Clueless in Seattle

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In Seattle, where I have spent most of my life, I often walk around a lake near where I live — Green Lake, which is bordered by a strip of public park. It is the most popular park in the city, hosting walkers, runners, skaters, and bicyclists on the paved path around the water. In this urban idyll a coven of campers lives year-round in RVs and tents or, in good weather, sleeps in the open on the ground. If I drive to the University of Washington, I go past another encampment near the freeway exit. Under an overpass by the University Bridge is a rag-and-cardboard hovel surrounded by stolen Safeway carts and piles of garbage.

We didn’t have this when I was growing up here in the 1960s, or many years afterward. Then you could see alcoholics in downtown Seattle, where they sat on park benches and drank. We called them bums. They were male, and mostly white or Native American. They lived in missions and flophouses. They didn’t pitch tents under overpasses and in city parks, because the city didn’t allow it. Legally it still doesn’t, but legality alone doesn’t matter. Seattle does allow it, which is why people do it.

Seattle’s unemployment rate is close to 3%, which is as low as it ever gets. There is plenty of work.

The mix looks different now. I see modern nylon tents, some of them with bicycles parked next to them, or discarded office chairs. Many of the homeless have electronic devices to play music.

The situation is not at all like the famous picture from the 1930s of the “Hooverville” of squatter shacks with the pointed top of the Smith Tower in the background. That was a time of social emergency, of 20 or 30% unemployment. Today the city is booming. Seattle’s unemployment rate is close to 3%, which is as low as it ever gets. There is plenty of work. As I write, within one block of my house are two “Help Wanted” signs on restaurants. Within five blocks are several building sites where work has been repeatedly stopped, probably because of the shortage of labor.

Nor is the problem that Seattle is nasty to the homeless. Quite the contrary. I refer to The Hungry American, a book self-published 2004 by Tom McDevitt, an Idaho doctor who went slumming as his retirement project. Of all the cities in which he practiced being a bum — Pocatello, Salt Lake, Phoenix, San Francisco, New York, and Seattle — my city was the most generous. But in none of those cities, he said, did the homeless starve. The hunger he saw in the Sad Sacks around him “was not of the belly kind, but the gnawing hunger for tobacco, alcohol, drugs and relief for a tortured mind,” he wrote. “In America people are homeless because either consciously or subconsciously they want to be homeless.”

To Seattle progressives this is a cold, insensitive, reactionary, and racist point of view. Their view was correctly expressed in the Seattle Times last November by Adrienne Quinn, who earned $188,662 in 2017 as director of the King County (Seattle) Department of Community and Human Services.

When I see people living in tents on the shores of Green Lake, living out of rat’s-nest cars and RVs within a mile of my house, am I really to believe that it is not their fault?

“Homelessness is a symptom of failures in the child-welfare system, racism, wage inequity, the failure to adequately fund mental-health and addiction services, and skyrocketing housing costs,” she wrote. “Not being able to find an apartment for less than $2,000 a month, or being put on waitlists for housing or treatment, or living in foster homes as a child are not individual failings; they are societal failings.”

I have a relative who is adopting two boys from foster care. Before being in foster care they were living on the street and eating out of dumpsters. Their plight was terrible. But it was the fault of individuals, not “society.” The individuals at fault were their parents, who were heroin addicts.

When I see people — white men, mostly — living in tents on the shores of Green Lake, living out of rat’s-nest cars and RVs within a mile of my house, am I really to believe that it is not their fault? The other day I asked one of the Green Lake maintenance men about the camper that has been parked all winter in lower Woodland Park, a few hundred feet from the sign that says, “No Camping.”

“We can’t do anything about that,” he said. “They send social workers to talk to those guys.” The social workers’ job is to convince the homeless to use social services.

That’s Seattle.

The Seattle Times has a special team funded by outside donors — Starbucks, the Seattle Mariners, the Bill and Melinda Gates Foundation, and others — that writes about nothing but the homeless. Recently the Times had a story about the death on April 5 of Sabrina Tate, 27, who had been living out of a camper in a city-sanctioned homeless parking lot the politicians called a “safe zone.”

Economically, Seattle is a stunningly successful city.

Sabrina Tate was from Spokane, a city less transformed by entrepreneurial capitalism than Seattle. She got into the drug lifestyle as a teenager, after her parents divorced, and she eventually moved to the Pacific Northwest’s big city. She became a heroin addict and was for some years. In February she had gone back to Spokane and seen her mother, who was alarmed that Sabrina’s legs were swollen and infected as a side effect of drug use. Her mother offered to take her to the hospital to treat her legs and kick the heroin, but Sabrina insisted on returning to the “safe zone” and her camper, where shortly thereafter she was found dead on the floor.

