Jersey Shore? Fuhgeddaboudit. Jersey City is the gem of reality TV. Shore is MTV. Jersey City is FBI. Like, how real is that? Killer videos of pols talking trash and passing cash have been unspooling in federal court in Newark at the trial of Jersey City Deputy Mayor Leona Beldini. Beldini was busted last summer in an FBI sweep that corralled dozens of Jersey pols. It was one of the largest corruption roundups in Jersey’s thick history of roundups. The majority of the busted were from Hudson County, parent entity of Jersey City, second largest city in the state. Twelve public servants have pleaded guilty; Leona Beldini is first to stand trial. Charges? Bribe taking, attempted extortion, and conspiracy to commit extortion. MTV’s Jersey Shore has hot munchkin Snooki, but Jersey City has the far classier — albeit far older — Beldini. Back in the day, Beldini was burlesque queen “Hope Diamond.” “The Gem of Exotics.”

In the here and now, Deputy Mayor Beldini is a prominent Realtor, past president of the Hudson County Board of Realtors. Until suspended as deputy mayor (an appointed position) Beldini was Jersey City Mayor Jerramiah Healy’s liaison to various development-related municipal agencies. Beldini also headed the board of the quasi public Jersey City Economic Development Corporation, which among other things, administers the city’s Urban Enterprise Zone projects. One third of Jersey City is Urban Enterprise Zone. Development projects in The Zone are eligible for a wide array of tax exemptions and utility breaks.

Mayor Jerramiah Healy hasn’t been indicted but he appears in FBI videos featuring Beldini. (There are other tapes, starring other pols.) As does former Jersey City Housing Authority Commissioner, Vice President of the Board of Education, and Hudson County Affirmative Action Officer Edward Cheatam. (Yup, Ed wore 3 hats.) Also appearing: the late Jack Shaw, a well worn political consultant. Cheatam has pleaded guilty to conspiring with Beldini and others “to accept corrupt cash payments” in return for “official influence.”* Consultant Jack Shaw died of a Valium overdose a few days after being busted.

Mayor Jerry Healy is Jersey City’s version of Jersey Shore’s bod-flaunting JWOWW. JHOWW-come-he-keeps-getting-elected and Beldini go back decades. A Healy son has a license in Beldini’s real estate office and Beldini and the Healys are neighbors in Jersey City. They have summer homes a block from each other in Bradley Beach at the — where else — Jersey shore. In 1999, when Healy was Chief Judge of Jersey City Municipal Court, cops visited his vacation crib. Neighbors were bitching about party hearties. Healy wrestled with the cops on his porch. In the nude. (Though one neighbor said he was clutching a towel when the fracas began.) Healy pleaded guilty to a minor disorderly conduct charge.

In 2004, mayoral candidate Jerry Healy was seen — and photographed — passed out naked on his front porch in Jersey City. The nudie pic, which was posted on the Internet by an opponent, might have discouraged a less determined electorate. But Healy swept to victory.

In 2006, Mayor Healy was back for a rematch with the Bradley Beach cops. (This time he was clothed.) Two officers rassled him to the ground outside his sister’s bar and gave him a few shots of pepper spray. The shots chased a good deal of beer. Healy was convicted on disorderly conduct charges in 2007. The same year he was made chairman of the Hudson County Democratic Organization, a monster political machine that’s been somewhat weakened by a decade of corruption indictments and flaccid leadership.

By the Spring of 2009, Jerramiah Healy was on the mayoral campaign trail again, with Leona Beldini as campaign treasurer. Things were looking good. New York City Mayor Mike “The Situation” Bloomberg was set to toss a $1,000-a-head fundraiser for Healy at his NYC townhouse. (The Situation and his deputy mayor, Kevin Sheekey, have Jersey City roots. Sheekey’s family goes way back with the Healy family.) Another big bux event was scheduled at the Beacon, an elegant condo fortress in one of Jersey City’s poorest nabes. Plus, a new developer in town was spreading cash around.

Developer David Esenbach wanted to build a high-rise luxury condo project of 750 units on land next to a site contaminated with chromium in an inner city neighborhood. Esenbach was confident the units could be marketed for half-a-mil each. But he worried the city’s planning, zoning, and overall development process might be too slow and cumbersome.

Esenbach conveyed his concern to Mayor Jerry Healy, Deputy Mayor Leona Beldini, Housing Commissioner Ed Cheatam, and political consultant Jack Shaw in meetings at Healy’s favorite luncheonette (City Hall is so impersonal) and other eateries. The foursome assured Esenbach that Jersey City was developer-friendly. Healy touted “a planning department let’s put it that way, that’s receptive.”** Beldini and Cheatam praised the director of the Division of Zoning Enforcement. “Tony’s Good” opined Cheatam. “He’s good” echoed Beldini. “Tony’s good. Tony’s been good for a long time” said Cheatam.

Despite the real estate slump, Beldini seemed to think Esenbach’s projected price of half-a-mil each for his condos was on target. Saying “with what’s happening, the inner city is the place to invest.” Esenbach granted Beldini exclusive dibs on marketing the condos. Beldini touted her ability to “cut through red tape” and cited her position at the Economic Development Corporation and as the mayor’s liaison to the Parking Authority. (Parking being a huge issue in large scale development projects.) She also tried pitching a “shovel ready” former sausage factory for a potential condo project but Esenbach didn’t bite. He’d already passed on a macaroni factory pitched by Cheatam.

(In ye old days, Jersey City produced something other than oleaginous pols and real estate capers.)

As the meetings progressed Esenbach made “donations” totaling $20 thousand. (A slice of what he was laying out at other meetings with Shaw, Cheatam, and myriad other officials.) Leona Beldini didn’t handle the cash but was enthusiastic about the transfer. Saying $10 thousand was for “J” (Jack Shaw) and the “Jersey City Democratic Committee”. She delineated how the money would be broken down into “different funds” (to beat legal limits on contributions) in order to “funnel it back into the mayor . . . which everybody does.” Esenbach said he’d “do him (Shaw) another 10 for Healy” and would “do more before election.” “Beautiful” replied Beldini.

Mayor Healy didn’t handle the cash. Cheatam and Shaw did the blunt talk. Esenbach did the taping.

Oh nooo! Developer David Esenbach didn’t exist. He was really developer Solomon Dwek, serial Ponzi schemer. In 2006, Dwek was nailed by the Feds for bank fraud after kiting tens of millions in bad checks. Apres bust, Dwek turned informant. Dwek was a natural for the job of Sting Boy. At Beldini’s trial, he admitted bribing countless public servants re development deals for some 10 years in Jersey and New York. He’d laundered the bribes through his family’s Yeshiva in Monmouth County. Dwek’s gift of grifter gab served him well with Healy, Beldini, Cheatam, and Shaw. On the FBI tapes the Fab Four echo each other’s lines and finish each other’s sentences like folks in a very old marriage. Dwek picked up their dialog and fed it back. Riffing on the slippery chit chat.

As for visuals, the tapes are cinema verite as shot from under a shirt. A herky jerky chest level camera catches Mayor Healy fist-pumping pepper onto potato salad. His tie hangs unknotted as if he’s starting to strip. His face looks red even in black and white. On one tape Leona Beldini describes the upcoming Healy fund raiser at the Beacon as an “elegant affair” with “carving stations” and “champagne.” The guests would be swell as well. “We want people who’ll look good.” One wonders — was Healy invited?

Political consultant Jack Shaw lends a touch of Banquo to the vids. As said, he died of a Valium overdose a few days after being busted. Accident? Only his shadow knows. His shadow hangs over the FBI’s case in Hudson County. After his arrest, Shaw allegedly agreed to cooperate with the Feds. His input would have been invaluable. It was Shaw who introduced Esenbach/Dwek to many of the indicted or suspect pols and it was Shaw who collected $40,000 from Dwek as an alleged bribe for the biggest fish in the batch — Joseph V. Doria, state commissioner of the Department of Community Affairs (DCA). As DCA head, Joe Doria chaired the New Jersey Redevelopment Authority, the Housing and Mortgage Finance Agency, and the Council on Affordable Housing. Doria, a Hudson County machine man elevated to state power by former Governor Jon Corzine, admits meeting with Shaw and Dwek but denies taking bribes. Doria resigned as DCA head last summer, after his offices were raided by the FBI. He has not been indicted.

Jack Shaw cut his corruption teeth in Cook County, Illinois. He told Solomon Dwek that of all the places he knew, Hudson County was the most like Cook County. When the state’s attorney in Cook investigated Shaw in the late 70s, he emigrated to Hudson County. (He was invited in.) In Hudson, Shaw was jack of all trades. Among other things, he served as campaign manager and advisor to ex Hudson County Executive Robert Janiszewski. In 2002, Janiszewski pleaded guilty to extorting bribes from developers. Until his arrest became public knowledge, he wore a wire for the Feds. There went another batch . . .

Jack Shaw had his ups and downs. He riled a few cronies by allegedly embezzling from them to support a cocaine habit. The State Commission of Investigation said scathing things about how Shaw and a buddy ran the Hudson County chapter of the Society for the Prevention of Cruelty to Animals. But in Hudson County, tomorrow is always another day. As the new millennium glided along, Shaw was guiding New York developer George Filopoulos of Metrovest Equities through the shoals of Jersey City’s development process. The result? The Beacon. An elegant condo fortress in one of Jersey City’s poorest nabes. FHA mortgages available! By the buy, Jack Shaw’s girlfriend was/is property manager for the Beacon. Money that Dwek gave Shaw flowed back to Mayor Jerry Healy’s campaign through her checkbook.

Even after death, Jack Shaw is a go-to guy. Leona Beldini’s attorney claims Jack was the real grafter. Cheatam? How ’bout that name? Solomon Dwek is a deceitful rat, Beldini an honest public servant. So pure she didn’t need to take the stand in her own defense. She just sat next to her attorney, shining . . .

As this is being written, the jury is out onU.S. v. Leona Beldini. In the FBI tapes, Deputy Mayor Beldini kept her hands clear of Dwek’s cash. Quid pro quo was at tongue’s length. Perhaps the jury will say “not proven.” But whether Beldini is convicted or not, the Feds deserve some sort of media award. Jersey City is a Reality TV classic. Its images are forever.

*Ex-Hudson County Official Admits Conspiring with Numerous Others to Extort Cash in Return for Official Influence, USDOJ, U.S. Attorney, District of New Jersey, 09/18/09

**Unless otherwise noted, all quotes are from the following transcripts of videos and audio tapes played during the U.S. v. Leona Beldini trial, and published in the Newark Star-Ledger:

• Dwek, Cheatam, Shaw body recording transcript 2, March 11, 2009
• Jersey City diner hidden camera video: Mayor Healy, Beldini meet with Dwek, March 13, 2009
• FBI informant, Jersey City deputy mayor Beldini discuss campaign donations, March 24, 2009

Carola Von Hoffmannstahl-Solomonoff
Mondo QT

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["Jersey City, New Jersey" photo by Oquendo; CC BY 2.0]

In early December, after days of deliberation, an Albany jury delivered corruption convictions to Joseph L. Bruno, New York State’s former Senate majority leader. On their way to finding Joe guilty of two federal felony charges the jury requested extensive read-backs and clarifications. Joe’s crony cozy deals were aired and re-aired. How often do New Yorkers get such detailed info about malfeasance in high places? About as often as Joe Bruno turned down gifts from pals doing business with the state.

