The Cratering Mortgage Market, WCI Communities and Amb. Al Hoffman

When Washington is as far away as LisbonJuly 19th was a big day in Portugal for the US Ambassador Al Hoffman, former chairman of WCI Communities.

Secretary of State Condoleeza Rice was in Lisbon for a day-long visit. According to the Embassy website, she met with Portuguese Foreign Minister Luis Amado, who hosted a lunch, and the two took questions from reporters at a joint press conference afterwards.

The press—at least the press earning salaries in Euros—might have noted the irony of Ambassador Hoffman, former campaign finance chair for President Bush and for two-term Governor of Florida, Jeb!, in Portugal, a nation that can lay claim to a superpower past of its own.

Put another way, it’s the fall in value of the US dollar that permits the European press and every other tourist from Europe to visit American cities that are no longer affordable destinations for Americans, like Manhattan where the price of a good but average room has spiked to $600 to $700 a night.

Maybe the Rice stopover was just to refuel and lunch in a place friendlier than Iraq, or maybe it was a thank-you for Portugal being a member of the Coalition of the Willing until its small contingent was pulled in 2005.

Maybe the press should have thanked Mr. Hoffman, for helping make the US cheap.

By that, I mean the massive instability in the US dollar, not just from trade imbalances, but the effect of sequential speculative bubbles in the US economy–the last of which, in housing markets, is just starting to unwind.

Since Florida is the epicenter of the cratering mortgage markets, and since Florida-based WCI Communities and Al Hoffman were in the middle of cheerleading the frothiest housing bubble in modern US history, my questions would have been along those lines.

In the 16th century Portugal was hounded from its territories because other, bigger players in Europe got the same technology and had more weight to throw around the seven seas.

It takes a lot of weight to instigate a world-wide credit panic, built on the back of liar loans in America’s platted subdivisions, mortgage fraud, and more wing-tip brands of scamming. Not that WCI Communities offers anything but high class condominiums to qualified buyers who can’t be blamed, it’s not their fault, that development encroached on wetlands from all directions during the housing boom, with legislatures cheering from one end of Florida to another, and Mr. Hoffman and Jeb Bush’s right hand–the chairman of Florida’s Council of 100–crowing to the Washington Post in its series on the Everglades, that development is “an unstoppable force”!

For that alone, Ambassador Hoffman should have got London, or Paris, or Madrid, don’t ya think?

Maybe not. Maybe the empire of Portugal is exactly the framework in which the former chief of WCI Communities places well, who only three years ago was on top of the world, a Bush loyalist consolidating campaign contributions from the development lobby and every engineering firm planning to reap windfall profits from the industrialization of Florida’s water supply.

WCI Communities was in the thick of the madness. It turns out that many investors in Europe, maybe even some in Portugal, were persuaded to buy mortgage backed securities that made the Florida condo market take off like Icarus.

Today, WCI Communities is a company with $2 billion in annual revenue that can’t find a buyer, at least not at an honorable price for its principal shareholders.

Yesterday, The Miami Herald reported on the company’s woes. Since early this year, the volume of buyers who abandoned deposits are roughly twice what the company forecast earlier, for 2007. WCI’s stock price has plummeted more than 70 percent in the past year.

Wall Street asserts that production home builders are stuck in a difficult cycle. The oracles also say that Florida—the epicenter of the housing market crash—and other states prone to real estate speculation like California and Arizona are containable problems that will not spread to the broader economy.

The Miami Herald report on WCI Communities cracks a very tiny window on reasons both these assumptions are not true.

“WCI is one of the few publicly-traded high-rise developers in Florida, so its reports are a rare view into an industry dominated by privately-held firms.”

Most consumers take the retail view of the housing crash: liar loans, mortgage fraud, and other shell games.

The wholesale view is something different. It’s wrapped up in private transactions that don’t make it to the financial pages because laws in the United States compelling disclosure simply do not exist.

President Bush has been trying to calm jittery markets. It is not clear whether anyone is listening. Among his sunny points on the economy, he assures the world that US employment remains strong.

But as economist Joseph Stiglitz noted recently, “By some reckonings, more than two-thirds of the increase in output and employment over the past six years has been real estate-related, reflecting both new housing and households borrowing against their homes to support a consumption binge.”

Who needs any more numbers and who cares, when Lisbon is so very far away?

ALAN FARAGO writes about the environment and politics. He can be reached at


Alan Farago is president of Friends of the Everglades and can be reached at