Hell to Pay
In May, 2005 The Miami Herald printed a guest editorial by one of Miami’s Growth Machine advocates, Willy Bermello; "Build them and they will come".
"Lately," Bermello wrote, "There has been more written about the "condo bubble" than the weapons of mass destruction during the Iraq war. There is a relationship in both phenomena: If you say it often enough, you actually start believing it, and soon enough you’re on your way toward a self-fulfilling prophecy." (Bermello is past president of the Latin Builders Association; the powerful lobbying organization in Florida’s most populous county.)
Now we gaze at the wreckage caused by Mr. Bermello’s nonsense. But why has the mainstream press been so far behind this story?
The "free market" took a dollar of home or condo mortgage and created from it 80 dollars of imaginary value (that is the ratio of leverage now disclosed by the Fannie Mae bailout); showering a blizzard of fees, commissions, and compensation to an elite group of builders and developers and greasing the wheels of a Ponzi scheme for which no one is going to jail but we will pay for.
Its critics, at the time, were denied a voice by the mainstream press. And still are. It was impolitic or impolite to ask hard questions of the underlying financial arrangements of the housing boom and apparently nothing has changed.
Back when the housing bubble was inflating, the mainstream media– like The Miami Herald– did not let a whiff of diverse opinion against the boom and its impacts in its editorial pages, unless it was one of Jim Morin’s editorial cartoons. It is still going on.
There is plenty of company for the Miami Herald’s failure to connect the dots for ordinary readers.
This is not a matter of complexity, of not wanting to bog down a newspaper’s pages with arcane and esoteric finance. It is simple: the Wall Street game on derivative debt depended on all the smaller gears meshing and working together; linking the zoning decisions of the lowliest county commission majorities, for instance, to the originators of mortgages, furniture warehouses, and the whole supply chain of campaign contributions that pushed forward an anti-regulatory fever and despicable imprisonment of the public good by higher and higher walls meant to separate people from their government. (The constituency that "knew" what was going on, better than any other: those "community activists" that the Rudy Giuliani skewered for blood sport in his speech at the GOP convention.)
And it is still going on, at the Herald. Only a few weeks ago, the entrenched political and economic elite– represented by a planned suburban development for 16,000 outside the Urban Development Boundary called Parkland– asked for and received a meeting with Herald executives, without reporters. Ed Easton, Jeb’s golfing partner, Segio Pino, Willy Bermello’s LBA buddy, Armand Guerra, a real estate speculator, and Tony Seijas, Lennar’s local executive; these characters represent the local development machine that ground up farmland, open space, and the public interest through platted subdivisions built mainly because they could be financed through derivatives and now exist as toxic waste in some distant investor’s portfolio. And, the point should not be lost: you and I as taxpayers are now bailing them out.
Over the weekend, a St. Pete Times journalist wrote his own mea culpa: one other paid subscribers of the daily news are waiting for. Business writer Robert Trigaux acknowledges: "A watchdog media was about as effective as a three-legged chihuahua. When we warned things were too hot as home prices soared, the real estate industry complained we were killing the golden goose. When we’ve since documented the dramatic price declines, the real estate industry complains we are flogging an already cooked goose."
It happens all the time in Miami: a story either overtly or deemed to be negative to the real estate industry elicits howls of complaint from advertisers from the building lobby. Whenever criticism was leveled during the boom, its big guns were on the phone to the publisher– then, Alberto Ibarguen: Armando Codina, who helped Jeb Bush to his first fortune, or Adolfo Henriques, who bought out Codina’s business, or the chairman of John S. and James L. Knight Foundation, Greenberg Traurig managing partner, Cesar Alvarez (and now, Ibarguen’s boss.)
(This a parallel question: how could the nation’s premier charitable foundations– charged with promoting independent journalism and analyzing the economy, completely miss the origins of the nation’s worst financial crisis since the Great Depression and who will hold their board of directors accountable?)
Trigaux, of the St. Pete Times, concludes, "Either way, the press did a sorry job of explaining what was happening."
At The Miami Herald, the sorry job is still going on.The newspaper’s editorial board is refusing to support the outstanding series by the I-Team (investigative team) on mortgage fraud in Florida. The multi-part series, that involved significant investigative resources, documents how more than 10,000 convicted felons were allowed by state regulators to originate or sell mortgages, even after some had been convicted of fraud. It lead to the resignation of the head of the state’s regulatory agency for licensing. (By all means, google Miami Herald "Borrowers Betrayed".)
The point the Herald is avoiding, or, expects its readers to extrapolate for themselves is how the entire regulatory structure in the State of Florida suffered under and is still dominated by so-called conservatives who sold the public interest to the highest bidder, unlocked the cells, and let the loonies run the nut house; all to service low-cost growth, growth that now blooms as toxic waste at the heart of a world-wide credit crisis.
It is not such hard work connecting the dots between the absence of regulation and the anti-regulatory culture that prevailed during the two terms of former Governor Jeb Bush, but the newspapers did not want to do it. If they wanted to, they would have rushed to back-up the "Borrowers Betrayed" series with equal measures of thought and consideration on its editorial page.
The same way that Jeb believed the solution to pollution was dilution– in other words, writing regulations to minimize the appearance of risk to the environment and public health– characterizes how the toxic intent of big campaign contributors who were also developers in Florida was masked by mortgage backed securities, collateral default obligations, and credit default swaps. It was a cluster fuck by men with business school manners still wearing suits.
Why won’t the Herald make the clear link for its readers: that the Republican status quo never saw a regulation hindering development that they couldn’t find a way to cut and trim to the fit of predetermined outcomes? Or, how Florida was the test tube Karl Rove and Grover Norquist intended– based on the elimination of regulations to free self-interest and to mobilize the economy for campaign contributors long before George W. Bush became president?
What is holding the Herald back from finishing the job started by the I-Team? Why do Herald executives meet with the pushers of suburban sprawl– the executives of Parkland like Lennar and board directors of US Century Bank– but not also meet with community activists struggling to protect the Urban Development Boundary? Maybe it is because the community activists are not rich enough. Maybe it is because they don’t give to The United Way or the YMCA. Maybe it is because they don’t rub shoulders at downtown events at the Performing Arts Center, or, its salons.
Really: we are in a fix because the entire constellation of interests who caused our financial panic are still in power, still working to make a solution along the old lines that created the problem in the first place.
Bermello ended his May, 2005 editorial: "The bubble is not latex but stainless steel." In light of the unfolding disaster Mr. Bermello’s point of view inflamed, nothing I have to say in response is printable for polite company.
ALAN FARAGO, who writes on the environment and politics from Coral Gables, Florida, and can be reached at firstname.lastname@example.org