Republican Joe Bruno’s abuse of power to gild his own lily was fierce. But his style? Old hat. Self-serving pols masquerading as servants of the people are a bipartisan New York special. And once they get in, they never get out. Some municipalities and counties have been under the same greasy thumbs since the daze of Rip Van Winkle. Oh but there’s hope! The Working Families Party (WFP) is making inroads in upstate races. Running candidates on the Democrat, Republican, Independence, or Whatever lines.

A tenant activist friend in NYC refers to WFP as the “Working Phonies Party.” Note to self — ask why.

More hope 4 New York; the possibility that state Attorney General Andrew Cuomo will be our next governor. Folks admire how Andy pounces on big-time financial fraudsters. Denouncing them seven ways to Sunday. That his pounces often result not in prosecution, but in payoffs aka fines and/or some form of political enhancement for himself, matters not. The non-necessity of prosecuting the powerful is another New York special. In late 2008, Michael Garcia, former U.S. Attorney for the Southern District of New York, decided that X Governor Eliot Spitzer shouldn’t face charges for availing himself of the money laundering services of the New York State-based, international prostitution ring he patronized. Stepping down to run his father’s real estate empire was punishment enough. Hey — Spitz knew he did a bad thing. When state attorney general, he excoriated money launderers and prostitution rings.

As a private citizen angling for another public berth, Spitzer is excoriating (expectorating?) anew. Coming on as Mister Reform in forums as far flung as the BBC and Slate magazine. In November, Spitz sniped Treasury Secretary Tiny Tim Geithner (former head of the New York Fed) for having “no backbone” while Wall Street partied with bizzaro securities and for flubbing the AIG bailout. Implying he, Spitzer, would have done it right. Prison’s loss might seem our gain if Spitz didn’t preen so nakedly. The man is a self love machine. Hard to understand why he had to hire hookers. As for bizzaro securities, Spitz as AG was a dud when it came to prosecuting the mortgage frauds that inflated the values on which said securities were based. Though he did excoriate predatory lenders and collect some mighty fine fines. . . .

For a fine example of Attorney General Andrew Cuomo in full NY pounce, think back to the brief period when the bursting housing bubble made it seem as if mortgage fraud perped by parties larger than brokers, bank clerks, and appraisers might finally matter. In November 2007, Attorney General Cuomo sent ominous missives to Fannie Mae and Freddie Mac. In the accompanying press release, Cuomo announced he was subpoenaing the government sponsored enterprises (GSEs) as part of an “industry-wide investigation into mortgage fraud.” An independent examiner would review all appraisals and mortgages purchased by Fannie and Freddie from Washington Mutual (WaMu), the nation’s largest savings and loan. (By the end of 2008, WaMu was the nation’s largest bank failure.) Transactions with other lenders would also be scrutinized.

Fannie and Freddie were suspected of buying and bundling fraud-inflated mortgage loans (as fodder for mortgage backed securities) from lenders colluding with several prominent appraisal entities. In a November 6, 2007, letter to Richard F. Syron, then Chairman of Freddie Mac, Cuomo said “GSEs may also have an interest in inflating (or at least in not questioning) the value of pooled loans . . . the higher the values of the loans closed, the greater the value for which the securities are sold on the secondary market.”

Imagine if Cuomo’s investigation proved Fannie and Freddie had colluded in inflating loan values! Wall Street would be shaken to its crap real estate foundations. The public would get an in-depth look at government sponsored mortgage fraud. Pols and appointed officials who control and/or oversee housing and finance at the federal level would be disgraced. In the heat of the moment, sweeping policy reforms would be enacted. Important heads might roll off to actual prison. And should Fannie and Freddie need a bailout, taxpayers would definitely balk at covering a pair of proven grifters.

Whew. The bomb never blew.

Five months after his missive to Fannie and Freddie, Andrew Cuomo closed his industry-wide investigation into mortgage fraud. On March 3, 2008, Cuomo announced an agreement had been reached with Fannie and Freddie and their official overseer, the Office of Federal Housing Enterprise Oversight (OFHEO). He also thanked Senator Chuck Schumer of New York, member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, for help in crafting the agreement. In Cuomo’s words, the agreement “begins to set right what had gone so wrong in the mortgage industry — rampant appraisal fraud.” Which occurred because “banks were putting pressure on appraisers to up the value of loans just to make a quick buck.” Nothing was said about prosecuting the unidentified banks that suborned fraud. (Though “predatory lending” got the de rigueur tongue lash.) As for the possible interest by Fannie and Freddie in inflating values, the topic was gone with the wind.

A few months after Cuomo closed his investigation, taxpayers bailed out Fannie Mae and Freddie Mac. Quoting CNN Money (The Most Expensive Bailout) “Congress essentially wrote a blank check to the Treasury Department in July 2008 to do what needed to be done to inject capital into the two firms.”

In the agreement struck with Cuomo, Fannie and Freddie didn’t acknowledge any wrongdoing. However, they graciously agreed to contribute $24 million for the creation of an “Independent Valuations Protection Institute.” The institute would monitor lenders doing business with Fannie and Freddie for appraisal code adherence. The code (the Home Valuation Code of Conduct or HVCC) was a brand new one shaped by Andrew Cuomo. And oh yeah, OFHEO. The board of the new institute would be approved by, and answerable to, Andrew Cuomo. And oh yeah, OFHEO. That a state attorney general was playing the primary role in setting crucial policy for national lending standards, and for two humongous enterprises sponsored by the federal government mattered not.

In September, 2008, as part of the full federal takeover of Fannie Mae and Freddie Mac, OFHEO officially merged with the Federal Housing Finance Board to form a whole new independent federal agency, the Federal Housing Finance Agency (FHFA). Prior to the merge, OFHEO was a sub-agency of the U.S. Department of Housing and Urban Development (HUD). Andrew Cuomo was HUD secretary between 1997 and 2001. As HUD head, he had the power to regulate Fannie Mae and Freddie Mac.

Weird thought: what if Andrew Cuomo’s industry-wide investigation into mortgage fraud had uncovered bad stuff at Fannie and Freddie going back to his own days at HUD? Cuomo would’ve had to investigate himself! For failures in oversight — and in policy. Cuomo was one of several HUD heads who pressed Fannie and Freddie to take on more and more subprime mortgages in the name of advancing affordable homeownership. An ideal shared by Senator Chuck Schumer. In 2005, when the danger of Fannie and Freddie’s bulging mortgage portfolio was raised in Congress, Schumer opposed stricter GSE regulation in the name of protecting affordable housing.

Schumer incidentally, receives a hefty hunk of his political contributions from the finance, insurance, and real estate industries. No biggie tho. These industries are traditionally generous to members of the Senate Committee on Banking, Housing, and Urban Affairs.

As for the home valuation code established by Cuomo and oh yeah, OFHEO, many in the real estate industry hate the HVCC and are trying to dislodge it. Claiming it keeps appraisal values artificially low. (Think they complained about appraisal values being artificially high?) Luckily, the Obama admin is tapping taxpayers in order to keep values inflated and housing affordable.

For those considering Andrew Cuomo as potential governor, the issue isn’t the goodness or badness of HVCC, but how he conducted his industry-wide investigation of mortgage fraud and how it reflects on his ability to potentially govern the Empire State.

New York government rolls on lack of transparency and autocratic attitude. Decisions affecting the fates and finances of some 20 million people are made by handfuls of power players in closed rooms. Hidden agendas and under-the-table alliances scotch democratic process. Even when results are beneficial (rarely) the public is treated like children who need to be administered, rather than as constituents. Hot button issues are come-ons for the rubes. Reform sentiment is exploited as a weapon for power grabs, extortion, and government expansion. Reformers are only reformers when it suits them. Questions are raised and accusations made but investigations fade away after advantages are gained or the wrong ox gets gored.

I’d say Andrew Cuomo is ready to lead.

Carola Von Hoffmannstahl-Solomonoff
Mondo QT

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["Fannie Mae and Freddie Mac come for your houses" photo by Ken Kennedy; CC BY-SA 2.0]

October 14th. The big chill was early, even for Albany. A press conference was being held in the park across from the New York Court of Appeals. The highest court in the state was set to hearGoldstein et al v. New York State Urban Development Corporation. The press conference speakers and their supporters were primarily Brooklynites up from The City. Veterans of the Atlantic Yards wars. Folks who’ve attended numerous court proceedings, marched in myriad demonstrations, and organized countless fund-raisers in a six year effort to keep their homes, businesses, and neighborhoods from being crushed by Atlantic Yards, the dream baby of mega developer Forest City Ratner. Eminent domain abuse is the heart of the matter.

Goldstein challenges the use of eminent domain within the Atlantic Yards footprint. Dan Goldstein, whose name graces the case, is one of the founders of Develop Don’t Destroy Brooklyn (DDDB), a coalition of 21 community organizations supported by thousands of donors. I live near Albany. Until the day of the hearing I’d never met Dan in person. But I’ve followed the Atlantic Yards situation since 2005, starting around the time the U.S. Supreme Court made its infamous decision re Kelo v. City of New London — the Connecticut case that opened the nation’s eyes to growing misuse of eminent domain.

Eminent domain is government’s constitutional right to seize private property in the name of “public use.” Owners must receive fair recompense. (Though being forced to sell does tend to push fairness downward.) In the past, eminent domain cleared the way for public facilities such as hospitals, bridges, and schools. At times it was used for corrupt land grabs. By the beginning of this century abuse was the norm, largely because the interpretation of “public use” had been stretched to cover private development. A typical rationale is that projects will ultimately deliver more tax revenues and create more jobs than existing homes and communities.

For pols, projected birds in the bush are worth more than ones in the hand.

The Atlantic Yards project was officially announced in 2003. Though plans went through changes as the real estate and credit markets waned, Atlantic Yards is essentially envisioned as 22 acres of high rise set amidst the low built neighborhoods of downtown Brooklyn. It includes a sports arena for the New Jersey Nets (owned by Bruce Ratner, CEO of Forest City Ratner) commercial spaces, luxury condos at NYC market rates, and a far smaller number of “affordable” units subsidized by the U.S. Department of Housing and Economic Development (HUD). The number of cheap slots keeps shrinking. HUD subs aren’t assured. Much of “affordable” Atlantic Yards will be done under the aegis of the Association of Community Organizers for Reform Now. Aka ACORN. Yup, the same ACORN whose Brooklyn offices were featured in those notorious videos — the ones where ACORN staffers give tips on how to commit housing fraud to undercover reporters posing as a garish pimp and rather wholesome hooker.

By the by, those who think only right-wing vid kids revile ACORN are wrong. Many NYC lefties do likewise. ACORN has a history of supporting development projects that roll over low income and/or minority communities with eminent domain. They also have a rep for cutting self-serving deals with developers.

ACORN’s participation in Atlantic Yards provides the astro turf cover Forest City Ratner needs to qualify for government largesses. The Ratner/Acorn relationship is mutually beneficial. In mid 2008, Ratner gifted ACORN with a package of grants and low interest loans worth $1.5 million. The assistance couldn’t have come at a better time; ACORN was having fund-raising problems due to aNew York Times article about the group covering up a $1 million embezzlement by ACORN biggie Dale Rathke.

Note to collectors of funny ACORN stuff: the photo of developer Bruce Ratner wearing an ACORN t-shirt, throwing his hands in the air, and marching side by side with ACORN president Bertha Lewis in a demonstration, is right up there on the laff meter with the clown-pimp and hooker vids.

