Dear Mr. Rawlings, et al.
My source regarding the root of the financial crisis comes from the currently vice president of risk management for Bank of America and before that he was the head of the risk management division for Countrywide. He shares no love for the lending practices that his executives have performed, but did tell me that they had begun such practices into the sub prime market when it first became legal under the Clinton administration.
As for home prices doubling, well that is the simple result of over saturation of economic "buyers" that should never have been in the market in the first place. Much like the dot com bubble that burst in the 90's, over valuation of dot com company's were directly correlated to nonexistent actually consumers that could support such a valuation. It's simple economics, land and housing development will always follow demand. If the demand is artificially increased, in this case with the easing of credit in the in the sub prime market to traditionally unqualified borrowers , then it would appear that there is greater demand in the prime market thus spurring additional development. However since development and resale are not checked to each other, real estate resale of existing stock will grossly increase the price of a home two to three hundred percent with no actual increase in "board & nail cost" until development and inventory appear to meet the demand.
In California, it was not until the "flipping" of homes became illegal, that property values began to slow down their exponential growth in value. A particular house with an ocean view in Orange County, had been bought and sold six times in the matter of three months with consecutive titles being recorded within days of each other. The run up in price was over 300%! Now somewhere some sap was sold this bill of goods, obviously without doing any research as to the true valuation of the property using a more conventional method of escalation. Did the banks care? No, they were being told by their government to extend credit beyond what their risk managers were balking at and they profited handsomely from it...until the bubble burst. That is when the banks should have been let to crash and burn! But instead we heard the Speaker of the House, whose party controlled both houses of Congress and the Presidency...force through the biggest bailout package in the history of the world under the motto that "these banks are to big to fail". But it didn't end there now did it. Three bail outs later, that party lost control of the house. Just in the news yesterday, Fannie and Freddie need 6.6 billion dollars more and guess whose holding that bag.
I understand the OWS sentiment, the feelings are true, but completely misguided. I actually stopped by an OWS rally in the OC recently to ask a few protestors why they were there. Initially they all recanted the same sound bites we all hear in the news, but when I asked them who their Mayor was or who their State legislators were, they were stumped. I went so far as to ask who their congressional representatives were in the House and Senate. By now I was not entirely surprised to find out that only one in the six I spoke to was even able garner a guess of one of their representatives and the response was "...I think it's something Boxer...". (In CA, that would be Senator Barbara Boxer.) My guess is that most of these people are either not well educated in civics, don't participate in their local, state and even national political process or simply dislike what their political party in power had done but don't wish to blame them for it. When you get Obama saying "he on their side" and they don't say a peep about how it was his hand that signed the bank bailouts - which they are protesting - into law, well that's were their credibly evaporates.
I don't deny that money buys power, it always has, however historically citizens in pluralists groups have been very effective in checking such power grabs through civic means. Here in CA, we have an initiative process that dates back to the Gold Rush days, when wealth speculators received cart blanch powers from the State Legislature and Governor. The process allowed for the citizenry to stand up to obvious corruption within the system. Our state legislature, which has been monopolized by a single majority party for the past 40 years, has had it laws overturned dozens of times by this process, the most recent being a state constitutional amendment.
If the OWS folks were truly seeking reform, they would Occupy their State and national capitals. Isn't it ironic that the only State capital that was ever "occupied" was the Republican controlled Wisconsin state house when governor Walker moved to stave off bankruptcy in that state. It is very telling when the same community organizers that lead that "occupation" have been found behind many of the OWS sites.
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Ricardo Ramos Assoc. AIA, LEED® AP, CSI
Alpha Analysis, Inc.
Arcadia CA
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Original Message:
Sent: 11-04-2011 07:19
From: Eric Rawlings
Subject: Re: Should architects support local "Occupy" movements
This is going to keep going on and on and on with you. I believe we all agree regulations were nearly nonexistent, lenders preyed on people (which was and still is illegal), BUT the key point that no one is acknowledging is the property values doubling. You haven't had a single explanation for the root of the problem which led to the predatory lending, the derivatives, and ultimately the crash. It seems that many people have a mental block about what happens when the same exact house doubles in value in less than a decade when wages are flat and the economy was sliding. Do you seriously think it's normal for the most expensive commodity an American will buy in a lifetime, a commodity that takes 30 years to pay off and it just doubles almost instantly? You are focused on the results and not the root cause. If property values didn't go up so fast, no one would be underwater. One house at a time, the banks and their appraisers started fudging what they were worth. Mathematical flaws and fraud in the appraisals allowed this to happen. Lack of regulators or regulations may have been partially responsible, but it was fraudulent behavior none the less. The banks knew that historic data could not come close to supporting this phenomenon, yet they had no choice but to keep packing people into houses after it was too late. Other than Oil, Housing was the only thing going for Bush's economy and when they pushed those values up higher than what wages would support, people started losing homes. The banks conned people just like Madoff, except they didn't turn themselves in, making Madoff a better man in my mind. The con was brilliant because millions of appraisers and individual lenders all participated as accomplices and they all knew they were doing something wrong.
