December 26, 2008, here on slacktivist: Home for the holidays
Note that this financing is a no-brainer. There is nothing speculative or risky or “subprime” about making the loan the Bellwood homeowners association needs. It would be fully collateralized, and the people borrowing this money have an established track record dating back years of paying $100,000 in rent every month. If I had the money, I’d make this loan myself. If I could buy shares in this loan, I’d gladly invest most of my 401(k) in such a safe, steady and stable income machine.
Loans of this size, unfortunately, have become the province of financial dinosaurs incapable or unwilling to acknowledge such elementary arithmetic. Their shareholders demand higher-risk and higher-return investments, and they’ve abdicated all of their decision-making in such matters to the mystical metrics of Equifax, Experian and Transunion. So the financing for something like the Bellwood community’s loan may need to come from public money or public guarantees of private money. If that’s what it takes, then this becomes a public policy no-brainer.
So here we have a situation in which the contrast between possible outcomes is vast. The actions needed to produce the more favorable outcome are straightforward, noncontroversial, non-ideological, nonpartisan and not just inexpensive, but profitable. Yet in most cases like this we end up with the less desirable result — families are displaced and financially ruined and a stable community is replaced with a new development that likely won’t live up to its investors’ inflated expectations.
Stories like this one about Bellwood shouldn’t be rare, but they are. Is this just because of the stigma and the marginal status of the powerless and easily ignored “trailer park” residents? Or is it because of kickbacks and corruption on the part of developers and politicians? Honestly, I just don’t get it.
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