ACORN is only one Ratner pal. Atlantic Yards has been pushed by three different governors (Pataki, Spitzer, and Paterson) U.S. Senator Chuck Schumer, NYC Mayor-For-Life Michael Bloomberg (oops, he rescinded his support for term limits) and Brooklyn Borough President Marty Markowitz. The result has been tax deals, overrides of local laws, massive public subsidies direct and indirect, and eminent domain. Earlier this year there was talk of using federal stimulus funds to keep Ratner afloat.

Much of what moves Atlantic Yards flows through the New York State Urban Development Corporation. Godzilla member of the state’s Shadow Government. Defined by theNew York Times as “the 800 or so quasi-private authorities that run everything from the housing projects to the New York City subways.”* Though the quasi-private authorities wield government power, they aren’t subject to the same public oversight or level of transparency as actual government agencies.

The Urban Development Corporation (UDC) does business as the Empire State Development Corporation (ESD or ESDC). The UDC/ESD dispenses billions in public money, overrides local land-use and zoning laws, saddles taxpayers with bonded debt sans legislative or voter approval, and has the power of eminent domain. Its mission is to help pols and players circumvent the messy tangles and wrangles of representative government that can block them from doing visionary things. If done through the ESD or any of its gazillion subsidiaries, those visionary things are protected from the public by layers of impenetrable poop.

When Goldstein et al v. Urban Development Corp. was heard in the Court of Appeals, lawyers from the ESD appeared on behalf of Forest City Ratner, arguing that the quasi-private ESD has the right to use the government power of eminent domain to advance a private developer’s interest. If the court rules in favor of Goldstein, it will establish a precedent that would limit abuse of eminent domain in New York State. Supporters of the status quo say that if eminent domain for private development is curtailed, economic development all over the state will falter. The without-land-grabs-we’re-doomed mantra helps keep New York among the worst states in the nation for eminent domain abuse.

Of course, nothing discourages development more than an absence of reliable property rights . . .

Note to collectors of funny UDC/ESD stuff: on the same day ESD lawyers were defending the interests of Bruce Ratner in court, the Albany Times Union ran a story about the ESD awarding $4 million to Chaim Ausch, a Brooklyn-based investor and diamond merchant doing business in Albany as C&Y Albany Hotel LLC. The ESD gave Ausch millions even though he owes $615,000 in city taxes, school taxes, sewer and water bills, and assorted fees and penalties! How Ripleys’ is that?

Ausch owns the DeWitt Clinton, a gone-down deluxe hotel near the capital building in downtown Albany. The $4 million ESD funding is intended to help restore the DeWitt as luxury hotel. Initially a loan, the money becomes a grant if Ausch creates 75 jobs. Ausch bought the DeWitt in 2006 as See Why Gerard LLC. The name may refer to a prior business address in the Bronx. Ausch evicted the DeWitt’s 122 subsidized tenants, a mix of the disabled (including substance abusers) and the elderly. (Putting able-bodied addicts and old people into the same housing is an upstate HUD special.) Ausch also tried unsuccessfully to roust an on-site banquet hall. The proprietor has a long term lease. In 2007, Ausch aka See Why Gerard filed for bankruptcy, supposedly in an attempt to nullify the lease. He reemerged as C&Y Albany Hotel LLC.

According to ESD chairman Dennis Mullen, the review process of Ausch was “very arduous.”** Albany Mayor Jerry Jennings stands firmly behind Ausch. Chaim Ausch as See Why Gerard and another related entity, C&Y Atlantic, has stood firmly behind Jennings with campaign contributions. Ausch’s attorney says the unpaid sewer and water bills were the result of clerical error and all outstanding bills will now be paid. If the paybacks were made with ESD funds, taxpayer Peter would be paying off taxpayer Paul. With the pay-offs flowing through the quasi-private ESD. However, on the day the Times Union article appeared Chairman Dennis Mullen announced the ESD had been unaware of Ausch’s debts (guess the arduous review didn’t include public records) and that Ausch won’t get a penny of state cash until the taxes etc. are paid.

Whew. After Ausch pays, the tax deadbeat thing won’t be held against him. Nor does the ESD seem concerned about his bankruptcy filing. Maybe ’cause Ausch only did it as a ploy to break a contract.

Incidentally, in 2003, HUD got stuck with $3.4 million in dud DeWitt mortgages when the hotel’s former owners, DeWitt Clinton Associates, stopped making payments.*** By 2005 HUD was set to auction off the DeWitt. But Chaim Ausch stepped in and saved it from possible short sale with a $4.1 million mortgage from the State Employees Federal Credit Union (SEFCU).

A friend from Jersey recently asked me why I hadn’t been writing about Albany of late. Meaning Albany as the symbol of state government. Saying “has Governor Paterson cleaned up all the corruption?” After I stopped laughing I wrote back “I’ve become so cynical, disgusted and bored with politics at the state level (Albany in the broader sense) as well as Albany the city, that I have absolutely nothing to say. Why bother? I see no game changers on the horizon. The political situation is frozen in amber. . . .”

I know. I was being too gloomster. No system, no matter how calcified, is immune to change. Tiny almost imperceptible cracks appear then suddenly split wide open. Think of the Soviet Union.

Meanwhile, back in Brooklyn, Atlantic Yards rages on. The court decision re eminent domain abuse in the UDC/Ratner footprint is expected by Thanksgiving. Whatever the outcome, folks in and around Develop Don’t Destroy Brooklyn will keep fighting. Their never-say-die is an inspiration. . . .

Carola Von Hoffmannstahl-Solomonoff
Mondo QT

*New York’s Shadow Government,New York Times, 08/18/09

**Despite debt, grand hotel plans, Chris Churchill,Albany Times Union, 10/14/09

***“DeWitt Clinton finds a buyer; $5.3M sale of Albany landmark brings few details, eviction notice,” Brian Nearing,Albany Times Union, 04/11/06

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Abbie Hoffman, Yippie Emeritus, died 20 years ago. He was master of the culture jam before the term was coined, whacking the establishment with its own wack.

Quoting Wikipedia: “Culture jamming sometimes entails transforming mass media to produce ironic or satirical commentary about itself, using the original medium’s communication method.”

Hello, ACORN? Can I come over in clown pimp garb and film you getting down with housing fraud?

Talking interviews. . .

In 1980, I interviewed Abbie Hoffmann for the New York Rocker, a publication devoted to Punk Rock. The interview appeared in March, 1981. It stuck out like a psychedelic thumb. A member of an almost-famous Punk group accosted me on an East Village street demanding to know why Abbie was in theRocker. At the time, many Punks viewed the counter-culture of the 60’s and early 70’s as a repressive dead hand and spat on it in music, prose, and pose. The rebellion didn’t last. As Punk segued into deodorized New Wave, it embraced dead hand sentiments quicker than you could scream “destroy.” In its high school heart, Punk was conformist not truly contrarian. Unlike, say, Abbie Hoffman.

I knew Abbie as nodding acquaintance from my radical daze in NYC. In August 1968, I crashed for a time at the Yippie house in Chicago as the Democratic National Convention began its wild ride to the nomination of Hubert Humphrey as presidential candidate. Protesters from all over the country were gathering — for sober anti-war demonstrations and for the Yippie “Festival of Life.” The latter looked to be the anti establishment blow out of all time. Festival planning sessions “led” by Abbie Hoffman, Jerry Rubin, and other luminaries at the Yippie House were chaotic and open to the dozens of crashers drifting in and out. Nothing like the war room strategy sessions imagined by fantasists on the right. Besides, the masses of kids who came to Chicago were beyond command by Master Plan. Their motives were their own.

Weird to see, four decades later, fantasists on the left spinning similar conspiracy theories about the masses of Tea Party protesters. Many of whom carry flags sporting rattlesnakes and the slogan “Don’t Tread On Me.” An American Revolution classic that was also popular in Chicago circa 1968.

Interviewing Abbie in 1980 had its problems. He was a talented raconteur who was almost always “on.” He had a trunk full of culture jam tales about Yippies throwing money into the New York Stock Exchange pit, levitating the Pentagon, running a pig named Pigasus for president, and the 1969/70 theater-of-the-absurd masterpiece that was the conspiracy trial of the Chicago 7. The problem was getting past the familiar. My interview was taking place soon after Abbie surfaced from the underground; he’d dropped down the rabbit hole in 1973 after being busted with enough cocaine to qualify as dealer weight. Abbie was willing to discuss his underground adventures as “Barry Freed” but probing questions about his drug bust were off the table. For one thing, legal issues still loomed.

Abbie painted the coke bust as a government frame. Some people believed him. I didn’t. To argue the subject at length would be off topic. But I will say that while I admired — and still admire — Abbie’s creative spirit and innovative political style, I never idolized him or any other radicals I knew in real life. (Propaganda images were another story. I had fatuous teenage moments re Che Guevara.) Rads put their pants on one leg at a time, just like Republicans. Speaking of getting dressed –

In my interview Abbie described how as a boy, he’d heard a psychologist on the radio say you could tell what kind of a person someone was by which shoe they put on first in the morning, the left or right. (Yes Virginia, pop psychology was just as dumb in radio days.) Upon hearing this, Abbie resolved to never put his shoes on in the same order again.

I really liked that story. Still do. The image of boy Abbie listening to the radio when radio was king is evocative and touching. His determination to resist categorization appeals to my contrarian sympathies. (Though being a contrarian means having to admit the radio shrink would probably have said striving to put your shoes on randomly is as much a readable pattern as anything else.)

I included Abbie’s shoe story in the New York Rocker hard copy of my taped interview, but editor Andy Schwartz cut it. I figured he was disturbed by the idea of random shoe donning or that the radio shrink was his father. But he did leave other good stuff. Including Abbie’s answer to my questions as to why The Movement (it was always mentally capitalized) had become repressive and why its focus had narrowed to lifestyle issues such as eating “right.”

Abbie responded to the first question as if I’d asked why pigs had started flying. He conveyed that The Movement was incapable, by its very nature, of being repressive. As for the narrowed focus, he said making a revolution was hard, people get tired.

Somehow, his answers didn’t satisfy. It seemed as if Abbie the contrarian was blind in the left eye.

Eventually, I answered the questions myself. The bloody-minded and age old desire to control others via government power overwhelmed the Don’t Tread On Me component of the counter-culture. Celebration of free thought gave way to castigation of politically incorrect thought-crime and an attempt to control reality by controlling language. (See Newspeak.) And those who shifted their revolutionary focus to lifestyle issues weren’t tired. They just realized it was the best way to get people where they live.

Abbie Hoffman died 20 years ago from a massive drug overdose. Verdict: suicide. As said, I still admire his creative spirit and innovative political style. And it’s great to see, four decades after Chicago, that folks still know how to do the anti-establishment culture jam. Even if the establishment they’re jamming is chock full of faces and dogmas from my old daze.

Yippie!

Carola Von Hoffmannstahl-Solomonoff
Mondo QT

“There are no spokesmen for the Yippies. . . . We are all our own leaders.”

Revolution Towards A Free Society: Yippie! By A. Yippie, 1968

“And something is happening here/but you don’t know what it is/do you, Mister Jones?”

