, I encountered serious climate change — in terms of atmosphere — at a USA-Canada Summit in Grand Forks, ND. Sure people were concerned about the market meltdown, but the talk was all of new plans for expanding the economy across both sides of the border. The distressed martinis of Manhattan nights were gone in a place where drinks also came with good cheer.

Perhaps most inspiring was an appearance by Senator Byron Dorgan (D-ND) who spoke of the economic crisis but in terms far less hyperbolic than those used by many members of Congress and most of the media. He compared to the current crisis to a low tide that has exposed some weak points in the economy but has not fundamentally altered the underlying strength of what he called “the real economy”.

This includes the manufacturing, farm, energy and business services firms that are flourishing across large parts of the country, particularly in the Heartland. Firms representing these industries at the conference were not whining about competition or the credit crunch, but talking about cooperation across the border and the prospect of a better future.

How refreshing it would be if either of the two major candidates, particularly Senator Obama, the likely winner, spoke with such confidence about the intrinsic strengths of the country and this continent in general. I would not deny the real significance of the stock market crash and the real estate mess, but, as Senator Dorgan suggested, “optimism” about the future has been a primary driver of American progress since the founding.

Let’s hope Senator Obama, or Senator McCain, lose some of their negative rhetoric when they take office. It may be good politics now to be a nay-sayer, but as President, these fellows will need to comprehend the country’s fundamental strengths and how to utilize them to make a strong recovery.

Local and Regional banks in the Great Plains are doing just fine, thanks, according to Bill Wycoff, a bank president in southeast Kansas. Bill wrote in the WSJ Saturday that

"Here in the heart of Kansas, the sky isn't falling and Chicken Little isn't running around without a head. Community banks like mine are still making loans and serving the needs of customers. ... My father always told me that character repaid many more debts than collateral ever would. Community banks form long-term relationships with customers."

He's had to go out of his way to combat recent media coverage and hysteria about the financial industry:

"All of the media pressure about this terrible crisis has really worried people. We community bankers must spend time reassuring folks that everything will be fine. The best way I have found to do that is to make more loans this September than we made a year ago, offer new products, and serve a fantastic group of customers with home loans at our bank where all is well and none are facing foreclosure."

Here in the prairie, we see many small town banks opening branches in adjacent metropolitan areas to tap some of the solid economic growth. Growth here may not be explosive, but it is built upon the productive economy and professional and business services. The Great Plains has consistently bested the national rate of job growth since 1990, and many local banks have launched advertising campaigns in the past weeks to say "everything is all right."

Anyone in New York recently can see that the swagger is now gone. With the economy losing its primary engine - a relative handful of financial hotshots- the whole plutonomic system seems to be under major stress. The state and city budgets also seem to be heading south in a big way.

You can see this strolling through Soho and peering into empty restaurants and nearly empty shops. Clerks and waiters now actually seem to want you to enter. The $350 children’s sweaters are now on the sales rack, for about a third the price.

Wall Street area is in even worse shape, says friend of the New Geography, Jonathan Bowles of the Center for an Urban Future. Yet there are signs of dynamism. Jonathan and I went to lunch on 32nd Street, also known as Little Korea. Here the restaurants and stores, many of them tied to the global garment trade, seem as busy as ever. Good value, hard work and plain old sticktoitivness will still pay off, even in a recession.

New York will bounce back but the impetus likely won’t come from the investment bankers or the fashionistas. Instead, look for the Koreans, Indians, Africans and other newcomers --- and the skilled media and other artisans now mostly living in Brooklyn and Queens --- to pick up the slack. A more affordable, less luxury-obsessed city is good news for them. It makes running a business or buying a house or condo a possible dream. These are the folks most capable of reinventing the city in the post-bubble age.

S&P released the July Case-Shiller Index today. Check out our line chart to follow the trend in each market.

Click the graph for a larger version. Many of the most inflated markets are still in free-fall mode, but the 20 metropolitan area composite seems to be starting to level off. Markets such as Charlotte, Denver, Atlanta, and Dallas - areas with the most moderate increases during the height of the bubble - seem to be in the best shape.

Minneapolis seems to be rebounding slightly after a sharp decline in the last year, but Detroit has fallen below its mark in 2000. How far can prices fall? Check out Wendell's take on realistic housing prices. Here's a big version of the chart.

The late Jesse Unruh, longtime speaker of the California Assembly, was a giant of a man, both in accomplishment and girth. But he will be forever remembered for having said that “Money is the mother’s milk of politics”.

Never truer words were said. We got a good glimpse of that in the recent vote on the Paulson-Pelosi Wall Street bailout. A quick survey conducted by the Berkeley, California based Maplight.Org showed that members of Congress in both parties who supported the bailout received 54% more money from the financial service industry than those who voted against it.

The differential among Democrats was even wider --- those who backed the bailout received almost twice as much from Wall Street than those who opposed the measure. A regional analysis conducted by the New York Times showed another interesting pattern, with opposition to the measure strongest in the heartland states, Texas and other places where the housing bubble was less inflated.

Clearly constituents in these areas reached some of their representatives with complaints. As for those who went the other way, well, somewhere in heaven, California’s “Big Daddy” is wearing a sly, knowing smile.