“The day that New Urbanism Died?” was the headline of the St. Louis Urban Workshop blog that detailed the Chapter 11 bankruptcy of Whittaker Builders, developer of the “New Town at St. Charles,” a premier New Urbanist community located in the St. Louis exurbs (beyond the suburbs).
The author notes that “New Town will not disappear, plenty of people are happy to live there, but its promise is gone. It's become just another suburban enclave and will face the same challenges as other suburban developments; lack of retail, long commutes, etc.” The blog’s headline is a play on a characterization by postmodern architect Charles Jenks, who referred to the demolition of the infamous Pruitt-Igoe public housing project as “The Day Modern Architecture Died.”
The Northwest Indiana Times detailed the failure of a new urbanist community (Coffee Creek) in an October 23 article. The article noted that the planned 2,000 home mixed use development, located in the exurbs 45 miles from Chicago’s Loop had attracted only 12 homes and an apartment building. Much of the empty land has been purchased by another developer, who indicated an affection for the new urbanism concept, noting however that it probably would not work here. The article notes that a more modest New Urbanist development is doing better, in nearby Burns Harbor, with 75 homes occupied out of a planned 300.
Despite these unhappy stories, the death of New Urbanism is not imminent. True, to the extent that New Urbanism requires subsidies it is likely to prove unsustainable in the longer term, like its Pruitt-Igoe type predecessors. On the other hand, to the extent that New Urbanism represents a genuine response of architects, builders and developers to actual, rather than imagined demand, New Urbanism could be with us for some time to come.
Coming soon to a market near you: a bust in commercial real estate that will make the subprime mortgage crisis look like a picnic. The other shoe drops in 2010.
Federal Deposit Insurance Corporation Chairman Sheila Bair told a Senate committee on October 14 that commercial real estate loan losses between now and the end of 2010 pose the most significant risk to U.S. financial institutions. Although you can’t read it online, on October 7, 2009 Wall Street Journal reporters Lingling Wei and Maurice Tamman (Eastern edition, pg. C.1, Fed Frets About Commercial Real Estate) reported on a presentation prepared by an Atlanta Fed real-estate expert who is worried “about the banking industry's commercial real-estate exposure.”
Since July, the Federal Reserve has been pumping billions of dollars into commercial-mortgage-backed securities (CMBS, same things as the residential-MBS I’ve written about before in this space, only for shopping malls instead of houses). To accomplish this, the Fed uses the Term Asset-Backed Securities Loan Facility or TALF program. It is one of several alphabet-soup programs the Fed is using to pass a couple of trillion dollars to the stock market through private corporations (not just regulated banking institutions). For example, between March and July 2009, Harley-Davidson Inc. and other non-banks raised $65 billion in sales of bonds backed by everything from motorcycle loans to credit card debt. The Fed made $35 billion in TALF loans to investors buying those securities, which sparked a market rally. That market rally, however, is not in the commercial real estate market – it’s in the securities market. Since its inception, TALF has put between $2 billion and $11 billion per month into the securities market.
TALF lends money to anyone willing to buy CMBS (or student loans, car loans, etc.). The Fed reasons that, as long as banks can move loans off their books by repackaging and selling them as bonds, they will make more loans. So they justify giving money to non-banks to buy the bonds because the money will go to the banks. Get it?
Unfortunately, as vacancy rates rise, banks are increasingly reluctant to make new commercial real estate loans. This is obviously the case since Office of Thrift Supervision deputy director Timothy Ward told Congress this week that they will be issuing guidelines on doing loan workouts. A loan work out is what industry experts call “extend and pretend” – extend the terms and pretend like they are paying you. CRE loans, furthermore, are shorter in duration than home mortgages – typically 5 years instead of 30 years. That means a lot of loans will be coming due before the economy picks up enough to fill all those offices with rent-paying businesses. The value of commercial mortgages at least 60 days behind on payments jumped sevenfold in September – to $22.4 billion – or almost 4 percent of all commercial mortgages repackaged and sold as bonds. That’s about the same as the 90 day past-due rate seen for all residential mortgages (including those not sold off by the banks) in the first quarter of 2009.