Ballad of a Thin Man, Bob Dylan, 1965

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Spoiler alert for the last few folks who take Alan Greenspan seriously — don’t read chapter two of Douglas Rushkoff’s new book Life, Inc. The scene where Greenspan addresses attendees of the 2008 Wealth Expo in New York City via satellite is pure twisted comedy. The Expo, a yearly wing ding of wishful thinking and pyramid scheming organized by NYC’s Learning Annex, was held at the Jacob Javits Center. Despite the housing bubble’s demise real estate was being served. Speakers who appeared in the flesh included Than Merrill of A&E’s Flip This House and Donald Trump. Also on hand: busty babes in tight tank tops doing a “money dance” to a song with the refrain “Oh Oh I want a pie in the sky!”

The lyrics weren’t a satirical dig at the audience’s aspirations, they were meant to be inspirational.

Many in the audience had lost investment properties and homes to foreclosure, but hoped to get back on the horse. In order to learn the secrets of sky pie they over-extended their credit yet again to buy pricey “wealth system” info packs peddled by financial gurus such as Than Merrill and Barron’s. Hey — no risk involved. The packs could be profitably flipped to other wealth seekers who didn’t attend the Expo and had missed out on the special Expo-only prices. Attendees also got to chow down at a special auction of distressed and/or foreclosed real estate. Held in a windowless room so as to lock out distraction. From his place in space former Fed head Alan Greenspan answered tough economic questions put to him by a soap opera star. Real estate was “unquestionably” one of the best investments “over the long run.” Even if we are going through a “testing period.” Greenspan also suggested — albeit with a laugh — that the audience invest in his book, The Age of Turbulence.

When reading the account of the Expo I had to putLife, Inc. down and check the cover. Had Random House sent me an advance copy of the wrong book? Was this Bonfire of the Vanities Redux? Or had Mark Twain or Jim Thompson risen from the dead to re-skewer American grift? Nope. There was the short sweet titleLife, Inc. Followed by –

How the World Became a Corporation and How To Take It Back

Life, Inc. contains many passages that can be appreciated as black comedy (see the section on The Secret, the best selling self-help system that raises solipsism to new heights) but it’s not all fun and games.Life, Inc. is a relatively small book (244 pages in advance copy) on a very large topic: how and why we’ve devolved into consumers, rather than citizens, in a society dominated by what Rushkoff calls “corporatism.” In the process becoming divorced from ourselves and others, internalizing corporate values and applying them to our relationships and communities. Seeing life through shareholder eyes.

The introduction toLife, Inc. opens with an anecdote by Douglas Rushkoff about being mugged at gunpoint several years ago in the Brooklyn neighborhood of Park Slope. Thinking to alert his neighbors Rushkoff posted news of the mugging on a local Internet list. Instead of receiving thanks for the heads-up, he got angry missives about naming the street where the mugging took place and the potential impact on property values. Those who responded angrily weren’t real estate suits. As Rushkoff puts it, he posted the warning to a “crunchy Internet community of Moms, food co-op members, and other lefty types dedicated to . . . their decidedly progressive, gentrifying neighborhood.”

The mentality described in Rushkoff’s intro is oh so familiar. In my years of city living I often saw gentrifiers sweep crime under the rug. Pressuring local papers to drop police blotter and court docket coverage, leave out street names in crime reportage, and not run crime stories on Sunday. (Aka real estate section day.) By censoring crime info they endangered their neighbors, lured naive buyers into war zones, and helped keep incompetent and/or corrupt pols and cops on the job. Concern for property values trumped concern for public safety as well as the long term benefit of reducing crime by facing it squarely. Which is why I don’t believe home ownership inevitably brings stability to urban neighborhoods. (Another reason is the seemingly intractable prevalence of taxpayer-supported mortgage fraud.) The model for this theory of home ownership predates the era of unreal real estate.

Much has been written about the housing bubble and Wall Street and Washington’s role in pumping it. But few have nailed how abstract and fantastical the housing market, mortgage lending, and mortgage-derived investment became as vividly as Rushkoff does in the chapter ofLife, Inc. titled The Ownership Society: Real Estate and the Disconnect from Home. The depiction of the chimeric daze when home sweet home morphed into mind money evokes Kubla Khan: “It was a miracle of rare device/A sunny pleasure dome with caves of ice.”

(Photo credit: Ben+Sam;
CC BY-SA)

At times, Rushkoff strikes notes reminiscent of social critics such as Christopher Lasch and James Howard Kunstler. Like Lasch, Ruskoff perceives the corrosive effect of consumer society solipsism on community. The Kunstler resonances are less effective. Like Kunstler, Rushkoff socially stereotypes suburbia as a desolate landscape of isolated family units, with each member alienated from the other, locked in gas guzzling SUVs, shuttling endlessly between sterile McMansions and soul crushing mega malls. The falseness of the cliché undercuts Rushkoff’s credibility when he argues that suburban form follows corporate function. He also has a tendency to make sweeping generalizations, ascribing conscious, almost one-mind intent to negative events generated by huge numbers of people acting independently.Life, Inc., which at heart is a critique of dehumanization, too often dehumanizes. Depicting people as Gumbys trapped in a corporate imposed consciousness we may be incapable of recognizing from within. However, Rushkoff has managed to recognize it. When he writes “we” he means “thee.”

That being said,Life, Inc. is a visionary work powered by moral passion and resting on solid historical research. The sections delineating how corporations came to exist and develop a hand in glove relationship with political power are particularly illuminating as our here-and-now government slouches toward oligarchy. AndLife, Inc. is not just a jeremiad; Rushkoff has a plan. Put on the new man — and woman. Think local, trade local. Eat food produced locally. Maybe even establish a local currency. Gouge out your shareholder eyes (figuratively speaking) and get down with your real community self. Stop looking for succor from politicians and big business. Grants be damned! Support your local artist.

Incidentally, do I believe the premise that corporatism has worked a fundamental change on our very being? Nope. But then, I’m a Catholic who believes in fallen nature. I figure the devil is always up to date and from age to age works with whatever we give him.

Carola Von Hoffmannstahl-Solomonoff
Mondo QT

Life, Inc. by Douglas Rushkoff and published by Random House is on sale now. You can also visit Douglas Rushkoff at http://rushkoff.com/

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Hit the road Halloween. For those who loathe politicians (count me in) there’s no more horrific time than the final days of a presidential race. Our flesh creeps as the last candidates standing (sort of) do the Transylvania Twist faster and faster, spinning their true (sort of) beliefs on a dime and contorting themselves into whatever position seems ripe for the moment. We choke back our screams as campaign hacks steam up the screen in Nightmare On Election Street, partisan porn oozing from their lips as they extol, decry, and deny. Then there’s the media blood feast. In every election cycle someone gets made into a monster. Peasants in babushkas and business suits brandish the torch of journalistic truth and storm the castle in search of unpaid parking tickets and slips of the PC lip. Small wonder only ghouls and lawyers run for office. To be dead, to be truly dead, is a blessing when the news hounds come baying.

Not every moment of Nightmare On Election Street is scary. There are dull talky parts. Like when candidates pontificate about their constantly changing Plan 9 From Outer Space. Aka the domestic or foreign policy fixes hatched with the help of retread advisers from prior administrations. Got dud policies? Ones that sent us into Iraq, jazzed NAFTA, or inflated the housing bubble? No problem. The next prez knows who to blame. Igor dropped the brain. And Igor always belongs to the other party.

True, Doc Frankenstein didn’t hire wisely. Candidates with lurching campaigns should learn from his mistakes. And candidates who want to play God must remember that villagers aren’t dead bodies to be harvested. Many still cling to their pitchforks and old-time transcendent religion — as opposed to the worship of government. Taxing can’t be passed off as tithing. Speaking of false appearances. . . .

Here come the brides! More undead than Dracula’s multiple mates! Wives of presidential candidates are real live human beings when campaigns begin. But political consultants, who fear the reaper of public opinion, soon drain their blood. The brides go on walking and smiling and appearing on The View yet they’re no longer alive. If a mirror were held in front of their lips no breath or genuine opinion would show. Thankfully, the effect usually dissipates after the campaign. Spouses of failed candidates have been known to wax colorfully wroth at their mate’s ex-consultants. And one bride, whose hub made it to the White House, even sprang from her coffin and became co-president! Charles Willeford, the late great pulp fiction guy, wrote a book called “New Hope For The Dead.” The subject was crime and corruption in Florida not the reanimation of candidates’ wives. Still, the title applies. And not only to wives.

The word “reanimation” isn’t used in the blasted book of campaign clichés (a tome second only to the Necronomicon on the sorcerer must-have list) because of grave robbing connotations. However, “revitalization” appears frequently. Either in incantations to be delivered by candidates when wooing mayors of cities where corruption is the sole industry and the dead vote in droves, or in broader promises about “growing the economy.” The premise of said promise rests on the impressive success of one Doctor Praetorious (a colleague of Dr. Frankenstein) in growing homunculi in bottles sans reliance on any natural process. Also covered by the blasted book: how to invoke the image of “Average Americans worrying about finances while sitting around the kitchen table.” Though this image evokes La Vida Ralph Kramden rather than the gobble-n-go text message life of today’s overtaxed John and Jane Doe, a good political incantation never dies. It just gets hoarier and hoarier.

By the time a new prez is finally elected voters feel like they’ve walked with an army of zombie hookers, pounding the pavement from coast to coast. Thanks to an extra early start, this particular hike seemed to last forever and ever and ever. Yet the long march is almost over. In a few days we’ll be able to peek through our fingers and see who gets to be the new caretaker of the Overlook Hotel oops White House. Let’s hope the new guy does better than the old guys.

Mister and Miz America — Here’s Johnny/Barry!

Carola Von Hoffmannstahl-Solomonoff
Mondo QT

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Remember “change we can believe in”? How about “the straight talk express”? The first is the mantra of believers in Barack Obama, the second was John McCain’s war wagon during his 2000 primary fight for the Republican nomination. Though Dubya ultimately prevailed, McCain’s image as political brave heart got a righteous polishing. Even after he became Dubya’s liege the image didn’t completely lose its luster. As for Obama, his jousts with Bill and Hill of The Infernal Machine won huzzahs in independent circles. But those were the days of yore — this is now.

Evil omens re the economy hath melded Obama and McCain into one man, living in the cramped quarters of one craven political soul. Something/someone has to give. President-wannabe Obama McCain steps forth to issue a decree. Let the bailouts begin! Up the oligarchy! State capitalism we are here!

Here’s another kicker for the serfs. There aren’t any third party candidates with enough traction to act as vehicle for a meaningful protest vote. Obama has sucked the air out of the progressive room and Ron Paul’s eclectic libertarian revolution didn’t find credible expression in plodding Bob Barr. Traditional conservatives console themselves with Sarah Palin. But incendiary Sarah is a loyal second banana. Her banner may lead in the future but that will be then — this is now. The now of a massive expansion and realignment of government and equally massive new tax burdens for “Average Americans.” The “folks” Obama McCain invokes when denouncing the greedy lenders and Wall Street gamblers he rewarded by supporting — nay pushing — Dubya’s Big Bailout. This is also the now of Lord Henry Paulson and his mini-me Neel Kashkari. Goldman Sachs-R-Us! The now of a Democrat controlled Congress that hasn’t yet held a single hearing on Kashkari’s qualifications to be Bailout Czar and that folded like a poop suit when threatened by a failed Republican president and his discredited financial clackers.

