Ah, mortgage fraud. The unsung power tool of the housing bubble. Starting around 1999, the FBI issued repeated warnings that mortgage fraud was surging. Few in government listened. Fraudsters ranged from organized cross-country rings of real estate, banking, and investment professionals, to non-profit profiteers and Joe and Joan Doakes lying on mortgage aps ’cause they just had to have that house. Feeling nostalgic about the big grift that sent no major players to jail but left taxpayers holding the Hefty and the landscape blotted with foreclosures? No need. Boom or bust, the impetus for mortgage fraud is a constant. When housing is hot there’s pressure to keep the market booming, in bust mode there’s pressure to jack it back up.

According to Core Logic (a leading provider of business information), after taking a breather in 2009 mortgage fraud increased more than 20% in 2010. (The Mortgage Asset Research Institute reports that Florida and New York lead the nation at number one and two respectively.) With government now owning or insuring 97% of mortgage bonds via Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA), taxpayers are on the hook more than ever. And they’re paying for new twists. Quoting* mortgage fraud attorney L. T. Lafferty, a former federal prosecutor specializing in white collar crime, “fraud is … perpetrated differently when there are different opportunities.”

When one door closes, another opens…

Loan origination fraud, a mortgage fraud staple, is seeing new emphasis on hiding debt and liabilities. (Prior mortgage defaults? No problem.) Due to increased requirements for proof of income, credit, etc., mortgage fraud rings increasingly rely on identity theft rather than fake documents — thereby involving a wider circle of victims. Then there are the homebuilders with a glut of houses or condos who offer buyers financial incentives that aren’t disclosed to lenders. After buyers obtain loans, builders welch on the incentives. Oops, more underwater mortgages. Faked occupancy is on the rise. (Loans for second homes, and for rental properties without an owner in residence require larger down-payments and higher interest rates.) And hey — foreclosure rescue scams are on fire! Loan modification, refinancing, short sales, real estate owned (REO) sales, and government sponsored programs are being mined big time. Of course, almost the entire housing market might now be called a government sponsored program…

To date, taxpayers have kicked in $153 billion just to prop up Fannie Mae and Freddie Mac. Fan and Fred’s oversight agency (an organ of the FHA) estimates that the agencies’ losses through 2013 will require another infusion of between $68 billion to $210 billion. In government speak, a massive transfer of wealth from the general public (roughly one third of whom are renters) to cover a mountain of bad private assets is called an “investment.”

In Washington, the Obama administration and Congress are trying to hammer out a plan for “weaning the $11 trillion mortgage market from its dependence on government.”** The weaning, which will allegedly include the waning of Fannie Mae and Freddie Mac, must be done carefully and slowly so as not to damage the fragile housing market. (When the market was robust, reform was rejected ’cause it might damage the boom.) A time frame of five to seven years has been mentioned. By then the full wean will be in the hands of the next administration. In the meantime, the real estate lobby is beating down doors in DC, to make sure that nothing (untoward) is accomplished. The National Association of Realtors, the American Bankers Association, the National Association of Home Builders, the National Council of State Housing Agencies, and the National Fair Housing Alliance are united by their determination to protect folks from being cheated out of the American Dream of Home Ownership.

Do Mollusks Dream of Electric Drills?

Mortgage fraud isn’t the only real estate product backed by taxpayer investment. There’s always (forever and ever) urban revitalization. Point of info: investment in urban revitalization does not put the truly needy in safe, clean public housing and bring industry back to fading blue collar cities. Instead it pumps luxury condo enclaves, twee art and restaurant districts, and political corruption. Perhaps no place exemplifies this type of urban revitalization better than Hoboken, New Jersey. A small (one mile square) waterfront town across the Hudson River from Manhattan, which after biting post-industrial dust was reborn as the jewel of government-backed new urbanism. That almost all of Hoboken’s blue collar residents were pushed out of town in favor of wealthier professionals largely employed by Wall Street mattered not. Gazillion urban planners saw the future and it was Hoboken.

