Uncle Sam’s Enron! Ventura County Real Estate Doing’s for Week Ending September 20, 2008

September 21st, 2008 Categories: Weekly Real Estate Activity In Ventura County

Can you believe it!

We are witnessing the best day time soap opera ever written.

It has Greed, Sex, Lies, Apathy and maybe a Cover Up? Hollywood could not ask for a better script.

One hopes that all of this is make believe but unfortunately things are beginning to unfold, quicker than most people want or expected. The good stuff probably hasn’t been seen yet.

So let’s see…..in addition to Fannie Mae and Freddie Mac, this past week we bailed out AIG (which if I read the transaction correctly may not be a bad thing ….. AIG pays everything back with interest and if they don’t they have trillions in assets which the government can sell off).

Also there was some talk that the Federal Reserve will buy ALL bad notes from the banks. No one asked if this was limited to mortgages or if auto loans and others were going to be thrown into the pot. Expect the worse….all bad loans will include mortgages, auto and other loans (like credit cards).

So yes the United States tax payer will be plucked again by Congress. What is a mere $ 7,000,000,000,000.00 amongst friends with more to come. Maybe there should be more 000’s added to whatever that number represents.

This is going to be a slow, unwinding soap opera which will get an Oscar based on the performances yet to come from our politicians. I cannot wait until the other shoe drops.

And if that is not a kick in the pants, the people who created this Fannie Mae/Freddie Mac mess are still in office, heading many of the committees and (this is the best part of all), they are the one’s that will do the investigating and will be the architects who will create (yes, you guessed it) legislation to cure the problems they generated.

Perfecto! You cannot ask for anything better. Isn’t this the best script ever written. How many political Enron types do you think will end up in jail? My guess is ZERO!

Of course in most plots there has to be a bad guy. Yep….you guessed it. The news media are calling this soap opera that we are witnessing the Bush problem.

NOT SO! This is the 1990’s Democrat Congress fiasco. It’s their legacy to our future generations.

And another balloon released for general reading and reporting is that Fannie Mae and Freddie Mac are private companies. Not so! These are Government sponsored monopolistic entities pure and simple.

During the 1990’s the Clinton Administration saw fit to say and implement a strategy that all people deserved a home. A home in every pot so to speak. It did not matter that the recipient could or could not afford a home only that each person should have a home.

Subsequent to this policy a number of Republican law makers attempted to put controls on Freddie Mac and Fannie Mae but to no avail. Barney Frank and others muscled out any attempts to put controls on Freddie Mac and Fannie Mae. I have not checked but I wonder how much in donations Barney Frank and the others received from Freddie and Fannie?

This 90’s policy is what we are dealing with today. There are multiple billions of dollars at stake that the tax payer will have to pay. This is the legacy from the 1990’s group of Senators and House members that put into effect this horrible policy.

If this activity were undertaken in the private sector (remember Enron) to be sure we would be have hearing on Capital Hill instantly. But all is quiet. Hearings (if any) are going to started after the election. Why not now?

What should be happening now are hearing to see who is responsible for the overall mess. It is unfortunate that the culprits are in office and no one is going to be charged.

This is a government Enron type situation and the politicians are circling the wagons to protect their own.

The media has been eerrily quiet with the exception of blaming Bush (which in itself is tiresome). There should be lots of print and broadcasting as had been done with Enron and other companies. What has happened to our investigative reporters?

As happens in the private sector some politicians should be going to jail but don’t hold your breath because that isn’t going to happen.

There are lots of questions to ask. The first of which is “Who in Congress was keeping tabs on Fannie Mae and Freddie Mac? Why didn’t they see what was going on? What committee(s) and who are the committee members that are supposed to be watching the public interest?

Prison seems like a good place to put many of these people…..just like one would do in the private sector.

But it appears that the law which covers these crimes is handled differently for the private sector than for public crimes of the same nature. Enron now appears to be a love story compared to what is happening in Washington. Funny how that works out.

And do not get too comfortable……oozing out of the wood work will be Uncle Sam having to rescue State pension plans which are beyond the reach of many municipalities to cope with. Now that is going to be one heck of problem to resolve.

I suspect that a shock is in store for the system. In the private sector this would be handled via a bankruptcy and all pensioners would likely lose. I suspect that the public sector will also declare bankruptcy and all pensioners would lose.

Let’s add to glowing embers the possibility of a Jimmy Carter’s era of 17% mortgage rates? Oh….by all means one should expect healthy tax increases but that may a difficult task to legislate.

This gets better all the time…..I am running out of pop corn so wait for the next installment.

Side bar: From an historical point of view there were four panic occasions in which the Government had to act.

Panic of 1792. Nobody is around to discuss this situation but the Federal Government acted to take over State debts from the Revolutionary War.

Panic of 1907. Again not too many people around to address this situation but it appears there was a run on banks and trusts for failed loans in a copper company.

The Depression (1930’s period). The Home Owners’ Loan Corporation was created whereby Congress bought default mortgages (about 1 million mortgages) from banks, refinanced them at lower interest rates for fixed, 15 year terms. The stock market crash was the culprit.

Savings and Loans Crisis (1986-1995). Congress created the Resolution Trust Corporation to clean up the Savings and Loan mess created by failed commercial real estate loans which totaled $ 124 billion.

Ventura County.

Mentioned repeatedly was the fact that Ventura County appeared to be immune to the goings on National landscape. I hope that is remains true.

It appears that the shield has been dented. The shield hasn’t been punctured but the reports of jobs decreasing significantly often is a first step for other things to unravel.

The weekly real estate numbers appear to be strong. There has been a sizable reduction in listings; homes continue to sell at a good pace; days on the market appears to have settle in at about 6-8 weeks; but the variance between list price and sales price increased significantly over the last week. The culprits for this are high end residential sales. Properties selling for less than $ 500,000 tend to be less inclined for significant discounting.

Sidebar: Not much has been mentioned but it appears that foreclosures for properties above $ 1,000,000 is increasing significantly especially in areas of Florida, Nevada and California.

Overall the Ventura County real estate market is good and as can be noted the appreciation rate for County real estate will be approximately 7+% for the next 12 months.

Your comments are welcomed.