Inland Empire leaders fear a bailout wipeout

There's an excellent piece in today's Wall Street Journal reporting that business leaders in the Inland Empire are worried that the federal bailout could do lasting damage to the area's housing market.

The specific fear, according to the Journal, is that bulk purchase of foreclosed properties, and bulk sales to investors, will lead to a sharp drop in home-ownership in the area:

"We don't want the cure to be worse than the disease," said Steve PonTell, a business owner in the vast area east of Los Angeles known as the Inland Empire. He said he is worried that neighborhoods could be seriously damaged if the Treasury 'dumps' real-estate assets in such a way that leads to absentee ownership.

Government representatives in the area are now scrambling to muster support for a federal bill that would allow local businesses and governments to buy up some of the real estate to make sure it doesn't fall into the hands of speculators who have no stake in the community. The bill, introduced Sept. 27 by Rep. Gary Miller, a Republican who represents some of the areas in Southern California hurting from the mortgage meltdown, promotes the formation of regional public-private partnerships that could buy homes in their geographic area from the Treasury. This approach, they argue, would help stabilize neighborhoods and maximize financial returns to taxpayers.

Two cents: Interesting stuff. This is one of the problems with government intervention: It invites even more government intervention. So the government bailout might cause unintended consequences? OK, let's form regional government partnerships to diminish potential problems from the federal government's actions.

-- Peter Viles

Your thoughts? Comments? E-mail story tips to Peter Viles.
Hat tip: Todd in Weho, and others. Thanks.
Photo: Los Angeles Times

Comments

[anonymous]

I just don't get their logic. How is the local government different than an investor different than the federal government? None of these entities are going to live in these neighborhoods. All are out for a profit. The bailout is intended to benefit the financial markets, not the housing market.

[TC]

And with this regional government I would hope that "sustainability" comes into play some place.

How about smaller, more affordable, energy efficient homes that don't strap the owner with another 600-1000 dollars in utilities and upkeep every month.

I am all for personal ownership as it promotes diversity and pride, but please show me another country in the entire world where working class people live in 2000+ sqft homes with granite counter tops, pools, and laundry rooms. I can't necessarily speak for the IE, but I don't think where i live (Antelope Valley) is all that much different.

Your local developer and bank sold all you down the river with some bloated American Dream, try to limit the exposure next time and aim for a sustainable community.

/Steps off Soapbox.

[MyLessThanPrimeBeef]

I guess everyone wants in for a piece of the action, even local, private but well connected money.

[JusDaFax]

Forget about health care, welcome to Nationalized Housing. 'Public-private partnership formation' is code for 'making sure cherry properties are steered to preferred developers with political connections.' What a mess.

I just voted by mail and voted for a 3rd party presidential candidate instead of the major party candidate I was going to vote for pre-bailout.

Will you join me and pledge to NEVER vote for a politician who voted for the Wall Street Bailout. I mean never, so long as you live no matter what position they run for.

[Flubby]

It's time to get rid of Rep. Gary Miller. He voted for the bailout twice and now wants more government intervention.

[Rob]

Deregulation leads to Overregulation
Leads to Deregulation which leads to, you guessed it... Overregulation. Obamagulation?

Excuse me while I go yell at someone...

[mike]

why don't they stop playing in the private sector

[FreedomCM]

Isn't this whole story a canard?

Treasury is going to buy CDOs, which are only fractional ownership of any given mortgage. That is why they cannot 'bail out' individual mortgage holders (all the other fractional owners of the mortgage won't agree).

Unless the game plan has changed and Treas. is going to put Humpty Dumpty back together (reassemble the mortgages via buying up all of the CDOs that hold them). But I don't know any mechanism for that.

Maybe one of the big heads over at Calculated Risk could figure it out...

[sailor7x]

HEY ROB - OBAMAGULATION

nice one!

government riding to the rescue always sounds so wonderful and good. But here is a quote from today's Wall Street Journal.....

"investors appear to have grown numb to countless attempts by officials to ease the suffering in financial markets."

"We've bought into so many programs before that have not worked that we're selling on them now," said Mike O'Rourke, chief market strategist at BTIG.

They are selling on them now. Do you think they teach that in school?

OBAMAGULATION - isn't that the same as strangulation?

[peteviles]

Freedom CM writes, "Isn't this whole story a canard? Treasury is going to buy CDOs, ..."

Thanks, Freedom. I don't think anyone knows what Treasury is going to buy. My understanding of the bill is that Treasury can buy just about anything they want to buy -- whether it's stock in companies, real houses, bundles of mortgages, mortgage-backed securities, credit card debt, auto loans, student loans. Anything. Anything Treasury thinks will bring stability to the financial system.

[Juanito]

It is not OBAMAGULATION, it is actually called McCainized forced fornication, otherwise known as Republicans forcing the middle class to take it where the sun does not shine

[356man]

Funny how some are so quick to throw this down on Obama--how about McBush's role in this whole mess? Oops, forgot, the right wing is above reproach and accountability...

[socalinvestor]

Truly sad. The moral of the story of the last 5 years is this....if the entire herd is heading for croc infested river, go with them. Otherwise you will be the one pushing the others to the other side while the crocs eat you alive.

[Revolted Renter]

"I just voted by mail and voted for a 3rd party presidential candidate instead of the major party candidate I was going to vote for pre-bailout"

I'm right there with you, Obama officially lost my vote last week. I'm voting for Nader. Outraged conservatives should vote for Bob Barr (who made a pretty great video about the bailout plan on youtube).

[Crash and Burn]

Man, if you can't recognize a Congressman grabbing into the cookie jar for his slice of pork, there really is no hope for you. These are the scum that are frothing at some of the "free money" they see being doled out by Washington. I have no doubt Haliburton will soon be setting up shop to participate in these public-private (AKA the public gives to the private) "parternships" (AKA parasites). Wake up.

[upthecreek]

BYE BYE GARY MILLER.. YOU NEED TO GO

[Steve]

How can the IE get any worse. the region was a dump 20 years ago and is still a dump. It is basically an extension of SE LA, it is a ghetto with new housing and anyone who buys there is out of their mind.

[Jeremy]

JusDaFax wrote ":I just voted by mail and voted for a 3rd party presidential candidate instead of the major party candidate I was going to vote for pre-bailout.

Will you join me and pledge to NEVER vote for a politician who voted for the Wall Street Bailout. I mean never, so long as you live no matter what position they run for."

You took the words right out of my mouth. I'm voting for a 3rd party candidate and I'm also voting against my Congresswoman Laura Richardson. Not only did Laura Richardson vote for the bailout twice, she is famous for having properties in foreclosure.