Spriggsy and the out-of-town demons

Below lies an annotated version of our Mayor Spriggsy's attempt to boost Merced to the bunch of frat boys in the editorial offices at Forbes Magazine. It is pathetic because Spriggsy is caught in the very painful position of having to argue with his rightwing ideological betters, who have nominated Merced for the title of third most miserable city in America. It is an example of flak v. flak. Badlands comments are in italics.
Badlands Journal editorial board
Merced Sun-Star
William Spriggs: Opportunity, not misery
I sent the following letter to Forbes magazine taking issue with its listing our city as the third-most miserable community in the nation.
only a knuckleheaded wingnut like spriggsy would argue with a knucklehead wingnut magazine like forbes, last refuge of the flat taxers.
Editor: Thank you very much for including Merced in your recent list placing us No. 3 in the nation. However, we feel obligated to point out a slight error in your list: It should have been titled the Opportunity Index, not the list of Most Miserable Cities.
Merced is a university community that is growing, vibrant, affordable and eager to attract new businesses and industries. We are poised for development and we appreciate your calling attention to our attributes.
merced is decidedly not a "university community." boosters in the real estate industry, like spriggs, promoted a site for a university of california campus beyond the city limits yet provided by yet unpaid for city water and sewer services, as an anchor tenant for a real estate bubble that in its heyday was described by the wall street as the most overvalued residential home market in the nation. the kinds of new businesses and industries for which merced is allegedly poised for development consist of concoctions out of a u.c. merced business-incubator program including a subsoil drip-irrigation system that is supposed to save water. problems: how do crops respond to a water source a half a foot from the surface; what will be the source of the water for the system; and will equipment, installation, maintenance and repair costs justify the investment?
As your list noted, Merced has lots of affordable homes, ranking it as one of the most affordable places to live in the state on another recent list. And we also have numerous business and industrial sites at an affordable rate.
in other words, "speculators are welcome" to buy empty homes to rent to people who have lost their homes. but then there is the problem of the 20-plus-percent official unemployment rate. it takes money to rent a house.
You also noted that Merced has a large work force available to any new employer. These men and women have various levels of technical training, and we can always partner with the local community college to train workers in new techniques.
it is true we have a large, unemployed work force available and that they have various levels of technical training, from zero to some. it is also true that the local community college has developed programs for specific employers to train workers for their plants and factories, provided the students, graduates or not of our third-rate public education system can read, write, and do enough math to comprehend the training programs.
In examining your 10 criteria for selection to the Opportunity Index, you must have noted that half of our work force has a commute of 15 minutes or less.
and that's by bicycle because who can afford a car these days.
We must have scored high in crime prevention, since we have reduced violent crimes for three years in a row.
according to the FBI, crime rates are down in the entire nation for the last several years.
Based on your criteria, our scores must have received a boost because we haven't had any public officials convicted of any crimes (except for maybe a parking ticket).
lamentably, spriggsy is essentially correct as far as criminal law is concerned although we can think of at least one plea bargain down to a misdemeanor and three months in jail. on the other hand, serial, systematic violations of the california environmental quality act and open meeting laws are another story. in civil court, local land-use authorities have repeatedly lost cases or settled out of court.
We checked our weather stats with those of your weather guru and we scored 10 points above the national average. Having 262 sunny days every year -- and zero snow days -- must have helped our ranking.
and that doesn't even count our air quality, often the worst in the nation and about to get worse yet, with the arrival of the walmart distribution center, so enthusiastically boosted by mayor spriggs.
We were perplexed by the inclusion of our pro sports teams in your criteria, since we don't have any in Merced. The best we can figure is that the nearby San Francisco Giants winning the World Series helped push us up to the top of the list.
pro rodeo, perhaps?
And you didn't even include some of our other selling points in your criteria:
We have a vibrant and growing faculty and student body at UC Merced, a leader in solar technology and stem cell research.
is vibrancy what we seek in an academic faculty? why not a scintilating faculty or even an intelligent one. as for our students, they and their parents ought to be euphoric because it appears, at least anecdotally, that every student on the campus has a full scholarship because they agreed to attend the awful place.
We are two hours from the natural beauty of Yosemite National Park and Carmel/Monterey Bay.
spriggsy neglects to say that california also possesses an functional highway patrol that will prevent you from trying to get to the Monterey Bay in two hours.
We have lowered our development and other fees to encourage businesses to come to Merced.
yes, forbes, our political leadership is truly just as idiotic as our mayor sounds. having failed to make development pay for itself during the boom, rather than trying to recoup just a bit in the bust, our leaders have found yet another way to gut their town.
We foster an entrepreneurial spirit, with 39 new businesses opening up in our downtown in just the last two years.
and how many businesses have failed in the same area over the same period?
We have a great K-12 educational system that each year sends students off to Harvard, Princeton, Stanford and Berkeley.
we don't have a great K-12 educational system. this is california. perhaps a few advantaged students do go to the ivy league. far more don't graduate from high school (they help form that eager work force mentioned above.)what spriggsy fails to mention is our community college, that really does improve the chances of students to go for their last two years to four-year colleges, mostly in the california state university system.
We continue to be one of the most ethnically diverse communities in the nation.
forbes magazine would not regard our ethnic diversity as a selling point. it's another one of those ideological disjunctions spriggsy faces when confronting the giants in his political party.
We don't have to shovel snow.
but have you ever seen what expansive clay soil does to foundations?