Her parents got back together long enough to come to Seattle to see where their daughter had lived and died. They had never seen it. Inside Sabrina’s RV, wrote Times reporter Vianna Davila

The place was trashed. Flies buzzed around rotted food. There was hardly any room on the floor, though investigators told them that’s where her body was found. Much of the floor was covered with wet clothes, possibly the result of a leak in the roof. This looked nothing like the picture she had painted for them.

Her parents may never know if this was how Sabrina lived. They were told by police that the RV was quickly ransacked after her death.

The Times reporter recorded the reaction of Sabrina’s father, Tommi Tate. “I’m furious,” he said. Furious with his addict daughter? Furious with himself? Of course not. He was furious with the government.

“This kind of stuff shouldn’t happen and it doesn’t need to happen, and it’s only going to stop if people quit looking the other way and if our governments really, truly care,” he said. “Shame on Seattle.”

Shame on Seattle?

Reading that, I wanted to say, “Hey! You're her father. Where wereyou? It wasn’t the government's job to care about your daughter; it was yours. And at age 27, it was hers, and had been for some time. She made years and years of bad choices to get where she was. It had nothing to do with whether public employees ‘really, truly cared.’”

The median price of a single-family house in Seattle has jumped to $800,000. The median rent on a one-bedroom apartment is pushing $2,000.

This story spoke strongly to me, because I have a son the same age as the dead girl. The difference is, he is healthy and has a career and a home. Why is that? Is it because the city employees here really, truly cared for him?

Enough stupid questions.

Economically, Seattle is a stunningly successful city. Recalling the city I knew as a kid back in the early 1960s, I remember the brick buildings downtown, most of them, like the Smith Tower, built in a burst of investment in the second and third decades of the century. That old downtown has been buried in a forest of glass-and-steel skyscrapers, the latest of which are being built for Amazon. For most of my life, the city population was stuck between 525,000 and 550,000. Suddenly it’s at 700,000. Including Seattle, King County’s population is now 2.1 million.

Among the state’s 39 counties, King County, the largest in population, has the highest average per-capita personal income. Seattle’s figure is $40,868, more than 40% above the U.S. average. King County is the home to Boeing’s commercial airplane division, Microsoft, Amazon, Starbucks, Costco and Nordstrom. It is the home of Jeff Bezos, Paul Allen, and Bill Gates.

To the disappointment to the Democrats who run state government in Olympia, Washington does not have a state income tax.

The median price of a single-family house in Seattle has jumped to $800,000. The median rent on a one-bedroom apartment is pushing $2,000. Part of this is because of Seattle’s restrictive zoning code and King County’s growth-management policy, and the Left mostly ignores this, but the commercial growth is the most important reason.

Politically, King County is the most leftwing county in the state. Here’s the picture from 2016, in which Hillary Clinton easily carried the state of Washington. Statewide, Donald Trump took 37% of the vote. In King County, he got 21%. In Seattle, he got 9%. Since the 1980s, Seattle has been a one-party town. To be identified as a Republican in this city is instant political death.

But we do have a communist on the city council.

Am I “red-baiting?” I suppose so. Councilwoman Kshama Sawant calls herself a socialist and says she’s for democracy. But she has identified herself as a member of Socialist Alternative, which the Internet tells me is a Trotskyist organization — meaning Leon Trotsky, former chief commissar of the Red Army. Sawant’s campaign manager told me she was a Marxist, and in listening to her when she first ran for office, I judged that he was correct. She came out for nationalizing Boeing, for example. If all that doesn’t justify the c-word, then I withdraw it. Sawant is pretty far left, though. She voted against Seattle’s famous $15-an-hour minimum wage law because it wasn’t strong enough.

The rest of Seattle’s city council is all deeply Progressive. And given the view around here of the “root causes” of people sleeping in the park, there should be no surprise at the solution the council has reached.

Raise taxes on business.

Seattle is not a low-tax city. We have a property tax that hits most homeowners between $5,000 and $10,000 a year, and a retail sales tax at the nose-bleeding level of 10.1%. (Buy a car here, and feel the pain.) We have a tax on soda pop and a tax on disposable grocery bags. But to the disappointment to the Democrats who run state government in Olympia, Washington does not have a state income tax. The people voted for one in 1932, but the Washington Supreme Court threw it out, and statewide voters have since rejected it four times. Seattle has tried to impose a city income tax, and has been blocked in the courts.

This is a tax on employment to fund non-employment.

Now to the matter at hand, the head tax. This is how Seattle’s ruling class — its political ruling class — proposes to raise the $75 million it wants for the homeless: a 26-cent-an-hour tax on payrolls of companies with at least $20 million in annual gross sales.

