Tuesday, July 8, 2008

The problem with some of the rich ...

... is that many of them just aren't very bright -- and aren't secure enough to hire help bright enough to disagree with them. Inherited wealth relies on a gene pool that is often hit or miss -- and often breeds for height, not brains. (Yes, I know, there are some important exceptions!) And the self-made -- guys like Buffet aside -- often just benefited from an economy growing at such a rate that showing up for work in a two-thousand dollar suit passed for genius, and managing to get a good haircut qualified you to manage a billion or two. Management pay was divorced from actual corporate success -- Romney got rich cutting jobs, and we won't even mention Sprint -- so you could be a rich & successful CEO while your company failed and your employees headed for the breadline.

So, here's my Fannie Mae story:

While the Fed was lowering interest rates to the point that you could borrow it cheaper than you could print it in your basement, lots of folks of modest income were buying investment rental property. (Remember those seminars on how you could be a millionaire without using any of your own money?) Lots of it was in less fashionable neighborhoods, but qualified for Section 8 subsidy.

Then the market collapsed, jobs were lost, and those who could not sell were foreclosed upon. Including property that was fully occupied and getting rent.

When Fannie Mae forclosed on such properties, it evicted every tenent! (That was its uniform and unalterable policy -- per its St. Louis attorney who was paid to do it.) Of course, that meant no income to Fannie Mae from the rent. But that was not the worst part.

Oddly enough, unoccupied & abandoned housing seems to deteriorate quickly, especially in the less fashionable areas of the City. Within a week or two, it is stripped of everything valuable: fixtures, pipes, wiring, windows, flooring. Its potential resale value drops into negative numbers as it goes from unoccupied to unoccupiable. It becomes a blight that lowers the value of every other house in the neighborhood.

Oh, and it is absolutely worthless to Fannie Mae, which is bleeding money.

Repeat 500 times in KC and 50,000 time nationwide.

So how stupid do you have to be to think this is a good plan? And what do the guys who are running Fannie Mae get paid? And how lucky are they not to live in Red China, where this level of mismanagement means they take you out and shoot you in the back of the head?

4 comments:

whistleblower said...

Wow Phil!

Nice rant!

I agree 100%, but don't just blame Fannie May.

For all of this to occur, it takes a lack of responsibility and accountability from the top to the bottom.

What will KC do with all this blighted property that they acquire?

craig said...

This coming from a rich lawyer who succesfully argued in court that he didn't understand a mortgage contract.
Sorry, but that was low hanging fruit.

Phil Cardarella said...

Dear Craig:

1. Wish I were rich. Unfortunately, my clients are the working class folks who are getting shafted.

2. No one ever said I did not read or understand the paperwork. EVERYTHING I signed was absolutely clear and completely accurate.

I do forgive you for not understanding that -- in post-Constitutional America -- innocence is not a protection against prosecution by the Bushies. If you are really interested, check out Dr. Donald Shields study and the 800+ other examples, or listen to what Congress is doing with Rove.

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