As of October 14, 2009, the TALF balance is $43.2 billion and growing. From what we are hearing now, it may not be enough.
From the Register, Britons spent £6 million in public funds for an ad campaign which Nature simply calls the Worst. Climate. Campaign. Ever. The advertisement depicts a father and daughter sharing in a bedtime story describing "a land where the weather was very, very strange." It continues with a sophomoric overview of the causes of climate change, and describes the consequences in a cartoonish overture. The Times reports that "the advertisement attempts to make adults feel guilty about their legacy to their children."
With all their various predictions of the Earth's demise – 100 months? 96 months? Four months? – and tons of carbon spent hauling scientists and politicians to climate change conferences all around the world – climate change campaigners still have the time to make us feel guilty for trying to make a modest living – all at the expense of the already deeply in debt UK taxpayers.
Is this movie about to get played on televisions here in the USA? After all, we have plenty of money to spend on propaganda here as well.
Bifurcated means to split or divide something into two parts. It is a term often used to describe trees, but today it can also be applied to our politics in America. It seems that right and left, liberal and conservative, Republican and Democratic have never been more at odds than in our recent history.
Politics has always been blood sport. A quote often attributed to President Harry Truman is, “If you want a friend in Washington, get a dog.” This may have been true about our politics, but our legislative process was much more collegial. Elected leaders worked together, shared power, listened to the other point of view, and knew how and when to compromise. Today, lines in the sand have become chasms, and compromise is viewed as retreat. What happened? .
Robert Bork, by any objective criteria, would be judged to be highly qualified to become Justice of the Supreme Court. He was a renowned legal scholar who had the misfortune of also being a strict constructionist of the constitution. In 1987, he was nominated by then-President Ronald Reagan to fill a vacancy on the court. Within an hour of his nomination, Senator Edward Kennedy stated, “Robert Bork's America is a land in which women would be forced into back-alley abortions, blacks would sit at segregated lunch counters, rogue police could break down citizens' doors in midnight raids, schoolchildren could not be taught about evolution, writers and artists could be censored at the whim of the Government…” At that point civility ended. Bork’s nomination was withdrawn and the process has not been the same since. Ted Kennedy defined the fears America harbored about conservatives, and a new word was added to the American lexicon – “borked” – which is defined of a savaging of a candidate because of what they believe.
In 1988, Rush Limbaugh syndicated his talk radio program nationally. He was unabashedly conservative and a ratings sensation. His three hour show usually does not include any guests. To his audience, he is a “lovable little fuzz ball,” but to his enemies he is the personification of mean-spirited Republicanism that is anti-Black, anti-woman, and anti-environment. Limbaugh set the stage for conservatives like Sean Hannity, Glenn Beck and Laura Ingraham to follow and achieve talk radio dominance for the conservative point of view. Limbaugh provides daily talking points to his listeners in the form of arguments against what he deems liberal policies. His “dittoheads” now form a network of followers throughout America who can be quickly mobilized into opposition.
Liberals tried and failed to match Limbaugh by launching “Air America” and other programming, but their programs have all been ratings failures, leaving the right firmly in command of talk radio content. Talk radio has divided America not so much along party lines as along ideological propensity, liberal and conservative.
Trust in our elected leaders has been greatly diminished over the past few decades. Republican trust was shattered when George H.W. Bush broke his “read my lips” promise not to raise taxes. The wound deepened when Newt Gingrich “flamed out” in 1998. Democrats circled the wagons around Bill Clinton during his impeachment. His impeachment was viewed as criminal by Republicans, while his actions were considered minor, personal issues by Democrats. George W. Bush was elected in a disputed ballot election. From that point forward, to Democrats he was “selected not elected.” Our trust in our elected leaders is at an all time low as evidenced at recent town hall meetings on health care and polling data that puts Congressional approval below 30 percent.