But hey — there will be no exiles on Main Street. Obama McCain (aka OM) plans to rescue Average Americans too. Inside OM’s crowded skull the formerly separate candidates disagree re the details of the rescue. This makes for the kind of schizo public monologues most often heard on park benches and street corners. Though both halves of OM agree government (taxpayers) will foot the bill, they clash over how the cash will be culled and dispersed. Each side accuses the other of wanting to screw Average Americans. (Even though both of OM’s wives are lookers.) Sometimes OM seems ready to strangle himself. No doubt one half of OM, like Psycho’s Mom, will finally prevail.

The succor of Average Americans, under one persona or the other of President OM, will focus on Keeping Americans In Their Homes, Saving The Housing Market, and Supporting Business on Main Street. Possible scenarios include:

A) You give government most of your income. Government gives you back your 40 acres (metaphorically speaking) with a cut rate FHA-backed mortgage, plus the aging mule that your bank, thanks to a wad from Hank Paulson, has agreed not to repo. Your ownership of the 40 acres is administered by a new organ o’ HUD, with assistance from local non-profits with social justice missions. Helping you vote is one of the missions. Financial benefits from improvements in your property or from its resale go back to the government. If you don’t move for a decade or so (remember the importance of Keeping Americans In Their Homes) you get a cut. If the mule dies, recycled bikes will be available. As will vouchers for the vastly improved mass transit system due to be built any day now.

B) The Wal-Mart and McDonalds that got tax breaks to hang on Main Street need another stimulus injection. The government returns a tiny part of your income. You spend it on Wally & Mick. The nationalized stock market “soars” for 15 minutes and President OM gets a bump in his poll numbers. This helps him sell Congress on his plan to rescue the American Dream of Unaffordable Home Ownership.

C) In order to put a floor under housing prices and keep homebuyers dependent on government assistance and HUD oversight, and in response to pressure by the Nationalized Association of Realtors (NAR), President OM launches the American Dream Rescue Initiative. Comprehensive immigration reform is in the plan (the NAR coins the slogan Open Borders Mean No Open Houses) as is a more controversial proposal for controlled burns of large swaths of existing homes. Concern in Congress that Average Americans might be barbecued by accident is assuaged when President OM adds a proviso for the creation of a new Homeland Security organ that will “keep Americans safe from any wild-fires resulting from controlled burns of excess housing inventory.” Reps immediately start jockeying for the Homeland Security pork, claiming their districts are chock-a-bloc with too many homes. However, the U.S. Conference of Mayors urges the burns be confined to suburbs, in order to encourage urban revitalization.

D) The American Dream Rescue also contains a declaration that renters who have no interest in owning property are Enemies Of The State. Re-education camps to be established under the aegis of Homeland Security, HUD, and the NAR.

Ha ha very funny sez you. But until recently the idea that taxpayers would be tapped to back trillions in various forms of privately incurred debt, on which the level of rottenness is yet to be established, and that Congress, after a few days of panicked palaver, would do a cob job renovation of our financial and political system, would have seemed zany too. As would have the thought that the presidential candidates representing our two major parties would be of one mind and hop on the haywain post-haste.

Tis a mad mad mad new world. And Obama McCain is the man of our hour.

Carola Von Hoffmannstahl-Solomonoff
Mondo QT

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The Big Bailout Circus has the nation in stitches. Taxpayers are being sewn into a skin-tight forever suit by an amazingly bipartisan group of government clowns. But despite the agreement about the need for a slap dash redo of the U.S. financial system — and by extension our political system — the designing bozos disagree about details. And none can resist an occasional hit of the rubber chicken . . .

“This sucker WILL go down” fumes President Bush as he yanks the zipper on John Q’s paycheck.

“Further than your approval ratings?” House Speaker Nancy Pelosi is quick with the chicken.

Bap! The right hits back with a ref to the toilet numbers of Democrat-controlled Congress.

Treasury Secretary Henry Paulson needs that toilet. In exchange for Dem support for the bailout flush, Nancy-with-the-laughing-face and Rep Barney Frank demanded, among other things, an affordable housing slush fund. Frank was ready to cram the cash into the baggy pants of assorted “non-profit” clowns. The Volkswagen headed for Mortgage Fraud City is already packed. HUD has made a mega taxpayer contribution* via billions in emergency Community Development Block Grant (CDBG) funds that local pols and players can use to buy foreclosed properties. Slum fun will be had by all. Except the poor. Who luckily, are always with us. Dumb luck? Or systemic corruption and chuckle headed housing policy?

Never never forget that HUD spelled backwards is DUH.

Thuk! Another rubber chicken comes down. Republican clowns in Congress kill the Big Bailout slush fund, fearing non-profits would use it to get out the Dem vote by any means necessary. The cut is part of the Republican’s price for agreeing to indenture U.S. taxpayers to global markets.

Honk-a-dollar! The team of Mac N’ Cheese, aka John McCain and Barack Obama, tumbles into the ring. Each carries a comic valentine for Average Americans. Sometimes called “Folks.” Both guys do a killer routine of cautious caution re the Big Bailout. Both tinker toy with the master plan, albeit in different ways. (Though both agree on the big easy — sock greedy CEOs.) Neither presidential candidate sez dump it Dano, let’s start from scratch. Profiles in courage are so yesterday. Another yesterday thing: Dubya beating the imminent disaster drum. By the time the ballyhooed profits for taxpayers from the bailout prove as imaginary as WMD, Dubya will be back at the ranch. Rounding up memorabilia for yet another presidential museum.

Big Bailout urgency is also drum boogied by the majority of the mainstream press. Dubya is dirt in the eye of most media beholders but taxpayer revolts (except when directed at military spending) are a beam. A nip and tuck of the Bailout is acceptable if done by the same crew who didn’t flag the housing bubble or its derivative trash and who’ve been consistently wrong about how to fix the aftermath. But please, no meddling by the peanut gallery. Or for that matter, by the myriad economists and financial experts who spotted the bad moon rising years ago and issued countless warnings. Few of which got much coverage. Though predictions of non-stop home value appreciation from the National Association of Realtors (NAR) got the gospel choir. Vested interest, much? Speaking of the NAR –

In September, Lawrence Yun, chief economist for the NAR, addressed a gaggle of regional Realtors in Saratoga Springs, New York. Whee! Yun thinks the federal read taxpayer takeover of Fannie Mae and Freddie Mac will make it easier for prospective homebuyers to get mortgages. (Fannie and Freddie incidentally, are currently under investigation for fraud by the FBI.) But Yun is ticked off at the NAR’s former news media pals — and at Federal Reserve Chairman Ben Bernanke. Yun sez both have been spreading “negativity”** about the housing market and scaring off buyers. Yun even bapped Ben with a letter saying Ben’s bad mouth was “inappropriate.” Cause people “react to that.” He’d also like to make Alan Greenspan stick to housing happy talk. Alas. Not much can be done on that front. The X Fed head is beyond the reach of Yun’s rubber chicken. Though Greenspan hasn’t escaped seeing his rep go down in flames. Immolated by exploding ARMs.

Meanwhile, back at the Big Bailout Circus, the audience is getting restless. Feet are being stamped and popcorn boxes thrown. Pow! Wham! How long before the amazingly bi-partisan rage of Average Americans (sometimes called “Folks”) erupts into the ring?

Carola Von Hoffmannstahl-Solomonoff
Mondo QT

*Help is on the Way, Center for American Progress, 07/21/08

**Realtors given some reason for optimisim, Chris Churchill, Albany Times Union, 09/16/08

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At the October, 2001 national convention of the Association of Appraiser Regulatory Officials (AARO) the group’s past president Sam E. Blackburn decried conditions in the property appraisal industry saying “the present system is not working.” Why? Because “lenders have added a new twist to the old law of supply and demand: if appraisers don’t supply the numbers they need, they demand another appraiser.”

Blackburn wasn’t alone in his observations. For several years professional publications and online discussion groups had featured articles and comments by appraisers about lenders pressing for inflated estimates of value and retaliating against those who refused. Appraisers voicing these complaints took pride in their work and were saddened by what was happening to their profession. Some spoke of getting out of the appraisal business. Not all could afford to do so.

In October, 2002, Business Week published The Housing Boom’s Dark Side about the rising tide of mortgage fraud and over-extended buyers. The article quoted the FBI: “mortgage and housing related swindles have risen 25% in the last year.” (Six years later the FBI is still sounding warning bells.) James Croft, director of the Mortgage Asset Research Institute (MARI) also weighed in: “people have figured out that robbing banks is too hard. The real money is in real estate.” MARI, a non-government entity, collects data on mortgage fraud from private and public sources including federal and state agencies. In reports issued in 2000 and 2001, MARI identified various states, counties, and cities as mortgage fraud hot spots. Most still rank high with the FBI.

According to Business Week, factors contributing to the housing boom’s “Dark Side” included the post tech-bubble migration of securities salespeople into the mortgage broker business (do the bubble hop, hop hop hop) and the migration of professional criminals into a range of real estate industries. Connie Wilson, an investigator from AppIntell put it this way: “You’ve got money laundering operations in Miami involving real estate and rings of thugs in California doing house-flipping scams.” Also at play: EZ mortgage transactions over the Internet and a mortgage securitization process that uploaded shoddy loans into the investment ether. From sea to shining sea, real estate was becoming increasingly unreal.

In the growth years of the housing bubble the majority of securitized mortgages flowed through Fannie Mae and Freddie Mac. At one point Fannie and Freddie controlled roughly three quarters of the mortgage market. After investment banks put a hurt on their business (largely through subprime) Fan and Fred got into the subprime game — despite the fact that their government charter restricts the GSE’s sphere of activity to mortgages deemed “conforming.” Though this may be splitting hairs. As lending and securitization standards deteriorated so did the lines between grades of mortgages.

As we all know now, Fannie Mae and Freddie Mac are not just “mortgage giants” (the info-free term the press often used when covering Fan and Fred’s myriad scandals) but Government Sponsored Enterprises. Aka GSEs. Neither straight-up businesses nor flat-out government agencies, Fannie and Freddie have enjoyed the best of both worlds. With their privatized profits pumped by the implicit guarantee of socialized losses — in case of disaster break glass and soak taxpayer. That implicit guarantee has now become an explicit government takeover by the U.S. Treasury. The ultimate cost is unknown. Estimates run from billions to trillions. The Congressional Budget Office believes the bill should appear on the federal budget. According to the September 9th Financial Times (Cost of US-loans bail-out emerging) President Bush may not have realized the GSE surge would go on the federal books.

Taxpayers who fear toting the Fannie/Freddie load may find hope in the words of Treasury Secretary Henry Paulson as quoted by Reuters on September 8th (US’s Paulson: Fannie, Freddie costs difficult to know). “Many of us believe that this housing correction will stabilize in the months ahead . . . in that scenario, it’s very possible for not only the taxpayer not to be hurt or to make money, but for the shareholders to have some value restored to them.” Paulson didn’t mention how large the possible profits from the possible scenario might possibly be; it’s difficult to calculate possible returns without knowing the ultimate size of the forced investment.

