Duh!

Duh

My two big “Duhs” of the week. (Part of my award-winning series of insightful journalistic excellence entitled “Duh!”):

First, the front page  article in the NY Times yesterday  morning on how the bonds markets has been gouging cities and states on bonds fees due to the significantly lower credit ratings Wall Street gives City Hall than Corporate Headquarters.

Duh.

Of course the Bonds Industry sticks it to local governments.  They do it for the same reason the best and the brightest of the Wharton School and the Harvard School of Business gave us the S&L debacle of the 1980s, the Dot.Com debacle of the 1990s and the Sub Prime Debacle of the 2000s.  They did it because they can.  Wall Street is all about money, of course, but it is all about short term money, with every bonds trader and fund manager dreaming of one thing:  hitting the big bonuses for moving the most paper, worthless or otherwise and getting to retire as a modern feudal lord to a summer house in the Hamptons.  If you can get there quicker by screwing Main Street USA, be it consumers with jumbo, “yeah you’re going to default on this sucker someday but by then I’ll be promoted and it won’t be my problem” loans or City Halls from east to west with higher borrowing costs on bonds.

Funny thing about that.  The free market says credit ratings and the cost of borrowing money should be a function of risk.  So who is more likely to default on a loan – a municipal government or a corporation?  That’s right, corporations.  So why do they get charged less for loans?  Because the Bonds markets figured out years ago that municipal politicians, playing with taxpayer money, would be less likely to kick up a fuss about being gauged at the Bonds spigot than corporate leaders held accountable by irate share holders.

They screwed the cities and states for the simplest of all reasons: they could.  And they did.

Duh.

And then comes this from the Center for Policy Initiatives report on campaign contributions to local political races.  Brace yourselves:  Real Estate developers ponied up around 20% of the million plus dollars contributed in 2007 to the 2008 Mayoral and council district races.

Who’d a thunk it?  Real Estate developers want to curry favor with the people who, if elected, would craft the ordinances and policies dictating how real estate can be developed in San Diego.

Duh.

The surprising thing to me in the CPI report is actually what a small percentage of the total  contributions the development industry constitutes.  I mean, come on developers.  You stand to make tens of millions of dollars by turning Otay factory lands into compacted housing developments and cramming in  thousands of additional  residential units into the I-15 & I-54 corridors.  At least have the good manners to contribute real money to the political campaigns and not a paltry few hundred Gs.

I mean,  I’d like to think that if San Diego government is for sale, it at least goes for a good, hefty price….

Duh.

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2 Responses to “Duh!”

  1. Everything San Diego » Blog Archive » Duh! Says:

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  2. Everything San Diego » Blog Archive » Duh! Says:

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