I design mostly residences and I do many at spec. Spec houses sell right away (at least mine do), so you can see exactly what the market is doing. When you design houses for a rich end user, that house may sell in two decades at a used price, not exactly helping one gauge what the market is saying about your work today. By watching my houses sell, I saw many of these fraudulent activities first hand and not in some news article trying to levy all the blame on Freddie & Freddie or Planned Parenthood. You and your like minded friends always present it as if Fannie & Freddie allowing people to qualify beyond their means only happened to irresponsible greedy poor people and that this was the root cause, not the fact that they needed to qualify for the same house that just doubled in price. Do you think people with money weren't qualifying beyond their means? Newsflash! By 2005, almost everyone was qualifying for a loan that was beyond their means because real estate was that overpriced for everyone. No one was buying a smaller house. High Middle Class suburbs lost more money via foreclosures and much of this was because of builders not selling an entire subdivision of half built spec houses. There is always an underlying tone that this was all the fault of irresponsible poor people, yet data is proving quite different. How many beach condos in Miami were lost via foreclosure? How many of those were poor people purchases?
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Eric Rawlings AIA
Owner
Rawlings Design, Inc.
Decatur GA
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Original Message:
Sent: 11-03-2011 02:12
From: Ricardo Ramos
Subject: Re: Should architects support local "Occupy" movements
Dear Mr. Rawlings,
That is exactly my point. This is election cycle theater at its best. The Left is in an unpopular position in this election cycle, so they do as all nationalist socialist parties do, they strike a very "real" popular sentiment of social injustice and then set up the "1%" or "Rich" strawman as the scapegoat. Its a wonderful distraction and works every time. But don't take my word for it, just look at the history of Venezuela, Cuba, Germany, and other countries where socialism took a major win from a former capitalism position. The same goes for the GOP, only their tack is different, but as we all saw, they made major gains in the last election cycle with their "protest concert tour"
The analogy of the car is actually quite accurate. You see the banks are the vehicle, the Banking Oversight Committee and the FED are the drivers and the President and Congress ride along as passengers, the barricades were Great Depression laws that separated banking and investment operations. Senator Barney Franks has been the ranking chairman and regulator for four presidents, three Fed Chairman's and the biggest defender credit easing through Fannie Mae and Freddie Mac. He was the key figure in the repeal of Glass-Stegal Act, the key member that rejected any regulation of derivatives in mortgage back securities and continues to keep the government in the mortgage backing business with Fannie and Freddy. That is nearly 20 years of defrauding the public trust (and making millions) by driving the banking "car" into the crowds and yet there is not even one mention about him in all of your postings. If knowing who the driver of the proverbial banking regulation car is and with such knowledge I move to get out of the way makes me a martyr for the Rich, then I must really question if you understand the source of your frustration.
This individual is the chief perpetrator that enabled company's like Countrywide and others to engage in predatory lending. Prior to the credit easing actions in the Clinton administration, such predatory lending was limited to insurance company's because the government was not guaranteeing mortgage backed securities. Anyone with half a brain knows the risk of the sub-prime market, but then we had Senator Franks diving the full faith of the government taxpayer to cover these toxic credit risks and then openly allowed the banks and Wall St. to hide them by bundling them into in mortgage backed securities as derivatives. Even if you bought or sold prime market mortgage backed securities, these derivative would be latch deep inside there like terminal cancer. This is why the banking system melted down and has so badly affected our profession. But who was the real criminal here? The banks who unwittingly bought the toxic mortgage backed securities or the regulators ran through all of the barricade that had been erected to prevent just that sort of thing from happening - since the last Great Depression? Why has Senator Franks not been indicted along with Chairman Bernanke and Greenspan?
