It’s a big project, replacing all the sand that is washing away from Miami beaches.
One way or another, taxpayers have spent more than $125 million, in just a couple of years, to put back what nature is taking away. Now, a new dilemma has cropped up; there’s not enough sand left in Florida for the job.
My suggestion is to start pumping the sand from between the ears of elected officials who presided over the housing boom, now in cinders here and everywhere.
The weekly Miami Today reports of Brickell Avenue, the downtown Miami corridor, where four developments planned for completion in late 2008 would increase the area’s total condo inventory from 5,348 to 12,299 units.
“Only nine condos closed from June 19 to July 18,” according to one professional. “If that pace continues, absorbing the entire projected inventory would take up to 64 years.”
We are not aware of a single elected official, in Miami or in Washington, DC, who raised the question whether or not it was advisable to zone and permit a construction frenzy that has rapidly unspooled into a world-wide credit crisis involving hundreds of billions of dollars.
How did it happen?
You see, removing brain matter and replacing it with vast amounts of sand is the highly profitable business of American democracy.
The roots of the empty Miami condos soaring to the skyline are buried deep in the arterial system of Wall Street where inventive financiers, some still with baby fuzz on youthful faces, proliferated liquidity out of thin air with the encouraging support of the nation’s grey-haired financial overseers.
On either side of massive fees, commissions and bonuses are the suckers: individual investors, teams of investors, and the plain old folk who bought into the condo craze in Miami, or San Francisco, or Las Vegas, or Pheonix, or LA, or Manhattan.
Don’t feel bad; the bigger suckers are on the other side of the deal. That would be distant investors persuaded by banks and financial institutions collaborating with rating agencies to purchase securitized debt instruments, like CDOs (collateral debt obligations) believing them to be credit-worthy investments.
An investment professional notes the scam as “the greatest bait and switch of ALL TIME”. In a letter to clients, he reports a conversation with a Wall Street insider. (Note: the following was also referenced in Baron’s financial weekly.)
“This individual proceeded to tell me how and why the Subprime Mezzanine CDO business existed. Subprime Mezzanine CDOs are 10X20X levered vehicles that contain only the BBB and BBB- tranches of Subprime debt. He told me that the ‘real money’ (US insurance companies, pension funds, etc.) accounts had stopped purchasing the mezzanine tranches of US Subprime debt in late 2003 and that they needed a mechanism that could enable them to ‘mark up’ these loans, package them opaquely, and EXPORT THE NEWLY PACKAGED RISK TO UNWITTING BUYERS IN ASIA AND CENTRAL EUROPE!!!! He told me with a straight face that these CDOs were the only way to get rid of the riskiest tranches of Subprime debt. Interestingly enough, these buyers (mainland Chinese banks, the Chinese Government, Taiwanese banks, Korean banks, German banks, French banks, UK banks) possess the ‘excess’ pools of liquidity around the globe. These pools are basically derived from two sources: 1) massive trade surpluses with the US in USD, 2) petrodollars.”
For non-financial readers, here is a primer: the housing boom, now in cinders, was not built on your desire for a new home, a bigger home, or any kind of home. It was manufactured by builders and developers and Wall Street.
After the internet bubble collapsed in 2001, the Federal Reserve initiated the series of interest rate cuts spurring the “ownership society” that manifested its last gasp in 2005, with an astonishing rate of mortgage fraud, liar loans, and collusion between bottom feeders and the wing-tipped crowd. Some 20 percent of subprime mortgages issued in that year alone are expected to collapse in foreclosures, ultimately affecting more than 1.7 million homeowners.
But to focus on the subprime sector–that is to say, buyers of lower priced homes–is a red herring. The bigger pools of blood are from buyers of credit-worthy financial instruments that are now essentially worthless on the secondary trading markets. The carnage is spreading to commercial financial derivatives, too.
If the quoted individual is to be believed then as early as 2003, the ‘real money’ on Wall Street knew that the only way to keep the Ponzi scheme going was to fob off the toxic mortgage waste on suppliers of cheap foreign imports and oil. Co-dependency is a bitch.
Which brings us back to Miami, where a rising sea laps the sand away and towering condos show the willingness of builders to build anything that can be financed and elected officials to allow the “free market” to have its way, so long as a spigot from the money flow is welded into their campaign accounts.
Miami Today reports that the local county commission chair, Bruno Barreiro, is asking for a resolution “urging the Army Corps of Engineers to expedite the authorization of foreign sand and for Congress to appropriate funds for county beach renourishment projects” since “no suitable domestic sand is available.”
Perhaps there is a solution, if the sand between the ears of elected officials is inadequate to the purpose of fighting off an indifferent sea.
Put the Army Corps of Engineers in charge of regulating financial derivatives sold on Wall Street, and put Wall Street financiers in charge of finding sand for the nation’s vanishing beaches.
I’m sure some public official can be found to serve that formula as “mission accomplished”.
ALAN FARAGO of Coral Gables, who writes about the environment and the politics of South Florida, can be reached at firstname.lastname@example.org.