More Kelo calamity: You can’t make this stuff up, as they say. This is from the New London Day last Friday (link probably requires registration, and would require a paid subscription after this coming Friday; HT Liberty Conspiracy):
Fort Trumbull Developer Asks FHA To Back $11.5M Loan
Faced with a tight lending climate, the Corcoran Jennison company has asked the Federal Housing Authority to back an $11.5 million loan to fund the long-delayed construction of housing on the Fort Trumbull peninsula.
Corcoran Jennison applied for the mortgage insurance last Friday, said Kristine Foye, spokeswoman for the New England Regional Office of the U.S. Department of Housing and Urban Development.
The request was filed three months before a crucial May 29 deadline for the Boston-based developer to secure financing and sign a construction contract for an 80-unit complex of rental apartments and townhouses.
….. While a federal commitment could bring more favorable terms for Corcoran Jennison, the company is also seeking conventional financing from major lenders, Carberry said Thursday.
….. According to the developer’s HUD application, â€œThe development plan is for an upscale rental property that will be positioned to compete at the top of the market,â€ Foye said.
So, if the project ever gets going, the properties that were the subject of the infamous Kelo decision — properties that contained middle-class owner-occupied and rental homes — will be replaced by palatial digs for the well-to-do, insured in case the project fails by Uncle Sam.
The “good government” types who supported the Kelo decision and believe that they must have the ability to take property from current owners “for the greater good” must be so pleased with themselves (/sarc).
I’ll have more on this in a Pajamas Media column later this week.
An extended version of this item is at this NewsBusters post.
IBDeditorials, on the banking situation:
….. amid all this action, some are criticizing the “bailout” of big lenders. That is not what it is.
As both a central banker and a former academic, Fed Chairman Ben Bernanke has been a keen student of the Great Depression. He knows too well that when confidence in a banking system is lost, the risk of a broader, systemic collapse becomes not just possible but probable.
….. contrary to those who claim Bernanke has “bailed out” irresponsible market operators, his moves have in fact been judicious and carefully targeted â€” not rash and desperate.
….. Let’s review what Bernanke has in fact done this time around.
Starting in August, he began with a few temporary infusions of liquidity into the banking system, and started cutting interest rates.
Then, he created the Term Auction Facility (in December) and the Term Securities Lending Facility (in March) to make it possible for troubled financial institutions to rebuild their depleted and damaged balance sheets.
Contrary to Bernanke’s reputation as “Helicopter Ben,” this wasn’t an indiscriminate dumping of dollars into the banks; it was an attempt to help banks weather the credit crunch. Together with interest rate cuts, these actions should help lending resume â€” without the inflation or “moral hazard” some fear.
I don’t think Alan (“I Made This Bed, But I Don’t Have to Lie in It; Instead, I Have Fun Criticizing It”) Greenspan would be doing as well.
From the “Hope He’s Right” file — The Wall Street Journal’s Holman Jenkins thinks that the Bernanke & Co. may have gotten the mortgage-security situation under control:
If it’s true that temporary market chaos has grossly distorted the value of securitized mortgage debt, the Fed has fixed a sizeable part of the problem. It took $30 billion in potential losses on its own books, and even will manage the portfolio. If the optimists are right and those securities bounce back, J.P. Morgan will capture the upside. If not, the Fed will get stuck with the downside.
….. Just conceivably Ben Bernanke has finally hit upon the magic formula for restoring confidence in securitized mortgage debt and trading will now resume. Speculators will come off the sidelines, convinced of the Fed’s willingness to step up and prevent price-crashing fire sales by illiquid institutions. The central problem of the past eight months — the fact that nobody was willing to take a flyer on a great deal of mortgage debt at any price — will have been solved.
If so, demands for a taxpayer bailout will fade along with fears of a self-reinforcing spiral of falling home prices and borrowers walking away from $10 trillion in mortgage obligations.
Not an impossible forecast. Markets are rational: They can be relied upon to put a realistic value on America’s outstanding housing-secured debt — that is, as long as investors don’t fear a cascade of forced sales by institutions desperate to raise cash at any cost to meet margin calls or regulatory capital standards.
After all, the dimensions of the challenge were never as unlimited as some made them sound.
And here are the stats of the day:
….. the mortgage default rate has risen to about twice the average rate of recent decades, and the difference consists largely of people who contracted mortgages their incomes wouldn’t support based on a bet that rising home values would bail them out.
More than a third of these new-look defaulters are absentee owners. Nearly half take off without communicating with their lenders. Mr. Bush is kidding himself if he thinks his fellow citizens share his view that these are needy victims.
Let us step back. A great deal of housing debt was created in the last few years to give speculative buyers nominal title to homes that they no longer want. Any postmortem will also show that too much government subsidy for the creation of housing debt was an original sin at the root of today’s mess.
I wonder how much of the mess in Northeast Ohio was speculative and/or absentee in origin?