In his classic, The American Political Tradition, Richard Hofstadter wrote about Herbert Hoover (blamed for the Great Depression of the 1930s): "...He (Hoover) had tried to lead the nation out of the wilderness and back to the comforts and splendors of the old regime. He had given his warnings and they had been spurned. Perhaps, after all, it was the spirit of the people that was not fundamentally sound." Could it be, after all these years, that the spirit of the people still is not fundamentally sound? As Pogo said, "We have met the enemy and he is us." If this is a (fair & balanced) jeremiad, so be it.
[x NY Fishwrap]
The Pools of Riverside County
By Timothy Egan
Riverside, Calif. – Look around at the still-life of half-built neighborhoods and red-tiled roofs, all so new, planted during the Miracle-Gro years when homes became A.T.M.s.
Look closer and you think you’re staring into a ghost exurb – empty homes left to bankers. This is the new America, Southern California’s affordable edge city, drowning in a sea of debt. In the Inland Empire, the eastern-most suburbs of Los Angeles, one out of every 43 households is facing foreclosure proceedings.
Peek behind the palm trees and there you see the most shocking sight: abandoned swimming pools, fetid and green, left to the elements and choked with algae. Thousands of people have walked away without even draining the water. Mosquito control agents now patrol these murky pools, treating them with pesticides to keep disease-carrying larvae from forming.
“With the skyrocketing foreclosure rate, the problem is compounding daily,” said Jared Dever, a spokesman for the government district that monitors insect breeding grounds. He said about 2,000 abandoned swimming pools would have to be treated in just one part of Riverside County.
The new year dawned with banks set to repossess more homes than any time since the Great Depression – about 2 million residences, according to various forecasts.
Is this the image of our consumptive age: the empty swimming pools of Riverside County? The epitome of middle-class life as just another cash play? People who took out loans on houses they never could afford, hoping for a quick flip, have left this squalor under the sun to the mosquito-control agents.
Or maybe we should look just to the west, to Orange County and beyond, to the half-empty glass hulks of the banks that changed the rules of lending – Ameriquest, New Century and Countrywide, now being picked over by federal investigators and civil litigants.
Ameriquest, founded in Orange County, basically invented the subprime mortgage industry, figuring out numerous ways for borderline debtors to defy gravity. Now bankrupt, they settled a lawsuit for $325 million after being accused of predatory lending practices. Their slogan was: “Proud sponsor of the American Dream.”
New Century Financial, also founded in Orange County, flew just as high. It is now bankrupt and defunct.
Countrywide, based outside San Diego, spread like a retail virus until it became the nation’s largest home-loan lender. The company chairman, Angelo R. Mozilo, could end up as the face of the subprime meltdown. Last year, while stock in his bank tanked by 80 percent in value, Mozilo sold shares worth $166 million, according to the bank’s financial reports. For the last two quarters it has reported losses in excess of $1.5 billion.
It’s an old story, not even surprising: corporate leaders say one thing to the public – we’re on a roll! — while dumping stock just as fast as they can in private. For recent history, we only have to go back to Ken Lay and Enron. The surprise is that it keeps happening, with only the corporate names changing.
Earlier this week, Mozilo said he would give up $37.5 million in severance pay. But it’s small change for a man who sold shares worth $310 million during a three-year period when most of the helium was being pumped into the housing balloon.
You may have seen Mozilo with Jim Cramer or Maria Bartiromo on television, touting the great American housing miracle. It was all good, all up, up, up. Flip and roll. No man with without a mortgage. Mozilo said every American who wanted to buy a home should be able to do so, and Countrywide made it nearly as easy to get a mortgage as ordering fries at the takeout window.
I knew something had drastically changed a few years ago when I saw a man with an advertising sandwich board standing at a busy intersection in Los Angeles; the board said, “Re-fi now – guaranteed low rates.” The banker as virtual squeegee man.
Now, you sense a meanness around the abandoned swimming pools of Riverside County. “Perhaps now we’ll see a removal of the low-class types,” wrote one man in a reader post for the North County Times, a Southern California newspaper.
“Too many house-flippers. Maybe they’ll be burger-flipping now,” wrote another.
Riverside County, stretching from Orange County to the Arizona border, is nearly the size of New Jersey. It added more than half million people in the last six years. Four years ago, this was Bush Country, with Republicans winning nearly all of the 100 fastest-growing counties in America, places like Loudoun County, Virginia, or Douglas County, Colorado.
Now, if you want to find some of the highest foreclosure rates in the country, you go the places where exurban America is pushing into farm fields and forests. In 2005 there were 12 home foreclosures in Loudoun County. Last year, more than 600.
Any fix to this mess won’t be easy. President Bush has proposed a plan. Democrats say it doesn’t go far enough. Who will get the blame, the backhand from those new homes filled with new voters?
People who bet their pensions, their savings, their college funds on something that seemed so safe now look at these wrecks on the banking frontier and wonder: what were we thinking?
It’s obvious what we were thinking, all of us – homeowners, appraisers, brokers, buyers, bankers. We were all in on the bet.
[Timothy Egan worked for 18 years as a writer for The New York Times, first as the Pacific Northwest correspondent, then as a national enterprise reporter. In 2006, Mr. Egan won the National Book Award for his history of people who lived through the Dust Bowl, The Worst Hard Time. In 2001, he won the Pulitzer Prize as part of a team of reporters who wrote the series "How Race Is Lived in America." Mr. Egan is the author of five books, including The Good Rain: Across Time and Terrain in the Pacific Northwest, and Lasso the Wind, Away to the New West. He lives in Seattle.]
Copyright © 2008 The New York Times Company
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