What are We Getting for Our $700 Billion?

In our last post ("There Has Never Been Anything Like This") we mentioned some doubts about exactly who is getting all that taxpayer money. That is, of course, the now mind-boggling $700 billion bailout proposed by the Bush administration, but without any details yet posted. It would be a stupendous mistake, almost as stupendous as the bailout itself, if all that money went unsecured to the very institutions that caused this economic melt-down to occur in the first place. 

Several writers in the news today are calling for public ownership of at least part of any company that accepts the bailout funding. That strikes me as not only fair, but obvious. I mean, if we are going use public money to fix something that private companies screwed up, then let's get some public ownership for our cash. I have no idea how that would work, but I do know that the government is not playing with Monopoly money--its real cash and more than some whole continents could muster. So for this real cash we should get real equity and the executives who let this happen should get tossed out of the plane real soon and without their famous golden parachutes. Really.  

I mean at least a lien for Pete's sake. Can you imagine Goldman Sachs lending any of us money to buy anything--a house, a car, a million shares of Microsoft, without taking back an interest in the property as security for getting their money back? Of course not. So why shouldn't the government take a piece of the pie for all their trouble? At least until the money is returned and with a lot of interest tacked on. I know Goldman and Morgan will understand.

(Sorry, we'll get back to condos before too long, but this is all way too interesting to ignore.)

There Has Never Been Anything Like This

The Assault on Our Economy

The historic meeting described below took place in Washington D.C. on Thursday night, September 18, 2008.

            

WASHINGTON — It was a room full of people who rarely hold their tongues. But as the Fed chairman, Ben S. Bernanke, laid out the potentially devastating ramifications of the financial crisis before congressional leaders on Thursday night, there was a stunned silence at first.

                  Mr. Bernanke and Treasury Secretary Henry M. Paulson Jr. had made an urgent and unusual evening visit to Capitol Hill, and they were gathered around a conference table in the offices of House Speaker Nancy Pelosi.

                  “When you listened to him describe it you gulped," said Senator Charles E. Schumer, Democrat of New York.

                  As Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the Banking, Housing and Urban Affairs Committee, put it Friday morning on the ABC program “Good Morning America,” the congressional leaders were told “that we’re literally maybe days away from a complete meltdown of our financial system, with all the implications here at home and globally.”[1]

 

Wow.  And after that, “How did we get here?” If you can get by the instinct to question motives, political and otherwise, this describes a situation that would be about as bad as it could get. The fact that both Republicans and Democrats can agree on its severity probably dispenses with the question of motive, but I guess we will all wonder whom we were really bailing out.

But, again, how did this happen? We wrote a piece a few months ago about the sub-prime mortgage debacle that we thought was moderately humorous.  “Who Are the Brains Behind the Housing Crisis”[2] Basically, we were asking how all of this Ivy League brainpower on wall street could screw something up so badly.

But this isn't funny...

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[1] Herszenhorn, David, “Congressional Leaders Stunned by Warnings,” The New York Times, September 19, 2008.

[2] CondoIssues.com, March 2, 2008.

The Role of Experts in Evaluating Building Defects

When a building fails to perform as it should, we immediately look for answers. Is the problem the result of someone’s failure to assemble it properly? Is the problem an act of nature? Was the proper maintenance of the building not performed as it should have been? The answers often depend upon a number of factors: the age of the effected building component, the exact nature of the problem, the presence or absence of human error, or some combination of all three.

Because buildings are not single products but rather an assembly of individual parts and components often put together by different contractors; and because the materials used often require periodic maintenance to maintain their projected service lives; and because acts of nature often intervene to test the resistance of building components to leaks and decay, it is usually never exactly clear why a particular building defect occurs. And the average person who might sit in judgment one day cannot easily understand, much less unwind, the disputes that arise over these enigmatic, technical and often costly problems.

For these reasons, independent experts are a necessary and valued part of the resolution of construction defect claims. Experts are professionals whose credentials qualify them to analyze the cause of a particular type of construction or design problem, design a solution, and assign responsibility for it. The qualifications needed are determined by the nature of the problem and the component, but in the construction defect arena experts are predominantly architects and engineers...

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Home builders look to Urban Development

In a couple of our prior posts (Back to the Housing Future, The End of Suburbs) we have predicted a return of housing to the inner city core where owners can be adjacent to transit and services as well as jobs. That trend is continuing and now The National Association of Home Builders, those responsible for 3/4 of all homes built in northern California,  are opening a new office in San Francisco for builders specializing in mid-rise, transit oriented structures. This new housing is aimed at "The Millennials" or "Gen Y" according to a recent article in the Contra Costa Times. It's also aimed at "the other huge group, folks over 55 who have sold the single family home when the kids moved out who live in denser condo or townhouse developments and don't want to move to Tracy and don't want a big house anymore." The NAHB points to a recent study indicating that there is a potential of 1.5 million units of infill housing in California alone in the next 20 years. Density requires multi-family housing, of course, and that usually means condominiums, so we are likely going to see a lot of new common interest developments in the inner city in the next few years.

Off Their Radar?

Why are Common Interest Developments Not on Party Platforms?

   It's all about politics this year. More to the point, its all about Republicans and Democrats. This is the season of the candidates, the issues, and the Parties. We hear everything about illegal immigration, the economy, and the war. The two political parties and their nominees for public offices everywhere are consumed with new and old answers to such social and economic issues as universal health care, housing, and interest rates. This is business as usual in an election year.

 

            However, if you listen to all of the speeches, read all of the political flyers, hear all of the endorsements, you will still hear nary a word about common interest developments, homes for millions of Americans. "Who cares?" you say, "Elections are about important national and state issues, not about something as mundane as my homeowners association." That's probably true at the national level where the debate about our country's future rages over problems that are often close to insoluble. But what about at the state and local levels? What about the candidates for city council, the state legislature, or governor?

 

            At the state level, housing and real estate law and land use should carry a great deal of weight with politicians, and common interest developments are all about those issues. Where should we build new ones? How do we make them green? How do we govern those that already exist? How do we make them affordable? What do we do with the projects that have reached the end of their useful lives? These are issues which can and will have an enormous impact on any state's housing stock, its economy, and its future...

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