Work out the math. Twenty-six cents an hour is more than $500 per employee per year. This is a tax on employment to fund non-employment. And the only employers obliged to pay it would be the for-profit companies. As I read it, the Bill and Melinda Gates Foundation would not have to pay, nor would Seattle’s big multimillion-dollar medical groups — Swedish, Virginia Mason, and Kaiser Permanente Washington — nor would Recreational Equipment Inc., a membership cooperative. Neither Boeing nor Microsoft nor (except one store) Costco Wholesale would have to pay, because they are not actually based in the city. But Nordstrom and Starbucks would have to pay, as would Amazon, which put itself right where Seattle progressives wanted, near the light-rail line at the north end of downtown. Amazon would be nailed for some $20 million a year.

And CEO Jeff Bezos, who has Amazon looking for a second headquarters city already, doesn’t want Amazon to pay. Amazon has announced that it is suspending planning for its next Seattle skyscraper, and that if the head tax is passed, it will build somewhere else.

The push for a head tax has not gone unchallenged. An opposition now coalesces.

I haven’t heard anyone say the company doesn’t mean it. The leaders of the Aerospace Machinists did say that a decade ago when Boeing threatened to open an assembly line for the 787 jet transport in South Carolina unless it got a ten-year no-strike agreement in the labor contract. The union guys didn’t believe the company. They rejected the concessions — and Boeing opened the line in South Carolina, just as it said. People in Seattle also remember when Boeing moved its corporate headquarters to Chicago.

They believe Bezos’ threat.

And the Left’s attitude toward this? Katie Herzog, writer for The Stranger, Seattle’s left-wing entertainment weekly, quotes Bezos on The Stranger’s blog saying that he wants to put his personal billions into space travel. Confusing Bezos’s personal money with Amazon’s corporate money, she writes:

“WHAT THE FUCKING FUCK, JEFF BEZOS??? THE ONLY WAY TO SPEND YOUR MONEY IS SENDING IT TO SPACE???? Please, excuse me for a moment while I go burn my Prime membership. (Just kidding. I use my dad's.) Here's one way Bezos, who has yet to make any significant philanthropic mark on the world, could spend his 130 billion dollars: PAY THE FUCKING HEAD TAX.”

I hear people who are angry — and almost all of them are Democrats.

Socialist Councilwoman Sawant, Herzog writes, should lock Bezos in a room and convince him to “get his shining head out of his ass and start using his wealth to help people other than himself.”

That is the Seattle Left in full, in its ideas and its manners.

The push for a head tax has not gone unchallenged. An opposition now coalesces. It includes the Greater Seattle Chamber of Commerce and other business groups long accustomed to the political culture called Seattle Nice. It includes the Seattle Times editorial page, which is urging Seattle Mayor Jenny Durkan to veto it. (Durkan, whom the Times supported for mayor, was Obama’s US Attorney here.) And when our socialist councilwoman and her groupies held a protest in front of Amazon’s new skyscraper, they faced a counterprotest of union ironworkers — the proletarians who would lose the chance to build Amazon’s new skyscraper.

The final vote is not scheduled until May 14. But whatever happens, much good has come of this. I hear people who are angry — and almost all of them are Democrats. Maybe Seattle will develop a two-party system — not a Republican-and-Democrat system, but some kind of opposition, some kind of choice. If it does, I will vote for whoever carries its flag.




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Acapulco Gold Rush

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Last weekend my wife was seized by an unwholesome enthusiasm for tiny houses. She’d read they were featured at something called a Better Living Show and wanted to go.

That’s what they call them, tiny houses; and in the truth-in-naming department you can’t do much better than that. Tiny houses are two-hundred-square-foot jobs, conveniently sized to fit into a single parking space. Except, if you lived in a parking space you’d have more room because you wouldn’t have to share your living quarters with a furnace and a water heater.

Tiny houses are the city of Portland’s newest, most environmentally correct way of encouraging neighborliness and doing something about urban sprawl at the same time. “Infill” is the word the planners use to justify them: 11, maybe 20 of the things bumper to bumper on a standard neighborhood lot. A business opportunity is what my wife called them. We could crowd a few dozen in the backyard, charge rent, and kayak the income stream into a comfortable old age.

The stuff isn’t even legal until July, yet here we were at a staid Better Living Show browsing booths filled with bongs and vaporizers and rolling papers and roach clips.

Marriages being what they are, we headed over to the Better-Living-in-the-Shanty-Town-of-the-Future Show, got out of the car, made our way on foot to where the parking lot receded over the curve of the earth, spotted a crowd, followed it into a warehouse-like building and found . . . marijuana paraphernalia. In fact, the first aisle was nothing but marijuana paraphernalia, display after display of the kind of things that would get you busted at any airport in America. Better living indeed.

Interesting, we thought, how quickly the free market kicked into gear once Oregon passed its marijuana initiative last fall. The stuff isn’t even legal until July, yet here we were at a staid Better Living Show browsing booths filled with bongs and vaporizers and rolling papers and roach clips. And it wasn’t just paraphernalia. One particularly popular young lady was pushing samples of what she billed as “medicine-free” edibles. Not that you can’t get edibles with medicine right now, just not at a recreational-use booth. Medical marijuana has been legal for decades but, until July, you will still need a prescription to indulge in recreational munchies.