More comfort for taxpayers: the Bank of China approves the takeover. As do other central banks in Asia. Where most of Fannie and Freddie’s debt is held. A September 8th article at Bloomberg.com (Zhou, Trichet Endorse U.S. Rescue of Fannie, Freddie) describes the go go reactions of a gaggle of big money boys. “This is positive,” glowed People’s Bank of China Governor Zhou Xiaochuan. “It should have a useful tranquilizing effect on the very stressful market,” intoned Joseph Yam, chief exec of the Hong Kong Monetary Authority. “Japan welcomes the U.S. action,” said Japanese Finance Minister Bunmei Ibuki. European Central Bank President Jean-Claude Trichet dittoed the welcome mat. But Polish central bank President Slawomir Skrzypek was a tad wet blanket. What if the takeover encouraged investors to take on more risk knowing government would bail out failures?

Ya think?

At the beginning of this decade the moral hazard question was raised by appraisers in their comments re lenders pressing for inflated values. Some appraisers thought that lending standards were deteriorating because lenders no longer held mortgages but profited upfront by selling them to Fannie Mae and Freddie Mac. And some suggested Fan and Fred were lax about the quality of the mortgages they bought since they made huge profits via securitization and that investors were equally sloppy because of implicit taxpayer backing. Which is now writ large in explicit stone.

Carola Von Hoffmannstahl-Solomonoff
Mondo QT

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Pundits are puzzled; why no lasting bounce for Obama post Berlin? He did boffo box office Over There. Evoking Kennedy and Reagan while recasting their image in 21st Century Bland. Back at the ranch John McCain straddled a hog — aka the war in Iraq — while hanging with bikers and firing off negative campaign ads. McCain may be older than Methuselah but he didn’t shoot blanks. The Obama camp cried foul over the Britney/Paris/Barack analogy but the real zinger was Charlton Heston.

For years NRA guy Heston was gun fun for gazillion stand-ups. Turn around was fairly playful in the McCain spot that featured Obama at his most messianic then cut to a shot of Heston as Moses parting the Red Sea. Subliminal image alert: did the split sea symbolize the divide between Dems re Hillary and Barack? Or was the jump-cut from Heston to a mental image of Obama parting a large body of water (a classic female symbol) meant to rile sexual insecurity in white men? According to New York Times columnist Bob Herbert, the ad comparing Barack to Britney and Paris was chock full of racist subtext and phallic symbols. As Freud said, “When correctly viewed everything is lewd.”

Though sometimes it’s just an exploding cigar.

Savvy pols snap jokes back at the cracker. Obama should have gotten into the Moses act — riffing how Republicans, as repped by Bush and McCain, are like unto a plague of locusts. Instead O and crew got seriously pious, calling the McCain ads “juvenile” and “cynical.” The latter being the big bad. Cynicism is a sin in the Age Of Hope. But cynics won’t go gently into the goody good night. . . .

Q: Wouldn’t President Obama and his robe riders mine the same bottomless pit of taxpayer money as President McCain and his cronies? And wield the same amount of insufficiently limited power?

A: Though the operational circumstances of an Obama administration would be the same, the outcome would be different because the intentions would be pure and guided by correct ideology.

The Peep’s Lawyer Speaks

The national stage isn’t the only place where cynicism is denounced. On July 22nd a crowd gathered at Albany High in Albany, New York (the state capital) to hear State Attorney General Andrew Cuomo give a speech about listening to the community. The event, which I attended, was part of the statewide (and state funded) Community Partnership Initiative, a project aimed at making the AG’s office more community friendly. Workshops were to be held after Cuomo’s speech under the aegis of officials from various departments. Since a slew of major political scandals have erupted in New York and Albany is the seat of state government, I figured a workshop on public corruption would be on the bill. Alas. No such. Mortgage fraud didn’t rate either. Even though New York ranks in the top ten states for the crime.

Mortgage fraud leads to waves of foreclosures that devastate neighborhoods. These days even folks who thought fraud was a wink-wink way to boost property values are concerned about foreclosures. Inner city nabes in Albany have been hit hard by mortgage fraud. Why no workshop? As said, the Community Partnership event was held at Albany High. The school has a record of violent incidents. The city has street crime problems. A 10 year old girl was recently killed by a stray bullet. Yet no workshops on gangs or drug trade were held either.

The local pols on stage with Cuomo were Democratic big wigs. The community as represented by the audience seemed heavily weighted with employees of state, county, and municipal governments and non-profit agencies. Well seasoned neighborhood activists were also present. Before Cuomo spoke the wigs made speeches. Including Albany Mayor Jerry Jennings and Albany County Executive Michael Breslin. Mayor Jennings (a former principal of Albany High) looked as tan and fit as ever and was as enthusiastic about the community coming together to solve problems as he’s been for 15 years. Providing problem solving doesn’t involve “being critical.” Because “pointing fingers doesn’t work.”

County Exec Mike Breslin struck a stern note. Expressing concern over the widespread perception of state government as dysfunctional. Saying if “we’re not careful we become cynics.” That Breslin included himself in the “we” made his warning all the more powerful. If such a venerable machine pol is in danger of becoming a cynic what hope is there for the average citizen?

Andrew Cuomo also addressed the cynicism issue. But first he tipped his hat to the pols who proceeded him. When giving Mayor Jennings the tip, Cuomo made a light reference to the 100 million bucks he’d delivered to Jennings when he (Cuomo) headed the U.S. Department of Housing and Urban Development (HUD) in the Clinton administration. Someone sitting behind me hissed to a friend “I’d like to know where it all went.” More proof (as if it were needed) of how pervasive cynicism has become!

Cuomo acknowledged that given recent events New Yorkers might have “good cause” for feeling negative about government and declared that a “lack of integrity” in public servants wasn’t acceptable. But according to Cuomo this “snapshot of cynicism” isn’t what New York State government is really about. He rhapsodized about the architectural grandeur of Albany’s many government buildings and how they symbolize the power and the glory of government. Cuomo’s rhetoric soared as he invoked the noble mission of politicians. I swan — it was almost like being in church. If cops hadn’t lined the aisles I wouldn’t have been shocked to see the government community holy rolling and speaking in tongues.

Cuomo did talk about other subjects. For instance, he described himself and his office as the “people’s lawyer” and urged the audience to “use us.” The 20 or so unaffiliated citizens in the room made note of the invitation. You never know when a fender bender might turn ugly.

Seriously folks, what’s with the anti-cynicism theme? Do pols fear the sneer is a sword aimed at the wack belief that government is way more than a necessary evil? Yet can’t be expected to provide basic services? To quote presidential candidate Paris Hilton: whatever. The cynics, united, can never be defeated!

Incidentally, workshops at the Community Partnership forum included ones on environmental protection, consumer issues, and Internet safety. The latter was addressed by several speakers. Albany County Exec Mike Breslin lauded Attorney General Andrew Cuomo for “protecting us and our children from pornography.” Cuomo’s comments on child porn included a denunciation of Internet anonymity.

Kiddie porn purveyors and users are scum. Still, I suspect pols want to crack down on Internet anonymity for a whole host of reasons. But then — I’m a cynic.

Carola Von Hoffmannstahl-Solomonoff
Mondo QT

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Go Brooklyn. A jury in that fair borough has found Emmanuel “Toto” Constant guilty of mortgage fraud and grand larceny. Emmanuel Constant is the former founder and leader of FRAPH, the Haitian paramilitary group that in the early 90’s systematically tortured and murdered thousands of supporters of deposed President Jean-Bertrand Aristide. Gang rapes and mutilation by ax were FRAPH specialties. The majority of victims lived in Haiti’s slums. Aristide, a Catholic priest enamored of liberation theology, was prone to totalitarian temptation. Some say he dabbled in drug traffic. Still, he was democratically elected by a desperately poor populace.

Try telling that to the CIA.

During the Clinton years Toto Constant got CIA jack. When Aristide returned to power (briefly) Toto snuck out the back. Entering the USA through Puerto Rico on a tourist visa. When Toto’s stateside presence was discovered it was kinda embarrassing for the Clinton admin. Threats of deportation were made. Supposedly Toto beat that rap by offering to reveal the details of his CIA deal on TV. Whatever. The Bloody One settled down in a lovely home on a quiet street in Queens. Though his residence in the USA remained legally dicey neither Clinton nor Bush deported him.

Eventually Toto became a licensed Realtor and mortgage broker. (In New York State having a rep for paramilitary excess doesn’t disqualify a person from becoming a real estate pro.) By the beginning of the new millennium Toto’s mortgage fraud career was flourishing. He was working with several overlapping groups of organized white collar criminals based in New Jersey and New York — zeroing in on low-income and/or Caribbean immigrant neighborhoods in Brooklyn and Queens. Toto also flipped out on Long Island, a regional hot spot of the national mortgage biz. Constant & crew employed all the tricks the FBI has been hollering about for years. Straw buyers, collusive bank officers, phony appraisers, forged docs, invisible rehabs, etc. One player bragged that their fraudulent appraisals had inflated the values of an entire down-at-the-heels neighborhood. Turning it into a pair of Manolo Blahniks. On paper.

Some of the biggest names in the mortgage game went for paper cranked out by Toto and his twisted business associates. One prime example: EMC Mortgage, son of Bear Stearns.

You can read all about Bloody Toto in Mortgage Fraud Land at Blogger News Network or NowPublic. Detailed trial coverage can be found at the Center for Constitutional Rights. Incidentally, Toto was warned about intimidating witnesses. He’d been making creepy phone calls. You can take the boy out of FRAPH but –

Carola Von Hoffmannstahl-Solomonoff
Mondo QT

“Se bon ki ra”
Good is rare
Haitian proverb

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Spring segued into Summer with Hillary Clinton’s white wedding. The hot wack was on as Milady Hill rolled in Joe Sixpack’s arms moaning how Joe wouldn’t go for O. The real wild thing? Mrs. Joe wasn’t jealous. She didn’t dis Hill like Hill’s pals did Bill’s gals. Trailer trash no sirree. Hillary, who served copious globaloney during her years as co-president, is a stand up rep for blue collar interests.

Ain’t nothing madder than mad love. Unless it’s mad mortgage fraud.

Back in April (it seems like an eon of Clinton ago!) FBI Director Robert Mueller gave a speech to the American Bar Association titled “Corporate Fraud and Public Corruption: Are We Becoming More Crooked?” The question was left open. Mueller wrapped up with a Teddy Roosevelt quote: “Character, in the long run, is the decisive factor in the life of an individual, and of nations alike.”

A few weeks later the FBI released their 2007 Mortgage Fraud Report. Illustrated with pics of slums featuring wall-to-wall rubble, bare slats, and torn out toilets. The dumps were dubbed “recently renovated condos” by appraisers who ascribed fantastic values. “Granite countertops” and “Brazilian hardwood” were cited. You know the bigger picture. They call it the housing bubble. Folks making chicken feed qualified for half-a-mil mortgages sans down payment. No-doc loans made lying easy. Teaser interest rates and deferred mortgage principle payments did the same for flipping. Realtors, brokers, and lenders embraced inflated appraisals and encouraged big eye buyers. Wall Street securitized the paper. Lap dog agencies rated it. The debt underlying gazillion derivatives grew ever crappier. Finally Ponzi popped.

Not all is doomster. According to the FBI mortgage fraud is going strong and adapting to the current market. Since more lenders now check credit records, mortgage fraudsters are increasingly relying on identity theft. Foreclosure rescue scams are also big. Perhaps both trends will end if the Housing Rescue bill passed in May by the Senate Banking Committee goes into effect and credit standards sink ‘neath a wave of underwater mortgages. The rescue goes this way: failing mortgages would be refinanced at better terms by lenders holding the paper. Among other things, they’d knock at least 15% off the original amount. Lender participation would be voluntary. Having their dud loans covered by government would be the incentive. Billions of dollars worth of refi would be insured by the Federal Housing Administration (FHA) using $500 million in funds channeled from Fannie Mae and Freddie Mac.