We appreciate your listing us third in the nation on the Opportunity Index. If Horace Greeley were still around, he would have said, "Go West, young man. Go West to Merced."
We invite the Forbes staff to come to Merced and write about the opportunities that abound in our community for businesses and industries.
William Spriggs, mayor
The Bottomless Pit?
Housing's Double Dip

The housing market is now in full retreat. This week, the Commerce Department reported that sales of new homes plunged nearly 17 percent in February to a 250,000 annual pace. That's a record low. At the same time, the median price fell 8.9 percent from February of last year. The news comes on the heels of Monday's equally-dismal report that showed existing home sales dropped 9.6 percent in February. These are Depression era stats and builders know it which is why they're unloading homes as cheaply as possible. It's been 5 years since housing prices peaked in July 2006, and the market is still nowhere near the bottom. In fact, the rate of decline is accelerating. This is shaping up to be the worst spring in history.
If you want to know where the housing market is headed, keep an eye on inventory. That's the whole ball of wax. When inventory balloons, prices go down. At present, inventory is rising (8.9 month's supply) which means that prices have further to fall. But these figures don't include the vast shadow inventory that the banks are holding off-market. Many analysts think there could be another 5 to 6 years of inventory stacked up on bank's balance sheets. The Wall Street Journal's Mark Whitehouse takes an even grimmer view. He thinks the backlog could be in the vicinity of 9 years. Here's a clip from his article in the WSJ:
"Banks' vast pile of foreclosed homes doesn't appear to be diminishing. That's a troubling sign for the future of the housing market.
Back in April, this column tallied up all the foreclosed homes sitting in banks' inventory, as well as the "shadow" inventory of homes in the foreclosure process or on which owners had missed at least two mortgage payments. At the time, we reported that at the current rate of sales, it would take 103 months to unload it all.
Over the past six months, that number has actually risen. Banks managed to pare down the shadow inventory, but largely by taking possession of foreclosed homes. As of September, they owned nearly 994,000 foreclosed homes, up 21% from a year earlier. The shadow inventory stood at 5.2 million homes, down 7% from a year earlier. Grand total: 107 months of inventory.
The numbers aren't exactly comparable to the April analysis, as the providers of data have changed. The inventory data now come from RealtyTrac, the shadow inventory data from LPS Applied Analytics, and the sales data from Core Logic. But no matter how you slice it, the housing market faces almost nine years of foreclosure hangover…..
The mountain of foreclosed homes casts a long shadow." ("Number of the Week: 107 Months to Clear Banks' Housing Backlog", Mark Whitehouse, Wall Street Journal)
If this glut of homes was suddenly dumped onto the market, prices would go into freefall and the banks would be swallowed up by the red ink. That would force the Fed would to initiate another bailout. (which Bernanke definitely does not want) So the banks are releasing homes in dribs and drabs while concealing the number of non-performing loans they're holding from shareholders. It's all a giant coverup.
This is from Bloomberg:
"The number of homes in foreclosure rose to a record 2.2 million in January, according to Lender Processing Services Inc. in Jacksonville, Florida. About 23 percent of homeowners with mortgages had negative equity in the fourth quarter, meaning their home-loan balances were higher than the value of their properties, CoreLogic Inc. said in a March 8 report."
Prices are falling, home equity is drying up, foreclosures are at record highs, and the incentive to "walk away" and let the bank take the mortgage-loss has never been greater. All of the mortgage modification programs have been a total failure. The Fed purchased $1.7 trillion of garbage mortgage-backed securities (MBS) from the banks, but hasn't lifted a finger to help homeowners. All of the pain from the $8 trillion housing bubble has all been shunted onto the backs of ordinary working people.
Present policy continues the same pattern of relentless class warfare. Since Bernanke announced his bond purchasing program (QE2) in November, the Fed has bought $440 billion of US Treasuries notes from the banks. This has pushed equities up nearly 15 percent which (according to the Fed's flow of funds report) makes it look like consumers are rebounding from the deep losses they experienced during the financial crisis. But the figures are misleading. The wealthiest 5 percent of Americans control more than half of all the nation's financial assets whereas the bottom 50 percent have almost none. So the uptick in stocks doesn't improve their situation nearly as much as a boost in home values. When housing prices go up, homeowners are more apt to spend which increases economic activity and stimulates growth. The New York Fed just released a working paper last week which showed that "Between 2000 and 2007, consumer borrowing added an annual average of about $330 billion to the cash they could spend; by 2009, consumers were diverting $150 billion away from potential spending in order to reduce the debts they had built up. This represents a remarkable $480 billion reversal in cash flow in just two years." (NY Fed)
So housing prices are critical to getting the economy back on track. But in a time when all the gains in productivity are upwardly-transferred to management, workers are more dependent than ever on rising asset values in order to increase their consumption. That's why consumer spending will stay flat until housing prices go up.
Obama's unwillingness to seriously address the housing crisis has extended the period of household deleveraging and added to economic sluggishness. He needs to force the banks to negotiate cramdowns (principle reduction) and keep more people in their homes. That's Job#1. Then he needs to boost fiscal stimulus to lower unemployment and increase demand for housing. The Fed's quantitative easing (QE2) can't fix this problem. It can buoy stocks and lower long-term interest rates, but it can't create jobs, patch household balance sheets, or stabilize housing prices. This week's plunging new home sales proves that Bernanke's strategy is a flop. It's time to move on to Plan B.
Mike Whitney lives in Washington state. He can be reached at: fergiewhitney@msn.com.