In the next aisle orchids were being ultra-violated in the sort of high-tech grow-box you see in movies about space stations. Orchids, we thought. Now that we’ve found the more traditional part of the Better Living Show, can tiny houses be far away?

Turned out they could. It also turned out that the grow-box wasn’t meant for orchids. The orchids were nothing more than body doubles for the medicinal herbs that were meant to go in the grow-box but, like the medicine for the munchies, were biding their time until July. Next to the grow-box were shelves of seedless seed packets bearing the names of every imaginable variety of the scientifically engineered seeds you could grow in the grow box, just as soon as July rolls around and the seed packets contain seeds.

It began to dawn on us that, maybe, the better living show we’d arrived at wasn’t the same Better Living Show advertised in the paper. Sometimes we can be pretty insightful.

“This is the Oregon Cannabis Convention & Trade Show,” a nice young man informed us. “Better Living Show is the next building over. Building after that is the Gold & Treasure Show.”

Gold & Treasure? I thought. Gold and treasure is even better than marijuana paraphernalia. The Internet will send marijuana paraphernalia right to my home, but gold and treasure? Not even the most desperately dispossessed Nigerian widow ever came through with any of that. We headed over to the Gold & Treasure Show.

You had to go through a metal detector and check your guns before they’d let you in. I saw that as a favorable sign, a promise that we were about to be ushered into Aladdin’s cave. Or, and this is a particular fantasy of mine, Uncle Scrooge’s money bin.

Tiny houses are a lot more honest about what they call themselves than that Gold & Treasure Show. At the Gold & Treasure Show there was no treasure and not much more gold than there was marijuana at the marijuana show . . . and gold has been legal since the early ’70s. A couple of guys at out-of-the-way tables were pushing run-of-the-mill coins at about 30% more than you could get them for at any gold shop in town, which may say something about who they thought would be attending the show.

In the next aisle orchids were being ultra-violated in the sort of high-tech grow-box you see in movies about space stations.

What there was plenty of was late middle-aged men dressed up like prospectors who’d been thawed out of a glacier left over from Klondike days. They sported full beards and work boots, flannel shirts, and heavy-looking pants held up with suspenders. Their only sartorial concession to the 21st century was baseball caps advertising the names of equipment companies, which weren’t that much of a concession because the equipment they were advertising was as old-fashioned as the outfits. Row after row of sluice boxes. Pans. Picks. All the latest in 19th-century gold-mining technology. Pretty much anything you’d want if you were about to head on up to Dawson City in 1898.

Except, that is, for the gold magnets. Gold magnets weren’t part of any 19th-century prospector’s kit I know about. The fact is, I’m not persuaded that gold magnets should be part of any 21st-century kit, either. The idea of using magnetism to suck gold out of the ground doesn’t fit with anything I remember from high-school science; and, when I tried one on my wife’s wedding ring, it didn’t notice anything special. Which could go a long way toward explaining why these guys were at a trade show selling equipment rather than making their fortunes in the wilds of Alaska. But then, gold-rush fortunes are always made by the guys who sell the equipment.

Competitionwise, the Better Living Show picked a bad weekend to come to Portland. Marijuana fills the better-living bill for lots of people, and pretty much everybody thinks gold and treasure would go far toward making their living better, but almost nobody except city planners and the occasional overly enthusiastic wife imagines tiny houses could possibly make life better for anybody except slumlords, which left the Better Living Show a distant third attendancewise.

The people who put on that show seemed to share the general opinion and gave tiny houses the same pride of place as the Gold & Treasure Show gave gold coins: next to a wall on the far side of the room. There were two of them, both looking like the kind of place Red Riding Hood’s grandmother immigrated to America to escape from, once she’d been regurgitated by the wolf.

While the Gold & Treasure people were mostly pushing 19th-century mining gear, the marijuana people were selling stuff from a century that hasn’t even happened yet.

Also, they were culturally better suited to Red’s grandmother than to modern Americans. Medieval European peasants were minimalists in the way of possessions, and the houses were decorated in that style. Nothing was in them, including plumbing, so you had to imagine where the toilet and sink and shower would go, along with the furnace and water heater, which took some imagining because a tiny house doesn’t have space for much more than a single room with a fold-down bed, and the beds weren’t there, either. I would have gone into one for a better look, but I couldn’t get in. Somebody was already inside and I wouldn’t fit.

The vendors at the Better Living Show appeared to have a lot of spare time on their hands. The one I got to talking to seemed much more interested in the marijuana show next door than trying to sell me whatever he was supposed to be selling. He was elderly, almost as old as I am from the grizzled look of him. He’d grown up in Detroit and, like a lot of inner-city Americans, didn’t have any tolerance for drugs. But marijuana? He spent time volunteering with veterans and, well, he’d seen guys even older than himself cured, by drinking marijuana tea, of the neuropathy that goes along with type 2 diabetes.