The powerful nightly news programs and newspapers at one time were the primary shapers of opinion in America. No longer. New internet based media and content providers simply beat them to the punch on a daily basis. This has caused a divide in how we get news. Fox News is soaring in the ratings with its “fair and balanced” tagline. In response, other mainstream media has moved left. What is troubling is that stories that are broken by Fox, using good journalism, are not even carried in the mainstream media. Two recent examples are reporting on Obama appointee Van Jones, and Fox’s explosive reporting on ACORN. The New York Times missed the Jones story. When he resigned they explained their lack of coverage, writing, “Our Washington bureau was somewhat short-staffed during the height of the pre-Labor Day vacation.” Charles Gibson, anchor at ABC, when asked about the ACORN scandal laughingly stated, “It’s a mystery to me.”
The way our “two media” view tea parties, town hall protesters and the September 12th March on Washington goes far beyond a mere gap in perception or difference of opinion on what constitutes news. It defines the camps in a divided America
If you are interested in rural community and economic development trends, this webinar is for you. Delore Zimmerman will provide guidance for rural community leaders about development trends and the steps communities must take to increase their investment attractiveness.
The role that technology plays in increasing economic vitality will be presented both in theory and practice, and Delore will include information about successful regional economic development strategies.
The International Olympic Committee has rejected Chicago in the first round. A delegation of President Obama, Michelle Obama, Oprah, Mayor Daley and others failed to convince the IOC. President Obama made an impassioned plea to the IOC:
"Chicago is a city where the practical and the inspirational exist in harmony; where visionaries who made no small plans rebuilt after a great fire and taught the world to reach new heights," Obama told the IOC's members. "I urge you to choose Chicago."
This fell on deaf ears representing a major defeat for President Obama, Mayor Daley, and powerful Alderman Ed Burke (who was the point man to hand out the money).
Veteran Chicago journalist Ben Joravsky summarized the negative concerning Chicago:
the city hasn't completed a major construction project on time or on budget in recent memory. Pick a project, any project: the reconstruction of Soldier Field, the creation of Millennium Park, the redevelopment of the prime downtown land at Block 37, the expansion of O'Hare airport—they were all finished way over budget if they were finished at all. In Chicago, people know that the question isn't whether city projects will go over budget, but by how much.
Even though Chicago’s City Council voted 49-0 in a guarantee to support the 2016, public support has been on the decline all year. A recent Chicago Tribune poll suggested half the public didn’t want the Olympics. The IOC, undoubtedly, had to be concerned the lack of public support in Chicago when making the final decision.
The grass roots organization No Games Chicago deserves much credit for taking on the Chicago Machine with meager funds. Thomas Tesser of No Games ran an effective campaign in the media against the powerful Chicago interests. The Chicago Sun Times ran this Tesser attack which was quite effective:
The City Council voted to give oversight of the City's Olympic commitments to Ald. Ed Burke, chairman of the Finance Committee. This is the final cruel joke played by the Council on the taxpayers. Burke has become a millionaire doing deals with firms that have business with the city and has collected millions in campaign contributions from firms doing business with the city. Pat Ryan, the chairman of the 2016 effort, contributed $3,000 to Burke. Burke didn't mention that he has ten clients who are major donors to the
Will Chicago come back for another try in 2020? Only time will tell.
Well, this story just gets better and better. It turns out that even when the MBS has an actual mortgage underneath it, the same mortgage is backing more than one security. Last week I talked to Matt Taibbi, who wrote in Rolling Stone magazine (The Great American Bubble Machine) that 58 percent of an MBS issued by Goldman Sachs had nothing but a list of zip codes where the mortgages should have been. He told me about a lawyer in Florida who has a list of cases where two MBS holders showed up at the bankruptcy proceedings, both claiming that they owned the same mortgage. You can expect to read more on that here as the story develops.
Then it gets worse! Gretchen Morgenson reported in the New York Times on Sunday that there are about 60 million mortgages registered with the Mortgage Electronic Registration System (MERS) to keep track of who owns which loans and which MBS. Problem was that MERS, created by Fannie Mae, Freddie Mac and the mortgage industry, thought they were too good to have to register liens against land at the county level – real estate 101 for any sober realtor. The Kansas Supreme Court has now ruled that changes in mortgage ownership registered with MERS – and not registered with the local land authority – have no legal standing.
