Thursday, August 23, 2007

Proposed Bailout for Mortgagees-Will Middle Class Welfare Program Collapse Us Financially?

The homewner bailout proposed by Senators Dodd and Clinton, and seconded by Sen. Obama and other pols eager to pander to the middle-class homeowner vote, got an additional boost from PIMPCO founder Bill Gross today, who appeared on CNBC to appeal for a bailout for beleagured home-debtors confronting foreclosure.

Additionally, here in Chicago, Mayor Daley is seeking ways to people who are upside-down on their mortgages stay in homes they obviously couldn't afford to begin with.

The bailout advocates are using emotionally loaded language to sell the public on the idea, usually referring to the poor homeowners who will be rendered "homeless" by foreclosure.

Aside from the dubious morality of creating an entitlement program for people who were greedy, deluded, or careless enough to borrow money they knew or should have known they couldn't repay, there is the even more doubtful quest to rescue the enterprises all the way up the chain of greed, delusion, and dishonesty that made it possible for so many underqualified borrowers to assume so many over-written loans. The links in the chain are the developers who are now seeing their construction loans foreclosed, the lenders who approved loans to people they knew were borrowing way beyond their means to pay, the hedgefunds and bond funds who bought the bundles of loans, the rating agencies such as Moody's and Fitches who assigned AAA rating to paper they knew or should have known was junk, and the quasi-government agencies such as Fannie Mae and Freddie Mac, who stood ready to absorb the crappy loans as fast as the mortgage boiler rooms could generate them.

Many people made massive fortunes from the speculative hysteria of the past five years. It paid for $40 MM mansions with 3 swimming pools and heated 10-car garages, paid for by the $100MM bonuses paid to top hedge fund managers and CEOs like Angelo Mozilo at Countrywide, as well as enabling a few million severely math-challenged consumers to live far beyond their means for a few heady years.

If a bailout is engineered, will people like Mozilo be required to fund it? Seems only fair, given that these guys and a few hundred other head honchos of mortgage providers, banks, debt traders, and fund managers were the chief beneficiaries of financial lunacy of the past few years, and the trillions of dollars of imaginary money that the Fed sent sloshing through the economy to fund it.

However, we know that will not happen. What we know is that this is one more situation where the profits are privatized while the costs are socialized, as the taxpayers are once more required to step in, because of the danger the bursting credit bubble presents to the economy.

The people who will help keep homedebtors whole and bail them out of the situations they created for themselves, and will keep people like Mozilo in their mega-mansions, will be the rest of us who did not borrow over our heads, including homeowners who live within their means and neither bought more house than they could afford nor used their houses as ATM machines to fund their expensive cars and foreign travel and outdoor kitchens. Another group who will help the poor, defenseless "homeowners" stay in their overpriced homes will be renters who sat on the curb and didn't chase the car , but waited patiently until they could either afford to buy on decent terms or until prices adjusted back to their proper level. These people will wait that much longer for a chance at membership in the "Ownership Society", while their taxes are jacked to rescue the feckless, the dishonest, and the delusional.

Worse, our national deficit will balloon to unsupportable levels. Given that the misguided and failing war effort has already brought us to the brink of insolvancy, what will four or five trillion dollars worth of bad mortgages accomplish?

It's a choice between bad and catostraphic. If we let a couple of million more homeowners go to foreclosure, the economic consequences will be bad, face it. 40,000 jobs related to the mortgage industry have been lost so far, with many thousands more in related financial to follow, in addition to those in other industries dependent upon the housing market. Consumers will no longer be able to tap house equity because they will no longer have any. House prices will trend steeply lower. There could be a deep recession while the bad debt works itself out and the housing and financial markets regain traction.

However, a federal bailout could collapse the entire country. As it is, we cannot afford to maintain and replace critical infrastructure, or properly fund Social Security. At this time, there is an estimated gap of $63 Trillion* between projected tax receipts and future expenditures; a recipe for financial collapse with everything that follows it: loss of credibility in world financial markets with attendant inability to attract foreign investment; inability to fund day to day operations of the government necessary to maintain national security, let alone critical infrastructure and services; and the bankrupting of an increasingly impoverished population.

If our legislators and policymakers can't grasp the economic implications of a bailout, they should take the temperature of the electorate. Most people are vehemently opposed to the bailout because of the raw injustice of it, which is something the Democratic candidates Clinton and Obama should think about, since notions of fairness and justice don't seem to weigh with them.