Tea, he said. “If it’s tea it’s not a drug. “That show still there tomorrow?”

“Think so,” I said.

“I need to go find out about tea.”

The marijuana show wasn’t really about tea, although there were people there who probably could have told him. Maybe the munchie lady would have slipped him a recipe or two. What the marijuana show was about was selling you equipment, then selling you the knowledge you needed to use the equipment.

The marijuana show was about gleaming pipes and tubes and gauges and vats and dials that looked like they’d been left over from Breaking Bad. It was about grow lights and consultants to tell you how to save electricity once you’d bought the grow lights. It was about other consultants who knew how to maintain the optimum humidity, or the proper day-night cycles. It was about scary-looking machinery to extract hash oil from all the buds you’d be growing with all the grow boxes and humidity and day-night cycles. It was about consultants on indoor growing to tell you about nutrients and hydroponics, and about entirely different lines of equipment and consultants for people who wanted to make their fortunes growing marijuana outdoors. Underneath it all, it was about selling people who didn’t know the first thing about marijuana cultivation or marijuana processing the dream of turning into international marijuana kingpins.

If I’d had a lot of money, even if I’d had a lot more money than that, I still would have had to go into debt, yea, even unto the seventh generation, to get started in that business. But none of that debt would have made the least bit of difference in light of all the money that would be rolling in, once I got the business cranked up. It was pretty clear these people had had a lot of practice selling this line.

They were, when I thought about it, the same sort of people as the ones at the Gold & Treasure Show, except that, while the Gold & Treasure people were mostly pushing 19th-century mining gear, the marijuana people were selling stuff from a century that hasn’t even happened yet.

Something that nobody was selling was the statistics on what became of marijuana prices in Washington when weed went legal. Despite sellers up there having their state, Idaho, and the whole captive Portland market to themselves, the bottom fell out of their businesses. Too many who thought they were getting on the elevator at the ground floor wound up stepping into an empty shaft, only to get smashed flat when the elevator turned out to be heading down at them.

Try as I might, and I tried for half an hour, I couldn’t get a clear reason why weed farmers would want to unionize their workers.

It wasn’t as if there was nobody at the marijuana show who knew that. Or knew how to run a business in general. Several organizations had booths selling business-support services. One fellow claiming to provide this kind of expertise was a union leader trying to organize the workers on marijuana farms.

“But nobody here is planning to be a farm worker,” I told him.

“Plenty are planning to be growers, though,” he said. “I’m organizing growers, too.”

“You think growers want to join a union?”

“Their workers would. I’m organizing the growers so they can organize their workers.”

Try as I might, and I tried for half an hour, I couldn’t get a clear reason why farmers would want to unionize their workers. The best unclear reason involved keeping all the farms on the same playing field, which would keep prices for the product at a uniformly high level so that everybody, farmers and workers alike, would get rich. When I asked if his union planned to organize the illegal growers who are, when I thought about it, all the growers that exist right now, his answers became more unclear than usual. When I asked how anybody was going to get rich when marijuana doesn’t sell for any more than it’s selling for in Washington, he became even less clear.

A few booths over, a lady was touting a security service. “Marijuana businesses attract a lot of shady characters,” she said. “Owner needs to know who they are.”

Maybe, I thought, when marijuana is against the law. When it’s legal and cheap, shady characters are a lot more likely to hang around jewelry stores and places selling gold and treasure.

“You see a car in your parking lot with some shady characters inside,” she went on, “the last thing you want is to have to approach that car to find out who they are.”

Probably true I thought. Of any business.

“If you hire us, all you have to do is call with the tag number and we’ll tell you everywhere that car has been in the last few months.”

“You know that?”

“Sure. We get it from the street cameras. We can tell you within seconds everywhere that car has been.”

I knew about street cameras. Street cameras are one of things I talk about that make people think I’m some kind of anti-government crazy person, along with the thing I used to say about how the NSA records everybody’s phone calls and emails. I never expected the government would bother about something like a warrant when it wanted to check up on where my car had been, but I did think that calling up a specific license number would take a bit of trouble, like those operators tracing phone calls in old movies. And that, at the very least, the government would be embarrassed enough by the whole thing not to go making it any more public than it needed to. It never crossed my mind that you or I or a private security firm could tie directly into the street cameras and know where somebody else’s car had been. And do it within seconds.

I also couldn’t see how knowing where a car had been would tell you much about the people in the car. Unless the car turned out to be parked every night in a federal motor pool, which would tell you all you needed to know if you were running a marijuana outlet.

Which brings up the gentleman in the insurance booth. He was selling policies tailored for marijuana businesses. “Cover slip-and-fall. Product liability. Renter’s insurance to ease landlords’ concerns about leasing buildings to use as grow facilities. Theft. Bad debts. Acts of Government.”