Don’t forget – MBS are the junk that Treasury Secretary Geithner wants purchase with tax-payer dollars; and Federal Reserve Chairman Ben Bernanke committed $1.25 trillion of freshly-printed dollars to buy up out of the marketplace this year. Here’s the math made easy – the median house costs $177,000, figure an 80% mortgage, times 60 million mortgages: it looks like $8.5 trillion worth of mortgages could have no real estate underneath them! If the repo man comes knocking on your door, remember these four words: Show Me The Paper!
Set aside for a minute whether high-speed rail (HSR) makes sense or not on a cost-benefit basis. Regardless of whether it does or not (and some smart people are arguing not), I'd like to make the argument that federal funding has no place in HSR. Instead, it should be left to individual states or regional state coalitions.
The federally-funded interstate system was originally conceived for defense purposes - rapid mobilization - after Ike saw the German autobahns. Freight and people movement were obvious beneficiaries, over short, medium, and long distances. It is a comprehensive network that crosses state lines, which argues for federal involvement. The government made the minimal investment it had to make - road beds - and people/companies paid for vehicles and fuel. Fuel was taxed to pay for it all. If EZ-tag technology had been available at the time, I suspect they would have tolled it all instead to pay for it.
Airports followed a similar arrangement: government provides the landing strips and terminals while private companies provide the vehicles and fuel. Passenger ticket taxes pay for the infrastructure. As airports are a local decision, they are (mostly) paid for locally, although regulated federally for standardization and safety.
HSR is targeted at medium distances only, making it more of a state/regional decision (i.e. a small collection of states). It also requires huge subsidies, as the government provides the track, cars, and energy. There is nothing directly related that can be taxed to pay for it (like fuel taxes for roads and passenger ticket taxes for airports). You could try to tax the rail tickets, but if they were fully priced they would not attract nearly enough riders. So no matter how you slice it, in the end the government (i.e. taxpayers) will be paying the majority of the cost of moving each passenger. The infrastructure cost cannot be covered by direct user fees, as demonstrated in other countries.
Rather than compare HSR to the interstate highway system, the better analogy would be airports. Imagine if California said, "Feds, give us money to build a few airports in key CA cities and provide a subsidized government-run airline to provide frequent intra-state service where tickets are priced way below cost." Put that way, people would recognize the idea as absurd, and tell California to do it themselves if they think it's such a good idea.
The problem is that a simple program that made sense at the time - a federal gas tax to build an interstate highway system - has evolved into a Frankenstein monster of massive federal involvement in enlarged urban freeways, local rail transit, and now high-speed rail - areas where they simply do not belong. Local transportation planners have shifted decision making from "What are the best cost-benefit investments we can make to move people in our area?" to "How to do we grab our 'fair' share of the federal pie, regardless of whether or not the project is something we would consider with our own money?" And that is leading to a lot of boondoggles being built around the country, culminating recently in the famous Bridge to Nowhere in Alaska.
The answer? The feds need to get out of the transportation business beyond minimal maintenance of the interstate highway system (the basic four lanes - not the expanded urban freeways). Let local entities make local decisions on transportation investments, including funding, and a whole lot of waste will magically disappear.
According to Railway Technology, Taiwan’s struggling high speed rail line, the only fully private and commercial high speed rail system in the world, will be taken over by the government his week. The line has been plagued by disappointing ridership levels totaling approximately one-third projected levels. The company has generated insufficient revenues to meet its debt obligations and had previously renegotiated its bank credit to substantially lower interest rates. The company lost $770 million in 2008 and has a debt of approximately $10 billion. The cost of the system was approximately $15 billion.
Not every local official is smitten with the romance of high-speed rail. Graphic evidence of this was provided by Springfield, Illinois mayor Tim Davlin, who expressed his concern that the proposed rail overpasses would slice the city in half. Davlin told the State Journal Register that the “Whole city would look like crap.” This is a problem faced not only by historic Springfield, the state’s capital and location of many Abraham Lincoln sites. Citizens and cities on the San Francisco peninsula are concerned that a proposed “Berlin Wall” will divide their communities if construction of an elevated high speed rail wall proceeds through their communities.