What they didn’t see were the mollusks. More about them in a minute. First, the corruption. Everyone saw the corruption. Over the roughly three decades in which Hoboken became the revitalized gem of Jersey’s “Gold Coast,” developers and public officials from Hoboken and its parent entity Hudson County, went down like nine pins; bowled over by federal and state investigations frequently targeting corruption related to government-backed development projects. The U.S. Department of Housing and Urban Development (HUD) and U.S. Department of Transportation were soaked again and again. As were assorted state agencies. Tax breaks were/are crony candy. Hudson County’s other cities revitalized their historic corruption with equal fervor, inspired by Hoboken’s new urban success.

Hoboken eventually became one of the most valuable chunks of real estate in the country. Yet taxpayers have never stopped investing in its revitalization. The promenade that stretches along the city’s condo-lined waterfront was a mega investment. The walkway and its park areas are open to the public. Hoboken’s master builders would have preferred waterfront access to be restricted to condo dwellers but local green space activists fought not only to keep it open, but to expand the walkway into an unbroken strip running along the entire Gold Coast. Since public largess was powering waterfront development, developers had to bend. Pols scrambled to speed their plow, cutting government red tape re construction. In Hoboken the promenade was largely in place by the 1990′s. New Jersey’s Department of Environmental Protection signed off on it every step of the way.

Now we get to the mollusks.

The first cave-in on Hoboken’s promenade occurred in 2007, at Castle Point Park in mid Hoboken. Just a small collapse. No cause for alarm. But two years later, part of a sports field that had been built atop a pier slid into the Hudson. When the field was developed in the 90′s engineers warned that the pier’s pilings were infested with shipworms, a type of mollusk. Shipworms eat wood. Suggestions were made that the pilings be replaced with something less tasty. The suggestion went into the memory hole.

In early 2010, a section of the walkway in the north, near a cove between Hoboken and Weehawken collapsed. Last October, a fifty foot sinkhole opened on Frank Sinatra Drive. (Sinatra was a Hoboken boy.) The drive, which is 13 years old, runs along the river in front of a strip of luxury condo towers — including one which houses former NJ governor and ex Goldman Sachs boss Jon Corzine. The sinkhole, which was also allegedly caused by mollusks, followed two smaller collapses on Sinatra. Recently, engineers determined that the steel beams supporting Pier A, a popular park on the south end of the promenade near Hoboken’s train and ferry stations, need a makeover. Seems the concrete jackets on the beams aren’t covering all they should. No danger from salt water corrosion yet. Just being proactive. Pier A is like, totally safe.

Despite all the wealth that hangs in Hoboken, the city has severe financial problems. Hoboken isn’t the only entity responsible for repairing the collapsing waterfront (as example, Sinatra Drive was a county project) but the city will have to cover much of the rehab. The cost will be more than the entire city budget. Massive debt will be assumed via bonding. According to the New York Times,*** Mayor Dawn Zimmer (elected in 2009) is holding out “hope for state and federal aid.” And Hudson County is hoping to obtain federal grants to repair the Sinatra sinkhole. As for the mollusks, they have high hopes for more wood.

*Mortgage Fraud: Worse Before Better, Expect More Schemes and More Regulatory Oversight in 2011, Tracy Kitten, Managing Editor, Bank Info Security, 02/04/11

**Obama Administration Calls for Winding Down Fannie, Freddie, Lorraine Woellert and Rebecca Christie, Bloomberg News, 02/11/11

***As Hoboken’s Riverfront Crumbles, the Cost for Repairs Soars, Richard Perez-Pena, New York Times, 02/08/11

Here’s the thing. When you talk about Albany to people outside the Capital Region most think you mean New York State government. In election years the reality of Albany as a specific place, not a symbol of pols-gone-wild, becomes even more difficult to convey. A shame, because the city of Albany has all sorts of exciting stuff going on. Particularly on its downtown real estate scene.