Say what?

“Acts of Government. It’s not just what the thieves are planning that a businessman has to worry about, you know. It’s what the government has in mind, too.”

Now that’s something I could understand, at least until I thought about it. Insurance against acts of government was the one thing out of the whole trade-show lollapalooza, the one thing among all the fantasies of tiny houses and 19th-century gold-mining, of drive-you-to-the-poorhouse high-tech grow equipment and knowing where somebody else’s car has been, that made sense to me. Insurance against acts of government — that has . . .

That has . . . I don’t know. The things the government gets up to always turn out to be so far ahead of anything any sane person can imagine, I’m not sure what that guy was really selling. Could be he was no different from the other hucksters that morning. At the very least, he knew who his marks were.

Lots of people who use marijuana, and lots of people who would have wandered over from the Gold & Treasure Show, have their suspicions about acts of government. Could be he saw us coming.

Could be I’m the sort of guy who’d be suckered into the empty promise of a policy insuring me against acts of government in the same way those latter-day prospectors imagined they’d make their fortunes in Alaska, or those urban wannabe farmers and processors fancied there’s endless money to be had in marijuana.

Could well be something like that.

p/p




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Well, Freddie My Fannie!

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A recent piece in the Wall Street Journal, buried by the brouhaha surrounding the election and the Libya cover-up, indicates that the Federal Housing Administration (FHA) is in profound financial trouble. Indeed, it seems to be following its siblings Freddie Mac and Fannie Mae into the swamps.

The FHA has been around for nearly 80 years, and gives taxpayer backing to loans for homebuyers who put as little as 3.5% down. But more recently, the FHA has been used to reinflate the housing market by allowing lots of mortgages to be written. It now guarantees a staggering $1.1 trillion in loans.

The FHA is supposed to use its reserves to cover losses of the loans that go bad. As late as last year, it was estimated that after covering losses, the FHA would have $2.6 billion left in reserves. But, especially because of dicey loans issued between 2007 and 2009, the FHA is projected to lose $46.7 billion this year. That exceeds the $30.4 billion in reserves. The $16.3 billion deficit will almost certainly have to be covered by tax dollars from the budget. This is on top of the $137 billion already ripped off from taxpayers to cover the rescue of those Twin Towers of Corruption, Freddie Mac and Fannie Mae.

In fact, independent housing economist Thomas Lawlar states bluntly that “if [the FHA] were a private company, it would be declared insolvent and probably put under receivership like Fannie and Freddie.”

There is no doubt even more of this to come. The federal housing agencies (FHA, Freddie, Fannie, and lesser ones such as the VA) now back 90% of all new home loans, and the Fed continues to pump out the money ceaselessly. God help us if there is another major “correction” in the housing market.

In a better world, we would amend the Constitution to require that after ten more years (say), the federal government will have ended all housing subsidy programs and be permanently banned from any involvement in the housing market from that point on.

But this is far from a better world.




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Americana, Boom and Bust

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Making a documentary is a lot like planting a seed you find in the yard; you don't know what you're going to get until after you start filming. When director Lauren Greenfield began filming The Queen of Versailles, real estate was at its height as an investment, and timeshare mogul David Siegel was a billionaire. He and his engineer turned model turned beauty queen turned trophy wife Jackie were building the largest private home in America: 90,000 square feet, 30 bathrooms, two sweeping formal staircases leading to the pillared ballroom, and more bedrooms than Jackie could count.

What could anyone possibly need with 90,000 square feet of house, you might well ask. Well, you have to put the kids' ice skating rink somewhere, right? And maybe someday they'll even take up skating . . . That was the story Greenfield expected to tell. It isn’t quite the story that she ended up with.

At the start, the Siegels were on top of the world as they posed for photographs and preened for their interviews. Siegel’s Westgate Resorts was the largest timeshare company in the world, and its showcase resort in Las Vegas was eclipsing all the hotels on the Strip. Donald Trump complained that he couldn't sleep at night because the Westgate logo shone into his penthouse at the Trump Hotel. David and Jackie both came from humble beginnings, and both were proud of the lifestyle they had come to enjoy: a world full of chauffeured limousines, private jets, celebrity parties, and an overabundance of stuff.

But having "stuff" is not the same as having class. The Siegels’ dream home was patterned (sort of) after Louis XIV's palace at Versailles, but there is nothing regal or even noble about the Siegels themselves. Let's face it: anyone who lives with dog poop on the carpets or takes the limousine to McDonald's is trashy, not classy. Jackie's painfully gigantic breast implants are symbolic of their lifestyle as a whole: overdone and in your face.

The Siegels seem like nice enough people, but I have friends who live in a trailer park who have more class than they do. The film provides a revealing look at this family of ordinary people living in an extraordinary home with unseemly amounts of money to blow on themselves. It's funny, it's shocking, it's sad — and it's fascinating.