A petition against the bailout,Tax Payers Against a Wall Street and Mortgage Bailout, was generated by a man named Thomas Roach. If you are opposed to this new welfare entitlement, you are invited to sign.

* "Drifting Towards Bankruptcy", by Laurance J. Kotlikoff, The Phladelphia Inquirer, October 22, 2006. (Link would not install.)

Saturday, August 18, 2007

Border's May Close Uptown and Lakeview Stores

Those hoping for a Border's store for Howard St. or any other Rogers Park location may now put that dream to rest, possibly for good.

I don't know how I missed the announcement in a March, 2007 issue of Crain's Chicago Business that the company is seeking to sublet four locations along the lakefront, but just read it in a recent post in Hyde Park Progress. Searching a little further, I found a few more articles, stating that the stores to be closed will be North & Clybourn; Diversey & Broadway; Broadway in Uptown; and Hyde Park.

Could it be that the failure to attract chains like Border's to Rogers Park may have a cause extraneous to the neighborhood and its well-publicized problems? My personal take is that there is a vast oversupply of redundant retail already, thanks to massive public subsidies for large-scale retail development, in combination with the growth of internet commerce. I have always wondered who supported all the repetitive shopping centers and strip malls, and it looks increasingly like the local taxpayers have been footing the bill for about 60% of the shopping malls and big-box power centers that have proliferated over the past 30 years.

I personally plead guilty to contributing to the internet shopping trend, as I buy books from Amazon.com when I can't get them from the public library. I feel guilty about this, because I enjoy loitering in the Uptown Border's store and so buy as many gifts there as I can, along with day planners and art books. However, browsers who buy the occasional art book or latte don't support a lavish space like this, and Border's is understandably not interested in functioning as a public library.

I have a feeling that we will witness massive consolidation and shrinkage of large-scale retail over the next twenty years, since there is so much more of it than is justified by consumer spending alone. Now that local political leaders are beginning to realize that throwing taxpayers money at unprofitable businesses, such as shopping malls to replace others a mile down the road, perhaps the frantic race to the bottom - that of seeing who can throw the most taxpayer's money at the largest number of big corporations who then move on in three years in search of their next $100MM "gimme"- will cease, and small entrepreneurs will find it rewarding to open small, specialized stores that form the fine-grained retail districts that give a neighborhood character and charm, and also give it a committed entrepreneurial class whose members are motivated by the desire to build homes and businesses in a neighborhood they love and care about, and to participate in a business that interests them, rather than a class of Corporate Welfare recipients who will move out and leave behind a vacant, useless building when some other community dangles a bigger carrot in front of their noses.

So maybe, down the road, we might get an Unabridged Books or Transitions instead, or a place founded and operated with love and commitment by a local citizen.

Thursday, August 16, 2007

An Atrocity Exhibition

Pictured above are some recently developed condo projects in North Coast neighborhoods, selected for their rampant ugliness and complete disrespect for their neighborhood context, for historical correctness, and most of all, for the contempt their designers seem to have for any concept of beauty or grace. Pretty has become almost a pejorative among academic architects. It's almost as though the architects wanted to make these developments as ugly and offensive as possible, and their motives are the same as any graffitti "artist" defacing the city with gang scrawls and wild-style block letters: they are offended by beauty and style because they are incapable of producing it, and can only "make a statement" by producing eyesores.

These, along with thousands of cookie-cutter 6- or- 8 unit Urban Generic condos, sadly botched rehabs,and new buildings of extraordinarily shoddy construction, are the visual, tangible remains of the rampage of greed, and imprudent borrowing and lending,that was the housing bubble of the early 21st Century. They, along with the collapsed hedge funds and the millions of foreclosures and ruined credit ratings, are the legacy of the greatest binge of financial lunacy in the history of the world, and one that our heirs and assigns will be stuck with for many long years after we've recovered financially and gone on to other obsessions.

In the first photo, is an Uptown townhouse development, a block of boxy, featureless, common-wall townhouses on Ainslee that have the air of a military barracks. The windows are small, ugly , and cheap, and the wall facing Winthrop is nearly blank. The best thing you could do with these places is to plant vines that will, in time, cover the places in their entirity.

Next is of a gut-rehab condo at the corner of Winthrop and Thorndale. The building, while never beautiful, was at least a respectable, though stodgy, vaguely Prairie-styled structure, that the developer rendered hideous by the addition of historically incorrect modern windows, in glaring white frames no less, along with "mod" pipe railings on the inset terraces on the Thorndale side, and new, glaringly inappropriate balconies and sliding glass doors on the Winthrop elevation. What is it with the sliding glass doors, anyway? Why are these ugly, graceless renmants of the 60s being slapped onto classically-styled buildings all over town? Wouldn't French doors be more in keeping with traditional styles of architecture? Why is it so difficult to respect the architecture of the structure, and to select fittings and appointments that are in keeping with it?

