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How the Financial Crisis Occurred

by ALAN FARAGO

“We are poor little lambs who have lost our way, Baa, Baa, Baa. We are little black sheep who have gone astray. Baa, baa, baa! Gentlemen songsters off on a spree, damned from here to eternity, God have mercy on such as we. Baa, baa, baa”.

— from the Yale Singing Club, Whiffenpoofs

The “Gentlemen songsters” would be the crowd of wealthy power brokers complicit in the nation’s most severe financial crisis since the Great Depression. Today’s list includes the publisher and executives of the Miami Herald who recently agreed to meet at the Herald offices with the principal developers planning a massive suburban project outside the Miami Dade Urban Development Boundary: Parkland.

According to sources, Ed Easton, Sergio Pino, Armand Guerra, and Tony Seijas of Lennar recently requested and were granted a meeting with the Herald brass– without reporters– to describe the virtues of their massive development (a “green” 16,000 planned community a stone’s throw from Everglades National Park. (For details and maps, read our index feature and archive “Parkland” and “Housing Crash”)

Eventually, Herald reporters were allowed into a separate meeting, with none of the Herald principals in the earlier meeting in attendance.

David Landsberg, publisher of the Herald, Manny Garcia, executive editor, Joe Oglesby, editorial page editor, and others agreed to this condition for the meeting by the developers; an example how Miami’s big development interests, who bear significant responsibility for driving the economy into the ground through their domination of campaign finance that selects public officials, continue with the practice that is right at the heart of the current national financial crisis: pushing the referees.

Of course, the example leads to other points of observation. Pushing the referees describes exactly how removing regulations guarding the financial system became the de facto standard of Wall Street conduct leading to this crisis, so severe that the Bush White House had to take the weekend to draft a three page emergency decree that represents the biggest alteration of citizens’ relationship to American democracy in modern history.

The Herald is certainly not alone in losing its editorial way during the building boom and asset bubble in housing because so much advertising revenue was dependent on the chain of suppliers, from furniture showrooms to production home builders like Lennar or the local operators, like Century Homebuilders and the whole panoply of well-paid lawyers and engineering companies whose main lines of business are massaging zoning and permitting in farmland and open space for platted subdivisions. (ie. Greenberg Traurig)

Publishers compensated through stock options based on profitability have been cautious in the extreme in relation to criticizing the anti-regulation forces that promoted growth at any cost. The framework, apparently– at least from the building industry’s side– is still intact. Why Lennar, hemorraging cash, is still pushing Parkland through the regulatory processes can only be explained one way.

And there are other aspects: the hubris of developers and referee-pushers who claim “we know better than you do”, on the order of, “we are business people who put our money on the line– not you “community activists” and other objectors to the kinds of toxic debt that has already shed billions in fees and commissions to the Growth Machine” and now could shed even more, with the de facto nationalization of the financial sector.

The Parkland develoeprs know that they have a difficult fight against Governor Charlie Crist and state regulators who have already rejected two applications to move the Urban Development Boundary, approved by the unreformable majority of the Miami Dade County Commission: that controversy is headed to administrative court in December. Why pursue the zoning change, now? Especially when the developers are planning to build half a dozen years from now?

There can be only one reason: they want to flip the property and get out from under the debt.

Until the underlying zoning changes, the Gentlemen Songsters are stuck with land purchased at exorbitant, speculative prices in far Southwest Dade.

So if you are a taxpayer, think a little bit about what this economic model has inflicted on you: speculators and referee pushers running the economy. A $700 billion bailout of toxic debt and a determined constituency, represented by the Parkland a capella team, that really just wants us all to listen quietly (without tough reporters in the room), the champagne to keep flowing, and that everything should be as it was before the economic model– fiercely anti-regulatory at its heart — disintegrated, putting the cost right on your shoulders.

Pushing the referees is what they are used to doing; and in the insular world of big media ownership, the result is consistently less news than the public deserves. Baa, baa, baa.

ALAN FARAGO, who writes on the environment and politics from Coral Gables, Florida, and can be reached at alanfarago@yahoo.com

 

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Alan Farago is president of Friends of the Everglades and can be reached at afarago@bellsouth.net

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