The world wide credit crisis started in the heart of America suburbia itself, and primarily through the politics of suburban development that radiated from South Florida. The story of subprime mortgage mess has not yet meshed with the campaign finance supply chain that wrapped up Florida production home builders, lawyers and lobbyists. But from the perspective of Miami and South Florida, it is clear that supply chain was managed by Jeb Bush, the former two-term governor.
Yesterday Bloomberg reported that $700 million in defaulted debt, representing sprawl (asset-backed commercial paper– the exact details have not been disclosed) has vanished from the trust funds invested by the Jeb Bush team, adding to losses that will change American politics in 2008 and beyond.
The world-wide credit crisis is too big to contain in one frame. It still has not come home to roost, how the hundreds of billions of losses reported by the world’s largest financial institutions from Hong Kong to Frankfurt to London to Beijing and Tokyo, have anything to do with politics.
But the most accurate frame to tell this story is the money trail from Jeb’s loss in 1994 governor’s race, to his victory in 1998, and subsequently, the presidential election stolen in Florida by George W. Bush in 2000. Both Jeb and W. were fully engaged in the policies of growth that spurred the hyperventilated housing boom that is now in flames. (for further detail, see eyeonmiami.blogspot.com under the archive feature, "housing crash")
Their programs and policies were grounded by a strategy to win Republican victories in the fastest growing suburbs in the nation. Today the massive leverage that supported suburbia has deflated, bringing hard currency consequences to taxpayers and voters whether they are Republican or not.
Although the news is now filled the housing market crash (in Miami, it’s the worst in a century), it is not being told in terms of politics. There are news segments on liar loans, reports on mortgage fraud and stories about hastily convened task forces, there are editorials on poor judgment by consumers and investors and efforts to bail them out, or millions of homeowners at risk of foreclosure, or who have been foreclosed.
These are the bits and pieces, and still, even if you laid them side-by-side, they would fail to capture the connections between the so-called fiscal conservatives and ordinary people now paying for the failure of the suburban dream.
How are Americans really hurt by suburbia?
Here is how.
Bloomberg reports today, "School districts and local governments in Florida have pulled $8 billion out of a state-run investment pool, or 30 percent of its assets, after learning that the money market fund contained more than $700 million of defaulted debt."
The State Board of Administration, that manages about $42 billlion of short-term investments, including the pool, as well as Florida’s $137 billion pension fund, is run by Coleman Stipanovich, brother of "Mac" Stipanovich, a Republican consultant and Bush family loyalist. In 2002, the fund lost $334 million on Enron, investing in the stock as the company was swirling down the drain-three times the loss of any other pension fund. A few years later, the same fund invested in Edison Schools whose stock value had collapsed from $37 to as little as 14 cents.
"Pardon the sacrcasm," the St. Petersburg Times editorialized after the Edison deal, "but was there no Enron stock left to buy?"
Enron-through its water subsidiary, Azurix-and Edison represented two areas of policy related to manias of the Jeb Bush years: socializing risk and privatizing profits. Jeb had been quietly encouraging the privatization of Florida’s water supply, administered by a network of state water management districts.
Enron’s collapse put a quick end to that, although stalking horses have not given up on the dream of privatizing water resources in Florida. And of course, Jeb’s acolytes, seeded through the Florida legislature, are still promoting charter schools as an answer to the teacher’s and other unions.
Now, to the $500 million plus that Governor Jeb Bush lost in the empowerment of private corporations, it is necessary to add an additional $700 million of defaulted debt tied to the housing market crash.
This is not some abstract penalty imposed by bad leadership on taxpayers.
The suburbs are restless and with good reason: suburbia and its costs are a Ponzi scheme for which no political leader will go to jail.
The scheme starts with local elected officials in control of zoning, up the ladder through lobbyists, land speculators developers and local bankers, all the way to Wall Street where lawyers and financial engineers, from investment bankers to hedge funds, who already spent billions in bonuses and fees for originating debt that has no value on the secondary market.
One reason the mainstream media has a hard time focusing on the heart of the problem, is that so many Americans call suburbia, home.
The mainstream media, in large part supported by the suburban supply chain, has either ignored or lambasted critics as elitists insensitive to the millions of Americans for whom glue gun, pod housing in bland and anonymous housing tracts (in order to conform to the requirements of mortgage backed securities) is an unassailable dream.
No longer. Not when people’s pensions are affected. And not even in Florida, where a Republican legislature still holds firm. For now.
ALAN FARAGO of Coral Gables, who writes about the environment and the politics of South Florida, can be reached at email@example.com.