On October 22, fire broke out in an enormous (11 stories, 500,000 square feet) abandoned warehouse on the Albany waterfront. Smoke blanketed a large section of downtown, an adjacent highway, and a railroad bridge that carries Amtrak over the Hudson River to points west. Central Warehouse aka 143 Montgomery Street burned steadily for three days and continued to flare for six, with firemen hosing it down from the outside due to fear of possible combustibles and hazards within. Nearby neighborhoods inhaling the smoke had no need to be concerned — the New York State Departments of Health and of Environmental Conservation issued words of reassurance. Saying the smoke wasn’t packed with too many particulates and that the thousands of pounds of ammonia gas that once graced Central Warehouse (a former refrigeration and dry storage facility) had been drained by its circa 2000 owners.

What-to-do-with-Central-Warehouse has been a downtown Albany development question for decades. Abandoned since the late 1980′s, Central Warehouse (CW) reached rock bottom in ’97 when it was sold for a dollar and back taxes. Since then it’s passed (some might say flipped) through a number of hands with the price steadily rising along the way. The last sale took place in 2007 for $1.4 mil. The buyers were a team composed of Axiom Capital Corp., an Albany-based commercial real estate financing firm and CW Montgomery LLC (also CW Montgomery Street LLC), a group of undisclosed partners. The New York State Department’s Division of Corporations shows CW Montgomery and an entity named Axiom Realty Management LLC registered at the same address on State Street in downtown Albany.

When Axiom bought Central Warehouse they expressed belief the state might kick in a $5 million rehab grant from the Restore New York Communities Initiative. Restore New York is administered by Empire State Development (ESD), a quasi-public corporation. Though not an actual government agency, ESD has the power to dispense massive amounts of taxpayer cash. Restore New York grants are intended to favor projects in Empire Zones (a tax-breaks-for-job-creation program recently scrapped due to corruption and ineffectiveness) and in “Brownfield Opportunity Areas.”

The post-industrial area in which Central Warehouse sits is nothing if not brown.

Among the hands through which Central Warehouse passed are those of Brooklyn developer Joshua Guttman, doing business as Albany Assets LLC. It was Guttman who in 2007, allegedly sold CW to Axiom and the undisclosed partners of CW Montgomery. Apparently Guttman had tried to market the building on eBay for more than $3 million. Joshua Guttman (no relation to Caspar Gutman, the morbidly obese, obsessive seeker of the Maltese Falcon) has a history of troubled development projects turned smoky. Most dramatic example: the 10 alarm Greenpoint Terminal Market fire of May, 2006. The fire was one of the worst in New York City history. The immense and historic Brooklyn waterfront property was left in total ruins. Declared arson, the fire was ultimately laid at the door (shopping cart?) of a vagrant stealing metal fixtures.

Joshua Guttman is currently embroiled with the city of Hartford, Connecticut (the state capital) over a property he and his son own as Myrtle Realty LLC. The property, Capital West, is a highway visible office complex with a Myrtle Street address. According to the Hartford Courant, Capital West is “regarded as one of the city’s worst blighted properties.”

Albany, N.Y., Mayor Jerry Jennings (right) and Fire Chaplain Rev. John Tallman observe firefighting efforts at the Cental Warehouse October 22. Photo by Sébastien Barre

Central Warehouse is one of Albany’s worst blighted properties. Despite all the hands that handled CW, no rehabs happened. But over the years talk was talked by its buyers and sellers, local development officials, and Albany Mayor Jerry Jennings. (Jennings has been mayor since before CW was sold for a dollar.) Central Warehouse was repeatedly said to be on the brink of becoming a condo and/or commercial palace. Sure, the highway overpass and railway bridge right outside the non-existent windows on the upper floors were a tad problematical. As were the non-existent windows themselves and assorted environmental hazards within the structure. CW is a veritable concrete fortress. Chock full of no-longer acceptable materials. Punching out windows and removing the bads would be difficult and monumentally expensive. Not impossible tho. As for the highway overpass, if the projected young professional residents of the warehouse looked past the stream of cars flowing by their windows, they’d have a glorious view of the Hudson River. The railway bridge? Mooning Amtrak from the comfort of your loft-style condo is a great way to cap bar crawls.

Yep — the plans to revitalize Central Warehouse were grand. (Even if nobody really touted the mooning thing.) Alas. As the real estate bubble deflated, so did the plans. The asking price for the warehouse went the other way.