Since FHA money wouldn’t be at risk the Housing Rescue plan is being touted as taxpayer friendly. Quel shell game. Establishing a major new HUD mission (the FHA is a HUD sub) will cost taxpayers plenty. HUD never sez mission accomplished so operating costs will be forever. Particularly since a third of the rescue fund will eventually flow into a HUD-directed affordable housing initiative. Then there’s the Fannie Mae and Freddie Mac connection.

Fannie and Freddie are Government Sponsored Enterprises (GSEs). Though publicly owned they’re government poodles. The GSEs buy and securitize mortgages. The assumption is that taxpayers will bail them out should disaster strike. Fannie and Freddie have an extensive history of book juggling and in the last 3 quarters lost $11.1 billion combined. Yet they’re being cast as the financiers of assorted housing bailout schemes and as the prop for sagging high-end markets. The cap on the price Fannie and Freddie can pay for mortgages was recently lifted and Congress has relaxed requirements for their capital cushion. (Aka safety net.) The Housing Rescue plan passed by the Senate Banking Committee has to be reconciled with an even zanier plan hatched in the House of Representatives. A bill could be on Dubya’s desk by July 4th. Bring it on. If a load of steaming defaults hit the fan (and fred) taxpayers will know…

What Happened

In May, former White House press secretary Scott McClellan brought forth his tell-all book. Alt title: Why Are We in Iraq. Oh no! We were sold a bill of goods by a president for whom lies become truth when told with conviction. His vision of mushroom clouds clouded our vision. The real reason for Iraq? The neocon notion that democratization by force would bring reform to the entire MidEast. When the plan didn’t pan we got stuck twixt a rock and a hard place. Five years and counting. Bodies and billions.

On June 4th the Washington Post ran an article by Dana Milbank about Hillary Clinton’s non-concession speech after Barack Obama clinched the Democratic presidential nomination. Titled “In Defeat, Clinton Graciously Pretends to Win.”

In election years responsibility for the national condition gets laid squarely on the sitting or outgoing president. Candidates embrace or reject the admin’s record depending on political circumstances and depict the public as needing more of a good thing or succor from a bad. It’s as if the public were a bump on a log and the prez was a ruler rather than representative leader. The public doesn’t do enough to disabuse pols. Take the housing rescue thing. When candidates inveigh against predatory lenders and choke up over hardworking-Americans-facing-foreclosure nobody ever raises a hand and says, “Pardon me, but I resent being painted as a hapless Gumby. I actively lied about my income on my mortgage app in order to buy more house than I could afford and hid the fact that my downpayment was supplied by the seller. A whole lot of people in my nabe did the same. So there. Put that in your pipe and smoke it.”

Then there’s the Iraq war.

One night in early 2003, Dick Cheney and Karl Rove stole into homes across America and sprinkled zombie powder over the residents. President Bush was in DC watching on Homeland Security TV. Next day when folks awoke, newsmedia war drums were beating. (It’s important to remember that members of the fifth estate feared for their careers in the face of patriotic fervor and Bush’s poll numbers.) Still, questions about the wisdom of invading Iraq and the reality of Saddam as nuclear threat or 9/11 co-conspirator were being raised on the Internet by credible members of the military, intelligence, and foreign policy communities. The ideological reason for the Iraq war was also being discussed by neocon pundits and their critics. Though all this info was readably available to the enormous number of Americans who were online by 2003, the zombie powder made them forget how to use their computers.

After the powder wore off and people saw the Iraq mission wasn’t accomplished they put Bush’s numbers in the toilet and echoed Hillary Clinton re her vote in the Senate to give him war power. Saying “if I knew then what I know now.” More hindsight: Hillary shouldn’t have bought more presidential campaign than she could afford. Barack may have to help retire her debt. No mention of tapping taxpayers. Yet.

Carola Von Hoffmannstahl-Solomonoff
Mondo QT

Sources include but are not limited to:

Haggling on the Hill, The Economist, 05/22/08

Housing Rescue Plan Passed, John E. Mulligan, Washington Bureau, Providence Journal, 05/21/08

Senators say have deal on housing rescue bill, Patrick Rucker, Reuters, 05/19/08

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mailto:editor@mondoqt.com

Crank the Wayback Machine to Summer, 2005. When the U.S. Supreme Court allowed New London, Connecticut, to use eminent domain to take the property of people living and doing business in the waterfront neighborhood of Fort Trumbull. The Supreme’s decision on Kelo v. New London was the cherry on an ugly sundae. New London and the state supported quasi-public New London Development Corporation (NLDC) had been trying to take Fort Trumbull for years. The “public use” justification? Fort Trumbull, with its hodge podge of single and multifamily homes, and its mix of moderate and low income residents, could be replaced by a deluxe and delightful development project that would generate more revenues, easing the burden on New London property owners and providing more cash for local government and public education. (That nearby Pfizer Pharmaceutical also wanted Fort Trumbull to become a more upscale accessory wasn’t included on the official bennie list.)

A small group of Fort Trumbull owners (including Susette Kelo, under whose name the Supreme Court case was filed) resisted being sacrificed for the greater good. Even when paid some folks have a thing about being forced by government to git for the rich. Claire Gaudiani, then president of Connecticut College (a private college in New London that advertises itself as “highly selective”) and a former NLDC exec, decried the resistors’ selfishness — essentially claiming they were costing local minority children a better education. As for the elderly people and families in Fort Trumbull who didn’t want to leave long time homes, Gaudiani famously declared that “anything working in our great nation” had required “skin on the sidewalk.” New London’s manifest destiny was to become “a hip little city.”

Androids may dream of electric sheep, but urban planners fantasize over faux hip.

This is all water round the Fort Trumbull peninsula. After the last few resistors departed in 2006, Corcoran Jennison, the preferred developer for the Fort Trumbull project, got cracking on a tony utopia. A thousand condos bloomed. Crowds of affluent young professionals now sip lattes and tap laptops in cafes overlooking the Long Island Sound. Revenues are rolling in. Property taxes have been slashed and children are learning to read and write as well as kids did a half century ago.

The real squeal –

Fort Trumbull is a residential wasteland. Ain’t nothing going on but the mud. According to Corcoran Jennison, the makeover is mired in the slack lending market. Speaking of slack, Corcoran Jennison has been dragging its feet on the Fort Trumbull residential redo for years, citing a string of reasons. The NLDC has had to get tough with Corcoran time and time again. Stern warnings have been issued. Fines have been levied. Deadlines have been drawn and redrawn in the sand. And Corcoran Jennison’s residential plan, as presented to the citizenry of New London in 2000, has undergone some important changes. By 2006, the development model had morphed from condos into apartments. New London’s Zoning and Planning Commission had no authority over the switch from home ownership to multifamily rentals. The NLDC and its parent, the State of Connecticut Department of Economic and Community Development (DECD), called the shots. As it was in the beginning, so it continues.

The quasi-public NLDC controls the deeds to the land taken from Fort Trumbull’s property owners. The DECD is the financial power behind the NLDC and the taking and remaking of Fort Trumbull. Though a state agency supported by state taxpayers, the DECD channels mega money from the U.S. Department of Housing and Urban Development. Aka HUD. Overseer of the Federal Housing Authority (FHA).

In early March 2008, Corcoran Jennison made another change in its Fort Trumbull residential plan by seeking an alternative to conventional financing; asking the FHA to pick up the slack of the slack lending market and back a $11.5 million loan. The loan, provided by an approved lender, would be insured under the Section 220 program, which applies to multifamily housing projects in urban areas in need of revitalization. Despite the fact that such areas have lots of poor people and Corcoran Jennison is a big player on the regional government-assisted affordable housing scene, New Londoners need not fear that a low income enclave will replace moderate and low income Fort Trumbull. Luxury digs are still the name of the game. Income limits on tenants will NOT be restricted. So says Kristine Foye,* spokeswoman for the New England Regional Office of HUD. The president of Corcoran Jennison, Marty Jones, worked for HUD during the Ford administration. First in Washington and then as a multifamily housing rep in Boston. Please — no jokes about how many HUD bureaucrats does it take to screw in a revitalization…

Should Corcoran Jennison default on the FHA insured loan, HUD would pay back the lender and take possession of whatever was built, or partly built, on the land controlled by the quasi-public NLDC, which is controlled by the HUD-bucked DECD. Doubtless this doomsday scenario will never take place, since all the involved acronyms know real estate like Corcoran Jennison knows slack.

How Corcoran Jennison fared with their FHA loan request hasn’t been announced. Dire words about the developer’s lack of financing are coming from the NLDC. Corcoran Jennison faces yet another deadline at the end of May. According to NLDC president Michael Joplin** if Corcoran doesn’t come through with financing the NLDC could be “very close” to giving them the heave ho. Don’t count on it tho. The tangled DECD, NLDC, City of New London, and Corcoran Jennison relationship smacks of the US engagement in Iraq; getting in was a big mistake but getting out means loosing face. And while the mission may have changed into something completely different over the years, taxpayer dollars keep boots on the wasted ground.

Carola Von Hoffmannstahl-Solomonoff
Mondo QT

* “Fort Trumbull Developer Asks FHA To Back $11.5M Loan,” Kevin Dale, The [New London] Day, 03/14/08

** “Fort Trumbull Housing Plan in Jeopardy,” Kevin Dale, The [New London] Day, 04/30/08

Sources include but are not limited to:

Trustee Profile, Marty Jones, Urban Land Institute, Marge Fahey, 05/07

Planning & Zoning Commission Minutes, City of New London, 07/20/06

All Politics is Local, and Sadly, Sometimes Personal, Laura Mansnerus, New York Times, 07/03/05

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A raw March morning in Albany. The wind whistled round the Empire State Asylum for the Politically Insane. Dr. Edwards, the new chief of staff, was making his first tour of the facility. Dr. Murchison, his predecessor, was acting as guide. First up, the day room. X Governor Eliot Spitzer had slipped his restraints and was running amuck. Several orderlies were trying to tackle him. But Spitzer was as nimble as a he-goat. Springing to a table top, he kicked a game of checkers into the laps of State Senate majority leader Joe Bruno (R) and Assembly speaker Sheldon Silver (D). The two were deep in a dream of divine right; a not uncommon condition in places where pols hang together forever. Those who hang separately have other problems…

“Welcome to my nightmare,” cackled Spitzer as he stripped to his socks in a split second. “Begone lewd varlet,” commanded Bruno and Silver. The orderlies made a grab for Spitzer’s legs but the Luv Guv (as the nurses called him) evaded their grasp. With a spray of spittle and a cry of Hi Yo Silver, he sprang at the state reps. Silver dodged neatly. Bruno didn’t. Spitzer landed on him full force, rassling him to the ground, screaming something about helicopters, a hot poker, and the senator’s posterior. A nurse jumped into the fray and jabbed Spitz with a mega dose of horse tranquilizer. That did the trick. The orderlies wrapped Spitz in canvas and stood him in a corner right next to current Governor David Paterson. Paterson didn’t notice. He was busy broadcasting his extramarital affairs through a megaphone made from a rolled-up newspaper. A crowd of inmates pretending to be reporters took notes with invisible pencils. “I’m from the Albany Times-Union,” shrieked one, “and we were not used by Spitzer!”*

“It’s not like this all the time,” apologized Doctor Murchison, “the moon must be full.”

