The politics of the housing crisis: When Miami goes bust

(Published at Counterpunch.com)  Miami-Dade is the most populous county in Florida, a state that has proven its electoral importance in presidential races. So, what happens in Miami bears scrutiny, in particular in respect to how voters assess responsibility for the nation’s economic ills.

Both presidential candidates, Barack Obama and John McCain, are attempting to focus the electorate’s inchoate anger through high gasoline prices. In Florida, the issue is manifesting in a decidedly desultory and misdirected way: proposals for offshore oil drilling.

For its part, Wall Street would be perfectly happy to keep the nation’s attention on gasoline prices, but the real affliction of the United States economy is debt and insolvency. Both have their roots in a housing bust draining the wealth of the nation. (“Florida’s real estate bust cost: $153 billion”, Miami Herald, August 5, 2008).

The political origins of this national economic catastrophe began in Miami. Hard to believe but true: using the deflection of Castro to animate block voters in Hispanic districts distorted public policy in service of private real estate speculators; from Section 8 housing to subdivisions in farmland, and served as a model to bring down the whole economy.

Parochial, ward politics have been practiced to perfection throughout America. But the defining feature of ward politics in most cases is leveraged in political patronage and union contracts. The Miami model had both with the addition of a new element: the manipulation of US foreign policy in service of domestic real estate speculators.

To be sure, private fortunes were being made in Florida real estate long before the waves of immigration, but it was the Latin Builders who perfected a scalable model, a model that not just used local ward politics to direct public infrastructure in service of private development but also depended on suppressing dissent by privately funding radio talk show hosts for whom hatred of Castro corralled voters into electoral cattle chutes.

Both Wall Street and the building industry grasped how the Miami model of development could proliferate throughout the fastest growing areas of the nation whose citizens didn’t care about Castro. Of the political parties, Republicans– and especially Karl Rove– understood how rapid growth of suburbs in farmland, facilitated by free market ideology that demonized “regulation” (ascribed by Miami Cuban politicians as “the hand of communism”), dovetailed with national political ambitions.

The ascendancy of two-term former governor Jeb Bush, a Miami developer before his political career materialized, and then President Bush depended on campaign contributions aggregated through builders, exemplified by Miami’s Latin Builders Association, and the supply chain maximizing profits based on platted subdivisions in farmland.

In Miami-Dade, all farmland was once Everglades wetlands. The scalability of an economic model based on real estate speculation–the one that pushed both Bush brothers to power– required a radical shift of power and authority from federal laws to the states and local regulations. During the housing boom in Florida and in Washington, DC, under control of Republican majorities, a virtual holy war was waged against rules and regulations protecting the public interest. Intense resources were applied to messaging the virtues of self-regulation, privatization, and shrinking the size of government so it could fit in a bathtub, presumably to be drowned.

In Miami-Dade and in Florida, the last phase of the housing boom added a fourth feature: new laws raising impossibly high barriers to the ability of citizens to petition their own government.

The “democracy” the Bush White House has tried to export needs to be understood through the Florida viewfinder, where the demon of regulation substituted for Castro and law denied more than 10,000 felons the right to vote but allowed them to work in the mortgage industry.

Today, US newspapers are struggling for ways to report the worst real estate crisis since the Great Depression. For the most part, news stories– filed by economic writers uncomfortable with reporting politics, or political writers uncomfortable making connections to powerful newspaper advertisers– rely on the sources and interests that caused the asset bubble and bust in the first place– production homebuilders and condo kings linked to bankers and local city and county commissioners and economists.

The Miami model of development– that steam-rollered the region’s quality of life, the environment, and sound planning for infrastructure– was built on “what the market wants” without challenge by the mainstream press. Critics received minimal coverage, as though the media were frightened off by the intensity of charges of “elitism” by developers and advertisers.

We don’t hear that, anymore. What we hear is how trillion dollars has been drained down the rathole of toxic debt from the housing bust, now backed by the US taxpayer. We don’t hear how these financial events already rained billions in fees and commissions to Wall Street bankers and will rain more, as the sale of new “rescue” packages generate more commissions and fees.

In specific, what we read today is what the blogs like eyeonmiami.blogspot.com said a year ago: that the subprime crisis had to be just the tip of an iceberg, the leading edge of an economic tsunami. “The first wave of Americans to default on their home mortgages appears to be cresting, but a second, far larger one is quickly building.” (NY Times, “Housing Lenders Fear Bigger Wave of Defaults”, August 4, 2008)

What we read today, in reports like the front page of the Miami Herald today, is the consequence of so much misplaced public priority in the service of real estate speculators: massive budget deficits in state and local government tied to a $153 billion loss of real estate values in Florida.

What we read are the effects: like Rudy Crew, Miami-Dade’s school superintendent–one of the top educators in the nation–, being chewed like a dog bone by school board members as though Crew himself was to blame for the $150 million shortfall in the county school budget; declining income that is the direct result of horrendous growth policies whose past profits funded political campaigns for those very same school board members who want Crew’s head.

The Herald story on the crash of real estate values quotes Broward County Property Appraiser Lori Parrish “pinning much of the blame ‘on really unscrupulous mortgage brokers'”. But blaming mortgage brokers is like blaming street corner drug runners for demand. It’s like blaming public schools for the diversion of tax dollars to school vouchers. Its like blaming gays for everything else.

What newspapers have failed to do is to link the whole bust to systemic corruption and greed wrapping up fiscal and monetary policies of the federal government with local developers who control local government. It is easy enough to see that blame starts with Wall Street bankers and firms like Merrill Lynch, whose debt has just been sold for pennies on the dollar; pennies it had to finance to boot.

But the real target of blame should be campaign contributors whose quid pro quo with elected officials was enabling real estate speculation to sound economic policies and fiduciary responsibility to taxpayers.

Consider key Bush and McCain fund raiser Al Hoffman, a central cog of the housing bust wheel, whose former company– WCI Communities– yesterday declared bankrupcy along with more than 120 subsidiaries; partnerships to aggregate, zone, and subdivide land for production homes for which a real market never existed. It was Hoffman who claimed, in 2003, that suburban sprawl was an unstoppable force.

The Herald’s penultimate word is given to Robert Parrish, president of the Florida Home Builders Association, who told Governor Charlie Crist at a business round table discussion: “We’re not getting any better… We could be getting sicker. We’re looking for the doctor.”

What the Florida builders’ spokesman means are further bailouts by taxpayers whose budgets are already stretched to the limit. With friends like Florida’s building industry, who needs enemies?

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One Response to The politics of the housing crisis: When Miami goes bust

  1. Very interesting site, nice design, greetings

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