By September 2010, Central Warehouse (aka 143 Montgomery Street) was on the market for $4.9 million. Offered by Carrow Real Estate Services of Albany, described as a prime development opportunity with “possible grants available for rehab.” Carrow is headed by Charles M. Carrow. On the company’s website Charles Carrow is described as a board member and treasurer of the Downtown Albany Business Improvement District (BID). The BID knows good grants. (Like other BIDs, they also have the power to levy special taxes within their borders.) However, Mr. Carrow isn’t listed as board member or treasurer on the BID’s current site.

But back to the blaze. The fire at Central Warehouse was immediately considered suspicious. Vagrants had been spotted on the premises. As were mysterious workers who seemed to be removing fixtures. On October 28th, the alleged culprits behind the fire were identified. The mysterious workers done it. A local contractor and crew, who were engaged until last June in legit fixture removal at the behest of the warehouse owners, had allegedly snuck back in. Folks at neighboring businesses had seen them going to and fro for weeks, lugging out truck loads. Those responsible for property management at Central Warehouse apparently didn’t notice the action — or the tons of missing fixtures. While popping pipes, the thieves’ tools had sparked, thereby igniting the highly flammable cork-lined walls at the warehouse.

Despite the fire damage Central Warehouse isn’t in total ruins. As said, it’s a concrete fortress. The property is probably good for several more rounds of real estate games. In the immediate future will the damage mean “New Price” for CW? If so, will it move down — or up? And if a buyer bites will the possible rehab grants materialize? Stay tuned…

By the buy, don’t expect New York’s new governor, be it Andrew Cuomo (shoe-in) or Carl Paladino (snowball in hell) to cancel the capital city’s real estate games. Paladino, a Buffalo developer who leases miles of office space to state government agencies, was instrumental in getting the Empire Zone program expanded from Buffalo’s inner city to its office tower downtown. Collecting more than $300 mil in tax bennies along the way. Ex HUD head Andrew Cuomo? The lion’s share of his political contributions come from real estate industries, including some of New York’s most powerful developers.

Game on.

Carola Von Hoffmannstahl-Solomonoff
Mondo QT

Send comments or confidential tips to:

mailto:editor@mondoqt.com

["Fire at the Central Warehouse" photo by Sébastien Barre; CC BY-NC-SA 2.0]

Welcome, fellow freedom fighter. Thanks for being interested in the Conspiracy.

In this production, we study the fallacy of what seems to be all the political rage today: so-called “energy independence.” Gardner Goldsmith looks at why being interdependent, or perhaps it is best put as “inter-exchangeable,” is most productive. Then El G Grande studies why the US government “cracking down” on child workers is a bad, bad thing.

All here! Comment at www.libertyconspiracy.com

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Many thanks to fellow Conspirator Paul Gibbons, who sits down with Gard in this audio to respond to claims that the BP oil leak is the result of unfettered market activity.

It is, rather, the result of all sorts of government favors and regulations that impede the proper establishment of a private property paradigm and restrict liability.

Lots to enjoy in this one!

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Join us in the Conspiracy as Gardner Goldsmith explains what Sarbox means when it comes to federal regulation of business, as GG details the nasty reality of the new financial regulatory mess, and as Gard looks at the Feds’ consideration of regulating SALT. That, plus a look at the EPA and its attempt to recruit children into a sort of Hitler Youth Brigade for “the Environment.”

Amazing stuff, the politicians simply don’t see how similar they are to despots who have already lived.

Check it out! It’s all from www.libertyconspiracy.com!

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["Salt Shaker" photo by Lenore Marie; CC BY 2.0]

As we head into the summer driving season and gasoline prices are again creeping up, the administration has announced plans to explore opening up more off-shore areas for exploration and drilling. On the one hand this can be lauded as a positive step. On the other hand, it is too little, much too late to have any meaningful or long-term effect on what Americans pay at the pump any time soon, if at all.

Indeed, if increasing domestic energy production was really a priority, the administration would direct the EPA to remove its many roadblocks and barriers to energy production. In fact, abolishing the EPA altogether would do much to improve our country’s economy. Instead of protecting the environment as they are supposed to do, most of what they do simply chills the economy. Polluters should be directly liable in court to any and all parties they harm, rather than bureaucrats at the EPA.