On the sun porch things were quieter. U.S. Senator Hillary Clinton was seated at a desk by the window, making notes on a legal pad. (Patients well enough to be on the porch were allowed to have pencils.) The pad was bulging with pages of closely written notes. Hillary suffered from a form of Napoleon Syndrome. She believed she was entitled to be president. Her belief was buttressed by a complex delusional system, including the conviction she’d already been POTUS. Albeit secretly. Like Pope Joan.

“What are you working on today, Madam President?” asked Doctor Murchison.

“My plan to fix the housing crisis,” said Hillary, without looking up.

Muchison and Edwards looked over her shoulder at the notes, half expecting to see the phrase “all work and no play makes Hill a dull girl” repeated again and again. But no. Hillary had indeed been working on a housing fix. Taxpayers, in the form of the Federal Housing Administration (FHA) would “stand ready”** to spend billions upon billions to buy, restructure, and resell failed mortgages. The fix would be “designed to be self-financing over time — so it would cost taxpayers nothing in the long run.”

“Note the patient’s inability to realistically conceptualize time,” hissed Dr. Murchison to Dr. Edwards, “and her disconnect from the immediate financial needs of wage earners.”

But Edwards didn’t hear Murchison’s comments, so startled was he by another aspect of Hillary’s plan. Her fix was to be guided by a group of economic experts headed by Federal Reserve Chairman Alan Greenspan and former U.S. Treasury Secretary Robert Rubin, chairman of the board at Citigroup.

Dr. Edwards had been on staff at the National Subprime Lending and Derivative Disease Center, so he was familiar with the role Alan Greenspan, via his interest rate cuts and inability to confront lenders, had played in creating the epidemic known as the Housing Bubble and its secondary manifestation, the Credit Crunch. As for Robert Rubin–! Before becoming chairman of the board at Citigroup, Rubin had been chairman of the executive committee. Top exec Rubin snoozed while CDO sickness metastasized. Massive write-offs and write-downs of CDOs and other mortgage related debt gave Citi the shakes in 2007. First quarter prognosis 2008? Not looking great.

Then there was Citi’s bailout of Ameriquest Mortgage, as facilitated by Robert Rubin at the behest of Massachusetts Governor Deval Patrick. Patrick was a former board member at ACC Capital, Ameriquest’s parent company. Ameriquest was a top subprime lender, with a predatory record. They did business in 49 states: attorneys general in all 49 sued. Ameriquest settled in 2006, but admitted no wrongdoing. The settlement required, among other things, that Ameriquest not encourage borrowers to lie about their incomes. By early 2007, Ameriquest was coming apart. After Patrick contacted Robert Rubin, Citi kicked in a capital infusion and line of credit. The deal raised eyebrows because Citi did extensive business with the State of Massachusetts. After Ameriquest folded, Citi acquired chunks of ACC Capital, including Ameriquest’s wholesale origination lending unit, Argent Mortgage. Argent is now at the center of a major mortgage fraud prosecution in Florida, with prime players based in New York State.

“Sick sick sick,” thought Dr. Edwards as he eyed Hillary’s housing fix. He conveyed his diagnosis to Dr. Murchison by making a whirling motion near his head with his finger. Murchison nodded and mouthed, “back to the day room.”

Hillary seemed to sense something amiss. She ducked her head down close to the desk. Her eyes darted back and forth. “Damn those snipers,” she said to an imaginary entourage, “this was only supposed to be a greeting ceremony. Kiss the baby, grab the flowers and go.”

Suddenly Hillary leaped to her feet. Bending low to the floor (in her mind, the tarmac of an airport in Bosnia) she bolted for the door. Murchison pressed a buzzer on the wall. Edwards took note of where it was located. He had a feeling he’d be needing it. NYC Mayor Michael Bloomberg had just entered, carrying his Congestion Pricing Plan.

Carola Von Hoffmannstahl-Solomonoff
Mondo QT

*‘Times Union’ State Editor: We Were Not Used By Spitzer, Joe Strupp, Editor & Publisher, 03/24/08

**Clinton proposes Greenspan lead foreclosure group, Jeff Mason, Reuters, 03/24/08

Sources include but are not limited to:

Update: Citi To Post Deeper-Than-Expected 1Q Loss: Oppenheimer, Ed Welsch, Dow Jones Newswires, CNN, 03/26/08

Former Vice President, Account Executive of Subprime Mortgage Lender Charged with Racketeering, Mortgage Fraud, and Grand Theft, News Release: Office of the Attorney General of Florida, 03/25/08

Charges announced in fraud case involving Argent, Sunstate, Tampa Bay Business Journal, 03/25/08

The Housing Crash Recession: How Did We Get Here?, Dean Baker, NOW on PBS, Week of 3/21/08

Robert Rubin on the job he never wanted, Carol Loomis, Fortune/CNNMoney.com, 11/27/07

Governor made call on behalf of lender, Frank Phillips, Boston Globe, 03/06/07

Millions to settle loan abuse, Kathleen Pender, San Francisco Chronicle, 01/24/06

Workers Say Lender Ran ‘Boiler Rooms’, Mike Hudson, E. Scott Reckard, Los Angeles Times, 02/04/05

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Jeez. The Clinton Obama show is killing comedy. Great jokes are getting lost in the sauce. Did you hear the one about Federal Reserve Chairman Ben Bernanke? Ben walks into a bar. A pair of antlers on his head. “Been cuckolded, mister?” asks a chippy, trying for a pickup. The bartender (a squirrelly guy with no chin) answers for Ben. “Nah — he’s just worried about stagflation.”

Not.

On February 28th, Fed head Ben told the Senate Banking Committee “I don’t anticipate stagflation”* and conveyed his willingness to keep cutting interest rates and inflating the price of food, fuel, and clothing, “I think you have your priorities straight” said Senator Even Bayh (D-Indiana). OK OK. Bayh only said good dog re the rate cuts, not the other stuff. Going for quick fixes and ignoring long term consequences is standard shtick in Congress. From the same trick bag: pushing the government-sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac as a housing bubble bailout machine.

Fannie Mae and Freddie Mac check into a motel. “Did you bring protection?” asks Fannie. “Aw Baby,” sez Freddie, “everyone knows taxpayers have our risk covered.”

Fannie Mae and Freddie Mac’s government-sponsored mission is to buy mortgage loans from lenders. The loans are held in the GSE portfolios, or securitized and sold to investors. According to New York State Attorney General Andrew Cuomo (more on Andy in a minute) the GSEs buy nearly 80% of USA home loans. Though the GSEs aren’t pure government agencies, they benefit from an assumption that taxpayers have their back. Despite Fannie and Freddie’s massive exposure to mortgage debt, official policy on the degree to which taxpayers would be tapped to avert a GSE disaster is unclear.

In 2007, defaults on mortgages purchased and securitized by Fannie and Freddie produced billions of dollars in losses. Both say 2008 is slumping the same. Yet the GSE regulatory agency, the Office of Federal Housing Enterprise Oversight (OFHEO), recently lifted the cap on Fan and Fred’s mortgage-based portfolios, allowing them to acquire more more more. OFHEO (a sub of the US Department of Housing and Urban Development aka HUD) will also be easing a mandate on GSE capital requirements. The mandate was slapped on Fan and Fred due to accounting scandals and required the GSEs to hold 30 percent more than before their book-juggling was discovered. But too much capital reserve means not enough GSE action. And as President Bush and Congress demonstrated with the Economic Stimulus Act, action is everything.

While most famous for one-shot tax givebacks, the Stimulus Act also authorizes the GSEs to buy and securitize larger loans than previously allowed, in hopes that a jolt of liquidity implicitly backed by taxpayers will revive inflated real estate markets and securities based on outsize mortgage debt.

Speaking of artificial enhancement, the specter of appraisal fraud inflating loans bought and securitized by the GSEs was dealt a blow in early March when OFHEO, in tandem with Fannie Mae, Freddie Mac, and New York State Attorney General Andrew Cuomo (a former HUD head) announced an agreement to “combat” appraisal fraud with a new Home Valuation Code of Conduct. Alt moniker: the “New Home Valuation Protection Code.” Among other things, the code prohibits interested parties from coercing appraisers. Since coercion can be hard to prove, code enforcers will have to look sharp. Complaint hotlines, funded by lenders and monitored by their totally independent Chief Compliance Officer or General Counsel, should prove helpful. As will a new national hotline. Anyone who’s ever rung up HUD or any of its subs knows how effective whistle-blowing by phone can be. The only thing better is a letter.

Also verboten by the code: lenders accepting appraisals “completed” by appraisers selected and compensated by certain third parties. To paraphrase Heidi Klum, mortgage brokers and real estate agents are out. Correspondent lenders and appraisal management companies are in. Albeit behind strictly defined Chinese Walls. Which could get a redo. The Home Valuation Protection Code doesn’t go into effect until 2009. In the meantime, agreement by federal banking agencies is being sought and comments by market participants will be considered. (Maybe the new prez will weigh in…?) And while the code won’t kick in till next year, the Economic Stimulus of jumbo GSE is a done deal. As is OFHEO’s cap lift on Fannie and Freddie’s portfolios, and the easing of their capital requirements. Not to worry tho. OFHEO Director James B. Lockhart will be “closely monitoring” the period in which the Home Valuation Protection Code does the Limbo.

Anyone who has checked out GSE history knows how effective OFHEO can be. Only a letter is better. Such as the one Andrew Cuomo sent Fannie Mae and Freddie Mac in November, 2007. Bearing news of subpoenas and a demand for an independent examiner to review all appraisals and mortgages purchased by Fannie and Freddie from Washington Mutual (WaMu), the nation’s largest savings and loan. GSE transactions with other lenders would also be examined as part of what a Cuomo press release called an “industry wide investigation into mortgage fraud.”

The mere thought gave Wall Street ajada. But the big look-see is past tense. Put to bed by the agreement to establish the Home Valuation Code — and to create an Independent Valuations Protection Institute. The $24 million price for the institute to be paid by Fannie Mae and Freddie Mac. (Who don’t acknowledge any wrongdoing, but do support sound appraisals.) The Protection Institute will monitor lenders doing GSE business for code adherence; the board of directors will be approved by, and answer to, Andrew Cuomo. And oh yeah, OFHEO.

New York State Attorney General Andrew Cuomo strides into Washington, DC. He helps himself to a hefty hunk of regulatory power over a linchpin of the US economy. One implicitly backed by taxpayers. “Hey Bud,” comes a voice from the peanut gallery, “who died and made you king?”

Carola Von Hoffmannstahl-Solomonoff
Mondo QT

*U.S. is not falling into stagflation: Bernanke, Greg Robb, MarketWatch, 02/28/08

Sources include but are not limited to:

OFHEO, NY Attorney General, Fannie Mae and Freddie Mac Sign Agreements To Combat Appraisal Fraud, Press Release, OFHEO, 03/03/08

Cuomo strikes deal with Fannie, Freddie, Forbes, AFX News Limited, 03/03/08

Freddie and Fannie Promise To Play Nice, Forbes, 03/03/08

Risks seen for growing Fannie, Freddie, Marcy Gordon, AP & Kansas City Star, 03/01/08

Freddie Mac’s Quarterly Loss Widens, Reuters & New York Times, 02/29/08

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