A timeshare provides a way of selling the same property 52 times. The purchasers buy one week at a resort and can use that week every year for the rest of their lives, and their children's lives for that matter, as long as the timeshare resort is still operating (which can become a bit iffy). If you get tired of vacationing in that spot, you can trade your week for a timeshare at a resort in another location. On the surface it seems attractive: timeshare resorts are generally nicer and more personal than motels, and it seems like it will save money to own a vacation place rather than rent a room at a hotel. But the purchasers still have to pay "maintenance fees" when they use the timeshares, as well as monthly mortgage payments, since most people just put 10% down when they buy. These "free" vacations get pretty expensive.

Jackie's painfully gigantic breast implants are symbolic of their lifestyle as a whole: overdone and in your face.

So how did the Siegels sell all those timeshares? You can't cheat an honest man, but you can sucker a greedy one. Timeshare operators bait their hooks with the promise of free stuff: free Disney tickets, free Vegas shows, free dinners, free hotel rooms. Like the little fish who thinks he can nibble around the bait and avoid the hook, these potential clients arrive at the timeshare table thinking — knowing! — that they will just spend three hours listening to a spiel in exchange for hundreds of dollars worth of goods. No way are they going to buy anything. But the timeshare sharks know exactly what kind of bait to use for the fish they have in the tank: the ones who feed on “good deals.” So that's how they position their sales marketing — as a very good deal. Taking advantage of the sellers, almost. Very few couples emerge from a timeshare office without a contract — and a mortgage — for a lifetime of vacations.

Of course, the sales reps don't want to think of themselves as predatory sharks. So Siegel gives them a different spiel. He baits them with statistics showing how going on family vacations regularly saves lives and marriages. He conveniently ignores statistics showing that consumer debt strangles families and destroys the same lives and marriages. The thing is, Siegel seems to believe his own statistics, citing the thousands of people who earn a living because of his empire. One would expect him to have contempt for the people he suckers, but he seems genuinely to believe himself when he insists, "I save lives." If he's a shark, he has convinced himself that he is a nurse shark, dosing his patients with the healing balm of a week in Las Vegas or Orlando every year.

Then — with unforeseen effects on the documentary — came the fall of 2008, and with it the fall of the economy in general and of real estate in particular. Suddenly the easy money that Siegel's company had relied on dried up. Without mortgages, new clients could not purchase the timeshares. His existing clients could not keep up with their own mortgage payments. His employees went from the sales table to the collections department. It was not a happy time for anyone at the company, and it shows on their faces as they call clients to ask for payments.

The Siegels got caught in the same overextended net, and found themselves unable to keep up with their own mortgage payments. At the height of his success, David employed 6,000 people (19 of whom were maintaining his house and nannying his children). He needed a constant stream of sales to service all those salaries. But when mortgage money dried up, so did sales. In the post-2008 interviews, he is pensive and withdrawn, no longer the gregarious host. "I never took anything off the table," he recalls. "I put it all into the business."

Even more damning is his admission about the lake property that he and his wife once owned free and clear in pricey Isleworth, an exclusive community in Orlando with the likes of Tiger Woods and Shaquille O'Neal as neighbors. "I paid cash to build our house," he laments, referring to the 26,000-square-foot house where they lived while Versailles was being built. "Then I borrowed against it to expand the business." Siegel did not erect a legal wall between his company and his personal holdings, as wise business owners do. He foolishly did not realize that the house you live in is not an investment. It is a consumer item. A home.

Soon Siegel needs $400 million to save his Las Vegas resort and $100 million to save the unfinished dream home, Versailles. Jackie starts cutting corners by doing her Christmas shopping at Walmart and letting all but two of the domestic staff go. "If I'd known I was going to have to raise them myself, I wouldn't have had seven children," she says, only half in jest, while cooking a dinner of chicken and corn on the cob. She continues to be a compulsive collector of stuff, but it's mostly cheap stuff. She buys three separate "Operation" games for her kids and gives David "Monopoly" and "Risk" for Christmas. (Odd gifts, when you think about it.)

Meanwhile David blows a gasket and refuses to come to dinner when the front door is left open and the lights are left on; "Don't you people care how much electricity costs?" he complains. But the truth is, Jackie's overspending hasn't caused their financial mess; David's overborrowing has. She might have wasted a million, but he has lost half a billion. Jackie repeatedly says that stress is bringing them closer as a couple, but when David is asked point blank if his marriage is a source of strength to him, he responds bluntly and firmly, "No."