Of course, last week’s announcement was couched in terms of removing barriers and red tape. However, the fact that we had these barriers in the first place is yet another reminder of how the energy market is hampered and controlled by bureaucrats and central planners in Washington, rather than the demands of the people and the decisions of private investors.

Consider how extremely negative our government’s reaction has been to other governments around the world that have nationalized their oil and energy industries, such as Venezuela and Iran. We deposed a democratically elected leader in Iran in 1953 for this very reason. Yet the level of involvement of our government and bureaucrats in energy is nearly absolute. Of course, the only thing worse than our government dictating energy decisions to its own citizens is our government dictating energy decisions to the citizens of other countries.

Along with the waste of prohibitions that leave our own natural resources untapped is the waste our government perpetrates with subsidies to alternative fuel sources. There is certainly profit to be made in perfecting cheaper, cleaner fuel sources, but government subsidy programs interfere with finding realistic long-term solutions. Subsidies divert resources towards certain politically-favored fuel types while ignoring others. If the market were left alone, private investors would put their own capital into the most promising alternative fuels. Instead, due to government incentives, resources are concentrated into politically chosen endeavors that could very well end up being dead ends. Meanwhile, precious time and money is wasted.

The government has the opposite of the Midas touch. This has been observed over and over by the reduced quality and rising prices in every private industry in which it entangles itself. Yet somehow people still seem willing, even eager, to relinquish to government control the most important and sensitive portions of our economy and society. Education, health care, and energy are all unfortunate examples of industries that are in my opinion, far too important to be left to government control when it is the market that has the golden touch.

["Gas Price" photo by Bev Sykes; CC BY 2.0]

Please join us for our great tradition: Al Gore singing classic Christmas Songs, with a global message!

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Join us as we check in with fellow Conspirators in the US, Australia and the UK, and look at issues such as Global Warming myths, the Queen, Donnie Darko, and Albert Jay Nock!

It’s all here for you to take a listen, whether you be at your computer, in your car, or on a plane. Thanks for battling for freedom! Call our hotline at 206-984-1069 to offer your thoughts on ANYTHING!

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["Cap and Traitor" photo by MeetTheCrazies; CC BY 2.0]

You could power 9,800 homes for a year on the energy that the U.S. Department of Energy is wasting by not using setback thermostats in its facilities, many of which already have the setback thermostats installed.

According to a report made public last week by the department’s inspector general, DoE was not using setback capabilities at 35 of the 55 buildings reviewed, because the systems were not maintained, or officials simply weren’t interested in using them.

After the inspector general’s visit, though, those agencies went on a crash course to start using the systems.

Setback thermostats are programmable to allow for heating or cooling to be reduced during the times when a building is unoccupied or needs less energy. In your home, a setback thermostat saves energy by automatically setting back the temperature when you are at work or sleeping. In an office, the temperature would be set back during non-working hours.

According to the DoE, homeowners can save as much as 15% on their energy bills by replacing an old thermostat with a setback thermostat. Businesses can save much more; the inspector general noted that savings could be as high as 40% for some of the buildings it inspected.

Department managers agreed to begin using setbacks, to require them in future building lease agreements, to train personnel on how to use them, and to consider keeping them properly maintained. You read that right; they will consider it.

Since part of the reason for the DoE to exist is to promote energy conservation, and the cost savings dramatically exceed the implementation costs, “we could find no plausible reason for the lack of interest in setbacks” among DoE officials responsible, according to the report. Some officials said it was “simply not a priority.”

What attracted my attention to this story wasn’t just the waste, which you can find anywhere in government, but a bizarre comment from a policy wonk.

Harvey Sachs, a senior fellow at the American Council for an Energy-Efficient Economy, said he was not terribly surprised by what he called “just one example of almost universal market failures” when it came to energy conservation.

“If I was in the nuclear management business,” Mr. Sachs said, “I imagine there would be much more urgent stuff for me to worry about than where the thermostat is set.”

