In STIMULATING DISASTER posted 7 December 2008 – the date of posting is NOT a happenstance – EMR commented on a short list of specific proposals put forth by the president-elect, Barack Obama to “stimulate the economy.”
On that same day on a television talk show, the president-elect suggested that the economic problem “would get worse before it got better.” Few disagree with that assessment.
The gross mismanagement of US of A financial Enterprises and Agencies – selling speculative paper based on bad mortgages – destabilized an over-leverage global financial system that was already grossly over-dependent on unsustainable ‘growth.’ It will take more than creating public service jobs, cutting energy consumption in Agency buildings, tinkering with health records and other sideshows addressed in STIMULATING DISASTER to make any significant change, much less achieve Fundamental Transformation to a sustainable trajectory for society.
Fundamental Transformation will require addressing the BIG ENCHILADAS:
The Mobility and Access Crisis, and
The Affordable and Accessible Housing Crisis
That means getting serious about the Helter Skelter Crisis, aka dysfunctional human settlement patterns and the unsustainable trajectory of contemporary civilization.
MOBILITY AND ACCESS
The only things that are on the table with respect to The Mobility and Access Crisis are:
• “Fixing” the Interstate System and “rebuilding highways” addressed in STIMULATING DISASTER and the comments following the post, and
• Bailing out the three largest Autonomobile Enterprises.
With respect to the later, Congress and the White House are on the case. They turned down a request for a $35 billion blank check and are tinkering with a smaller, short term blank check.
However, before they turn over the money, they want some assurance that there will be changes made. They want the head of General Motors to be fired.
They are absolutely right in getting to the core problem. What is GM doing with Mr. Wagoner in the lead? They need Mr. Hybrid.
It is not a joke that Congress is demanding Wagoner’s head. It is a joke if they think that will make any difference.
Wagoner has been on the job since 2000. The problem citizen now face has been growing since 1920. The unsustainable trajectory should have been clear to all since 1973.
In 1973 EMR lost a good client and a great project. Ford Motor Company, to handshake partner of the client, Weyerhaeuser Timber Company, walked away from a proposal to build a prototype Planned New Community applying new Mobility and Access technology being developed by Ford’s Fairlane research program.
When the OPEC Oil Embargo hit, Ford abandoned the idea of innovation (and fired the whole Fairlane Research Center that was looking at vehicle / settlement pattern relationships) to focus on their “core business.” Ford and the other Autonomobile Enterprises continued to focus on their “core business” over the next 35 years. They now face bankruptcy because their “core business” is not sustainable for the reasons spelled out in THE PROBLEM WITH CARS.
The problem is not some short-term, short-sightedness of a few CEOs, it is a problem of relying of Large, Private Vehicles to provide Mobility and Access to an Urban society. Autonomobiles have grown more complex and more costly to build, operate and maintain and more dependent on cheap energy every year since 1973. With the end of cheap energy, the 35 year joy ride is over.
The choice is either an alternative Mobility and Access System to support a sustainable human settlement pattern or Depression. Take your pick.
Chrysler president Jim Press says: “The solution is product.” No, the solution is a Fundamental Transformation in the settlement pattern and in the infrastructure and vehicles to provide Mobility and Access.
(This just in: The ASHTO lanudry list released in Philidelphia today is made up mainly of projects that that will make human settlement patterns MORE dysfunctional. And to this a list of shared-vehicle system projects like the Silver Line and you have a real disaster.)
AFFORDABLE AND ACCESSIBLE HOUSING
The other half of the BIG ENCHILADA solution to address the Helter Skelter Crisis is a way to provide citizens with Affordable and Accessible Housing.
Here again the issue is quite clear and has been addressed by columns in Bacon’s Rebellion for five years.
What triggered the Global Financial Meltdown was speculative paper base on bad mortgages. The underlying problem was not just loans to bad people or even bad people making bad loans, it was making loans on the Wrong Sized House in the Wrong Location.
For half a decade EMR has been saying that the problem with Fanning and Freddie was not just bloated executive compensation, unsound lending practices and no oversight. The problem was that Freddie and Fannie was pumping Billions into an overheated housing market and exacerbating an unsustainable settlement pattern.
We explored this issue in a series of posts: “IT IS ELEMENTARY,” (10 October 2008), “THE ROLE OF THE MEDIA,” (11 October 2008), “SWIFT BOATING THE MORTGAGE CRISIS,” (12 October 2008) and “THE BOTTOM LINE,” 13 October 2008). These posts will appear, in an edited format as “IT IS THE SETTLEMENT PATTERN STUPID” in TRILO-G.
Bailing out mortgagees or mortgagors will not solve the Mortgage Meltdown problem, that will require Fundamental Transformation of human settlement patterns.
Who will lead that effort? When one looks for an answer to this question, the future looks very scary. In today’s WaPo Robert J. Samuelson’s column is titled “Bernanke’s Burden.” The column outlines why Bernanke is the central figure in solving the financial crisis and points out that Bernake will be around in the new administration unless forced to resign.
Let us review Bernanke’s understanding of shelter finance as noted in THANKSGIVING PERSPECTIVE:
“Bernanke: There’s No Housing Bubble to Go Bust” in WaPo Business Section 27 October 2005 (A few days before President Bush nominated Bernanke to be Chairman of the Federal Reserve.)
“Housing Cool-Down Is ‘Orderly,’ Fed Chief (Bernanke) Says” in WaPo Business Section, 19 May 2006
“Fed Chief (Bernanke) Says Housing Problems Won’t Spread to Rest of Economy” on Page C4 of the 29 March 2007 New York Times.
A 5 December WaPo headline reads: “Bernanke Stirs Pot On Home Loan Help: U.S. Must Take Action, Fed Chairman Says.
The bottom line is still that the “leaders” at the federal level did not have a clue what was happening and they still do not know what happened or what will result from pumping more cheap money into shelter related Enterprises before everyone understand the importance of evolving functional human settlement patterns.
At the least mortgage assistance must be focused on loans that qualify for Location Efficient Mortgages.
If mortgages are secured by interests in sound, well located dwellings, even if the mortgagee cannot pay, someone can buy the dwelling and make it a home.
In the National Capital Subregion, the typical cost of a foreclosure mortgage wash for a dwelling in a scattered (orphan) Cluster-scale subdivision in the R = 25 to R = 40 Radius Band are running around $100,000 for a $190,000 resale. A 35 percent mark down on just 5 million underwater mortgages is $500 billion.
Here is the first paragraph of our 9 November 2008 post “Wrong House, Wrong Location”:
“On 31 October CNNMoney.com reported that First American CoreLogic had found 7.5-million home mortgages already “underwater” and another 2.1-million that were on the brink
. The International Herald Tribune story cited in EMR’s post “WAPO AND IHT HOUSING AND MORTGAGE COVERAGE,” 29 October on this Blog pegged the potential for underwater mortgages by 2010 at 19-million.”
You heard about the cause for Thanksgiving on turkey day. Any idea about New Years resolutions?
Note: This post (and other recent posts) have not been edited by Jim Bacon so it may not be as clear as it might otherwise be.
EMR