I challenge you, that the distraction from the true culprits of our current financial crisis, will allow them to continue to screw the American people until we go bankrupt. The sentiment is world wide because other countries bought our mortgage backed securities. Now that they have our toxic stuff in their portfolio's, there is no way for them to get rid of it. Iceland for example is now so heavily indebted to the UK because of this horrific mess (they were heavily leverage in Goldman Sac's), that their situation makes the Greece meltdown look like speed bump. But that is the genius of the OWS organization, it is based on half truths surrounded by very real sore sentiment and that is why it is so wildly popular...and far from organic. If you actually ask any of these protestors individually why they protest and actually inquire into their personal situation, you will find that its the sentiment that brought them to the protest and not the OWS manifesto.
As for speeding tickets, well as a former police officer I dislike the citations, but I own up to them because I know exactly who the driver was and why I was pulled over. Now if everyone else would own up to their reality movements like the OWS would not exist. No one needs to be an expert to know what they cannot afford. If your argument is that American's have become so financially ignorant that they cannot figure this out for themselves, well then this meltdown is just what they needed. My six year old can figure out that out.
My point is that capitalism means personal profit and personal loss, not personal profit and social loss, however that is exactly what our government has done. All of the bank bailout's should never have happened. The market would have consumed and redistributed the remains of those banks to the survivors. But Senator Franks, Speaker Pelosi and their cronies put the American taxpayer into the banking business with Fannie Mae and Freddie Mac, so now we have gotten screwed twice, and yet they have kept their jobs and will probably be reelected this cycle because of the OWS distraction.
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Ricardo Ramos Assoc. AIA, LEED® AP, CSI
Alpha Analysis, Inc.
Arcadia CA
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Original Message:
Sent: 11-02-2011 08:00
From: Eric Rawlings
Subject: Re: Should architects support local "Occupy" movements
Ricardo,
So ACORN is up to it again under another alias. I thought all those protesters looked homeless. If this bothers you then what about that Freedom bus with the RNC paid for protestors that wheel into each pre-scheduled "protest" complaining about tea, taxes, and government Health Care? FOX even posted all the dates like it's a concert tour. Now that's a corporate manufactured protest. OWS began organically and even spread outside the country. So, is ACORN paying homeless in Europe to protest too?
Listen to how you spread the blame to dilute it and ultimately let the banks off the hook. Your vehicle analogy is quite weak, as these old folks that hit the gas instead of brake are still held responsible for the damage and injuries. The government can regulate all day, but is it the government's fault when someone commits a murder with a regulated (registered) gun? Someone is always responsible for a car accident, I have yet to hear it was a draw. The banks didn't just follow a lousy set of regulations that I'll bet I can get you to defend. They went well beyond government regulations into the territory of fraud and this is what you're unwilling recognize. By supporting and defending the system that blew up our economy and destroyed our profession, that makes you a Martyr for the Rich. This support many like you are willing to give Wall St will only make this blow up in all of our faces again.
What's your rationale? No one should have bought a house between 2003-2007 because they should have all been real estate experts and knew the houses were all overpriced? No one is getting pregnant, married, or changing locations for work during this time? Again, enough with shaming the victims and defending the perpetrators. My uncle explained the shadiness of what his boss at Countrywide asked of him. When houses became completely unaffordable, they had to con people into taking out a loan for way more than they could afford just to keep moving houses. I don't think you're mentally grasping what happens when the most expensive commodity an American will buy in a life time just doubles in value so quickly while the economy was sliding. This wouldn't have worked in the best of economic times.
The lender is responsible for qualifying these people. The lender is responsible for not throwing their money away on investments they knew were way overpriced. It's the bank's house until you make the last payment, so it's is their responsibility to make sure their clients are capable of paying their debts. I know for a fact that people like my uncle were asked to prey on people and over extend them on purpose. He had the self respect to quit over it, but this doesn't have anything to do with regulations. They had a responsibility to their own businesses not to lend people more than they could afford and what happened when they ran their businesses into the ground? They took our tax money and gave the top bonuses. Both Tea Party and OWS alike are upset that these people could run their businesses like kids in a candy shop or Charlie Sheen in a brothel and they got rewarded for it, while the rest of us would normally have to accept our failure. The Free Market works differently for bankers and this is at the core of what OWS wants to change.
I'll bet you're that guy who gets pulled over for speeding and the first thing you say to the officer is, "The guy in front of me was speeding too. Why didn't you pull him over?" Always sharing the blame with everyone to take the eyes off the responsible party. Gee, I wish Architects could do that. It seems we're always responsible for everyone under our contract and everything they do. We get sued for the mechanical system failing. Maybe you could be useful in figuring out a way for Architects to pull the same childish blame sharing game to reduce our liability and we could all pay less in liability insurance.
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Eric Rawlings AIA
Owner
Rawlings Design, Inc.
Decatur GA
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