But, he added, the results of the audit were another sign that “for a lot of reasons, energy efficiency has not gotten as much play as it should have.” — New York Times

So a failure of the Department of Energy to save energy is somehow a market failure? I want some of what Harvey Sachs is smoking.

To start, some “evil greedy capitalist” came up with this setback thermostat thing in the first place! These systems have existed for home users since at least the 1990s; many office buildings have had them even longer, and it’s been widely known for decades that dialing back the heating or air conditioning when nobody is around will save energy. Not to mention that the more energy saved, the more environment is saved. What a horrible thing for the market to do!

Here’s your homework for tomorrow. Go find your office building’s physical plant manager, facilities manager, or whatever the job title may be. Ask him or her if the building uses a setback thermostat, and if so, how much money it saves the company. Then check your own home to see if you have a setback thermostat, if you are actually using it, and how much money it is saving you. Report back to me with your findings. Also, I know a few of my readers work in HVAC. I’d appreciate a more complete history of setback thermostats, if you know anything you can share.

The inspector general has also taken DoE to task in the last year for failing to activate power saving features of its desktop computers and for failing to consolidate data center operations to save both operational and energy costs.

The DoE’s energy bill is only $300 million, so maybe saving a few million here and there isn’t a priority. But it’s apparent that for the Department of Energy, being responsible stewards of taxpayer money, not to mention the environment, is “simply not a priority.”

There’s just too much information on the Internet these days, and it’s killing the poor old newspaper. That’s why we need a tax on information technology to reduce the flow of information, according to one proposal.

You heard right. The proposal, put forward by environmental analyst Dusty Horwitt in an op-ed in the Washington Post last week, calls for a “progressive energy tax.” It would “reduce the supply of information” by “making some computers, Web sites, blogs and perhaps cable TV channels too costly to maintain.”

And worst of all, he’s serious. Horwitt is an analyst at the Environmental Working Group, where he “focuses on public lands, energy and transportation,” and was a former deputy press secretary to Sen. Dick Durbin (D-Ill.), according to the group’s energy-consuming, information-filled Web site. EWG, perhaps best known for its online farm subsidy database, got into some tax trouble a few years back when it was accused of doing illegal lobbying.

Indeed, an op-ed like this is exactly the sort of thing that EWG does. It specifically targets the news media in order to disseminate the group’s messages. In the past, EWG “has also declared war on nail polish, hairspray, playgrounds, portable classrooms and ABC News correspondent John Stossel,” columnist Michelle Malkin wrote in 2002. In 2008, EWG seems to be preparing to declare war on the Internet.

Bloggers are taking eyeballs away from the traditional news media, and this opinion piece would likely be published by any newspaper editor who received it, simply because it points out that fact and proposes a way, however insane, that the newspapers might get their audiences back. After all, there’s too much information, and if everybody can speak and publish, then traditional media outlets like newspapers can’t “educate millions of citizens” (Horwitt’s words) about whatever ideas they’re pushing this week.

“He then goes on to suggest that true social movements have only happened because of the scarcity of broadcast media options, which somehow forced everyone to hear only a single message,” writes Mike Masnick at Techdirt. “This is, apparently, a good thing — because obviously the big professional media only reports on the important stuff, whereas everyone else only reports on bad stuff.”

A proposal like this is music to the ears of most “progressives,” who would love nothing more than to shut down as many sources of speech and press as they can, at least the ones they disagree with. Under this proposal, you can be sure that any source of information they agree with will be subsidized, while sources they disagree with are taxed out of existence. This is the way progressives use the guns of government, after all.

“Who wouldn’t support a policy of higher energy costs to shut up the riff raff and make Americans have to pay more for just about everything?” asks Masnick.

Anyone who’s ever published anything of importance and realized the power of the Internet to place even the smallest publishers, like myself, on par with the largest, like the Washington Post, would be insane to give that up. This article, for instance, may only be read by a few thousand people in the next week (unless you digg it) but many of those few thousand are actual opinion leaders in Washington and elsewhere who can act on it. That sort of reach is within anyone’s grasp today, and that’s what this proposal means to stop you from doing.