Then, we have another barracks-like townhouse complex on Ainslee. It's hard to believe that this is middle-class housing costing nearly $400,000 a unit. All the mature trees were cut down to facilitate construction, and it will take many more years for the young trees now growing there to veil the naked, scabid ugliness of the barren complex with its tiny, badly-placed windows and the gaping garage doors that lend the street the look of a storage facility.The screaming yellow Hummer in one drive highlights the military ambiance, in addition to making it painfully obvious that the driveways are too short, and so, possibly, is the garage. Could the driveways and garage entries have been placed in the back of the complex instead of in front? Somehow the streetscape looks just as blighted as it did in the days when this area was truly a slum. Note to owners: get the vines started.

On to Sheridan and Broadway, we consider one of the area's great lost opportunities. A beautiful and dignified old church used to occupy this triangular site, and it is one of the greatest building sites in the neighborhood. However, instead of a beautiful, well-proportioned building of striking design, what we got here was a hodgepodge of modern with a few traditional doodads pasted to it, built with cheap, ugly bricks and punctuated by small, ugly windows and large balconies cluttered with owner's possessions. The contrast between this stupid, graceless building and the otherwise beautiful Sheridan Road streetscape is ugly-it's like seeing a trash dumpster standing in a lush garden.

Next, we have Catalpa Gardens, a double-tower high rise complex sheathed completely in cinderblock painted in garish primary colors. Why do places have the word "Gardens" in their name when the place is more reminiscent of a warehouse or parking garage than a place of living, growing things? I thought that the city was not permitting cinderblock to be used on the facades of new buildings any more, but I guess the architects were able to sell the local zoning and planning board on them as long as they painted them in "playful" colors, to look like a couple of gigantic children's building blocks. This building should have been a legal impossibility, but here it is, and it's going to be blighting the Edgewater skyline for at least a century to come.

Lastly, we have a formerly lovely 20s vintage courtyard in the 1600 block of W. Lunt,that has been destroyed by an atrociously tasteless rehab. This building was a beauty, with beautiful brickwork and a terra cotta roof, and the fine proportions and air of elegance typical of courtyards of this vintage. Rogers Park has always been famous for the beauty of its courtyard buildings; no other neighborhood or city has such a collection of really beautiful, well-built, or varied buildings of this type. However, the hyper-development of the past few years has resulted in the degradation of some of the neighborhood's most beautiful buildings. Here, the facade has been defaced by ugly modern windows in the same glare white used on the developer's other de-habilitated developments, and by the addition of balconies and sliding glass doors.

This is only a small sampling of the ugly, inappropriate, misconceived developments that went up all over Chicago during the Great Real Estate Bezzle. Additionally, thousands of merely humdrum structures were built, and a few truly excellent buildings, happily.
Why has most of the stuff built since World War II been so overwhelmingly ugly and graceless? And why can't a rehab of a beautiful old building be done without destroying the beauty of the place and turning large, comfortable old apartments with exquisite millwork and beautiful, classicly proportioned rooms into ugly, stacked tract houses?

I would ascribe it to the cult of the Bauhaus, with its utilitarian, machine aesthetic that dovetailed so well with the desire of builders to cut costs and deliver the cheapest, mingiest construction they can get by with, who are further enabled in the endeavor by acquiescent buyers who long ago resigned themselves to the commonplace ugliness of most modern architecture, figuring that it's just how things are done these days and what can you do about it? There is also the idea that anything "new" or "cutting edge" is intrinsically superior, which is a very commonplace notion in an era of constant innovation and instant obsolescence.

There is nothing that dates faster that newness for the sake of newness, and the trendier and more "cutting edge" something is now, the more sadly outdated it will be just a few years down the road. You can't help but think of all the short-lived design fads of the twentieth century and of all the landfills stuffed with Bakelight and avacodo appliances, and every whacky youth fad of the past 80 years, when you look at much modern architecture. But a bad building is going to be with us a lot longer than last year's hot cellphone, and cost a lot more to replace, so you can't help but wonder what the landscape will look like 50 years hence, when we might well be a much poorer society than we are now, and will no longer have the money to replace the ugly, rapidly deteriorating garbage we've spent 50 years filling it with.