Eventually the bank offers the Siegels a way out: let the Las Vegas resort go, so the company will have enough money to keep operating the rest of its holdings, including the house. But David isn’t willing to give up his $400 million in sunk costs, and he is determined not to let the creditors have the crown jewel of his empire. He's stubborn. Or maybe he just believes in fairy dust. At any rate, he seems a broken man. "Aren't we finished with this yet?" he asks the filmmaker. "We're done. I'm done," he declares softly. It's hard to tell whether he means the film, his business, his family, or himself.

When David is asked point blank if his marriage is a source of strength to him, he responds bluntly and firmly, "No."

The Siegels do not appear in what is probably the most revealing and poignant scene of the film. The Filipina nanny invites the camera into "her" house. It is the children's elegant abandoned playhouse, and she has been given permission to use it as her own hideaway. Furnished with a bed, a dresser, and her personal trinkets, it is the place she goes to be alone and enjoy the quiet. In this film about building the largest single-family home in America, she talks about her simple goal: to provide a house for her father. "Owning a concrete house is so important to people in the Philippines," she explains. She has left her own children behind in the Philippines to raise someone else's children and earn money to send back home to her family. "I tried to give that to my father, but he never got his house. Now he's dead. He is in a tomb. I guess that is his concrete house now," she says with a sigh and a tear of resignation.

The juxtaposition of this nanny's simple dream and the dream house of the self-proclaimed queen of Versailles is simple and powerful. The rise and fall of the Westgate timeshare empire is fascinating. The entire film is funny, sad, and revealing. It's an outstanding documentary, one that Greenfield could scarcely have dreamed of when she started making it. Her creation turned out to be the real “Versailles.”


Editor's Note: Review of "The Queen of Versailles," directed by Lauren Greenfield. Evergreen Pictures, 2012, 100 minutes.



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Should the Bank's Loss Be the Law's Gain?

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The great thing about laws is that they protect us when we are unwilling and unable to do so on our own. Laws are great because they make sure no harm is done. So when it came to our attention that JP Morgan Chase just lost $2 billion because of risky investments and hedging, it may have seemed that what was needed was more and better laws, not personal responsibility.

Of course this isn't true.

Laws are necessary but not sufficient. Laws will never be able to keep pace with new developments in the financial sector, or anywhere else, which is why laws will never prevent problems but only react to them. And being reactionary instruments, laws cannot prevent the next wave of risky financial instruments or clever schemes to make money off of money.

In addition to not being able to anticipate problems, laws have unintended consequences that are sometimes worse than the problems they were designed to correct. Look at the laws that led to the housing bubble. For a time, the government, through various policies but primarily through Fannie Mae and Freddie Mac, infused more money into the housing sector than the market would have on its own. By making loans easy and affordable for people who would have otherwise not been able to secure home loans the government encouraged a misallocation of resources that drove up home prices.

Making loans available to people who would not have qualified without government interference pumped more money into the housing market than the market demanded. This drove up demand, which in turn drove home prices beyond market levels. Housing prices fell because the market corrected itself. This correction is what we recognize as the bubble bursting. The bubble and the burst were unintended consequences of the government getting involved in the housing industry.

In the banking and finance industry the government also distorts risk assessment, thereby forcing a misallocation of resources. Keeping interest rates low discourages saving and encourages investing. Low interest rates make putting your money in the bank an unattractive option if you want a return on your investment. So if you want your money to make money, you put it in the stock market. The government is essentially affecting the supply and demand of money rather than letting the market set interest rates and therefore determine where capital flows. This forces money into circulation that would otherwise not be there.

The banking laws we have in place encourage risk taking in other ways as well. First, banks the size of JP Morgan Chase know they will get government bailouts when they bet wrong, which means they can take whatever chances they want, and there is no risk involved. Second, the FDIC insures traditional deposit accounts up to $250,000, which means that no matter what kind of investments a bank makes with your money, as long as your account is below the $250,000 threshold, no one loses. Banks can fail in any number of ways without anyone involved failing to make money. The unintended consequence of government interference is an increased willingness of banks and their investment arms to take greater risks, which become no risks at all.

Certainly FDIC insurance has many benefits, as did the Wall Street and automotive bailouts, but there are unintended consequences that may have counteracted the favorable effects, if not encouraged the sort of risky behavior that created the need for the laws in the first place. The only solution is for individuals to take responsibility for their own actions. In view of our attachment to laws, this is an unlikely solution, but it is the only one with any promise.

Laws allow us to relinquish personal responsibility. When we make a bad investment that we did not understand entirely, or get into too much credit card debt because we failed to control our spending habits, it is easier to blame the lack of sufficient laws than to blame ourselves. If we were not motivated to make money we would have no reason to enter the stock market or make risky investments. But if we are motivated to do these things, the least we can do is spend some time understanding what we are getting ourselves into. If we don't understand what others are doing with our money, or understand the risk involved, then we shouldn't get involved. And if we do get involved with something we don't understand, we have only ourselves to blame. Laws can't help this; only we can. More time and energy should be directed toward cultivating character than toward crafting laws.




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