So far, environmentalists have been silent on economic and political calamities tied to the housing bust. One could not expect otherwise. Environmentalists may be natural conservatives, but they are not natural capitalists.
The way forward is first of all to understand the nature of the opposition, usually painted by special interests as “what the market wants”.
What the implosion of credit markets reveals, in particular related to home mortgages, is that the development patterns that engaged environmentalists in futile struggles during the housing boom now in cinders was not what the market wanted so much as what could be financed.
Environmentalists don’t need to become financiers or economic experts to decode the way forward: what they do have to do is understand that the better way to provide for growth and economic development is to demand that the securitization of home mortgages should take into account all the costs to the environment.
Putting the sharp regulatory pen to America’s vast market for housing along the lines of what benefits the environment would be anathema to so-called conservatives who made fortunes during the housing boom by wringing maximum productivity from the mass marketing and efficiencies of production home building on cheap land.
On this point, though, environmentalists need to be very clear: suburban sprawl as represented by platted subdivisions far from places of work represented the biggest subsidy ever given to any industry by the federal and state government. It wraps up billion dollar bonuses to Wall Street financiers and the budgets of the US Department of Transportation. And it turns out to wrap up trillions of dollars worth of toxic debt to investors.
In recent days, the Federal Reserve has opened the spigots hoping to ease the credit crisis in the United States. But the fallout from the housing bubble and crash is not over by a long shot.
Environmentalists need to make the case to the American people that we, the taxpayers, are becoming the lenders of last resort to a failed scheme for developing the American landscape that put hundreds of thousands of communities at risk, not to mention ecosystems, species and habitats.
The scale of financial devastation is all over the news. But the devastation to the environment has scarcely been mentioned. That imbalance must be redressed.
Environmentalists–who have been shut out from Wall Street and its important business with government in creating unsustainable debt–should do exactly as foreign investors are trying to do, today, according to a New York Times report, “Calls grow for foreigners to have a say on U.S. market rules.”
“Politicians, regulators, and financial specialists outside the United States are seeking a role in the oversight of American markets, banks and rating agencies after recent problems related to subprime mortgages. Their argument is simple: The United States is exporting financial products, but losses to investors in other countries suggest that American regulators are not properly monitoring the products or alerting investors to the risks.”
The products in question, environmentalists need to understand, are trillions of dollars of mortgages pooled from a building boom defined to a large extent by subdivisions whose low prices and homogeneity are not just because they were allowed to be built in wetlands or farmland but also because they conformed to financial formulas that allowed them to be priced at a “reasonable risk” while offering higher returns, or yields, than conventional debt.
On the retail side of the mortgage equation, liar loans and mortgage fraud ruled the day. On the wholesale side, the return on investments to indifferent investors depended on deliberately omitting “external costs” like environmental impacts–or those related to civic concerns like overburdened infrastructure, traffic, schools, and water supply.
Understand that it is as much within the rights of environmentalists to demand that underlying financial instruments should be regulated and marked to risk of species and habitat loss or poor integration with surrounding infrastructure as it is for foreign investors to ask for accountability.
“Banks and investment funds from China to France suffered losses after buying mortgage-related securities and complex financial products based on them in the United States.”
It’s true. And it is also true that the US taxpayer, as the lender of last resort, has suffered massive losses to quality of life and the environment without really understanding the complaints of foreign investors is the same as theirs.
If “moralizing financial capitalism” is going to happen, as suggested by the President Nicolas Sarkozy of France-and should-then environmentalists should prepare themselves to be at the head of the line to testify to House and Senate banking committees.
It is perfectly reasonable, for instance, to ask that rating agencies be required to penalize securitized mortgage pools that include “assets”, ie. subdivisions, built on wetlands or in buffer areas for environmentally sensitive lands like the Everglades.
The French finance minister gets the last word in the New York Times article, “Once the dust has settled we will see where the different powers stand and what will be on the bargaining table.”
If environmentalists are smart, they won’t waste a minute getting to that bargaining table-and if not invited then forcing their way in, because the home building lobby will be standing with arms-crossed barring entrance the way it always has.
ALAN FARAGO of Coral Gables, who writes about the environment and the politics of South Florida, can be reached at alanfarago@yahoo.com.