Now that the multi-billion dollar rescue plan has made it through Congress, the federal government must engage local leaders when determining the future of troubled mortgage assets that are underwriting this unprecedented taxpayer investment.The swift and staggering meltdown of America's mortgage-lending markets has had grave global economic consequences.
But nowhere is the pain felt more acutely than in thousands of neighborhoods across our nation where unsound mortgage-lending practices have foreclosed on the dreams of American families.
In the past 18 months, our fast-growing Inland Empire has suffered some of the highest foreclosure rates in the United States. As a result, we have suffered some of the most severe economic and social losses.
Last week, supervisors in San Bernardino and Riverside counties adopted resolutions calling upon federal lawmakers to recognize the significant role local governments and business leaders should be granted in the restoration and preservation of our communities as the federal government moves forward on the rescue plan.
The supervisors' resolutions call for creation of regional public-private partnerships to manage troubled mortgage assets, rather than turning them over to faraway bureaucrats and distant business interests with no motivation to provide local returns on the assets from which they would profit.
Here are five reasons why a regional public-private partnership plan is undoubtedly in the best interests of taxpayers.
1. Ensure fair pricing: Local marketplaces are unique. During the savings and loan bailout of the early 1990s, the Resolution Trust Company bundled properties across states, which inherently was unfair to Southern California. Regional public-private partnerships would prevent large bureaucracies and corporate interests that don't recognize differences between the Arkansas, Nevada and Southern California marketplaces from bundling and selling properties within those regions. Recognizing unique marketplaces would facilitate fair pricing practices.
2. Keep profits in local economy: During the savings and loan bailout, New York and Wall Street conglomerates bought properties lumped into large portfolios for pennies on the dollar. They would then "dump" the undesirable properties, selling to regional and local buyers for 40 to 50 cents on the dollar. This "spread" resulted in the loss of millions in profits to the East Coast. Regional partnerships would ensure returns on local investment.
3. Prevent a housing glut: Community experts with knowledge of the local economy would systematically release properties into the marketplace to prohibit the dumping of homes for far less than their worth and devaluation of entire neighborhoods. The 1990s taught us that outsiders and faraway bureaucrats are not inclined to pay heed to the negative economic and social effects that property dumping has on communities.
4. Encourage taxpayer returns: All of the securities being issued in the rescue plan are backed by real properties. All real estate markets are local and regional partnerships with local expertise are best-suited to manage local assets. Putting local properties into the hands of remote business interests that fail to recognize the difference between Southern California and Oklahoma marketplaces portends big losses for taxpayers. Ignoring the expertise of community leaders would be a disservice to taxpayers across this country.
5. Ensure safer communities: Properties retained by the government fall off the tax rolls and have potential to become magnets for criminals and squatters. Conveying properties to a public-private partnership would ensure continuing management of the properties and an ongoing tax-revenue stream to local governments. Tax revenues pay for vital public services such as police and fire.
As we move ahead, communities must have a voice in their future and a stake in the enormous investment that taxpayers are making to restore our financial markets.
Congress must do its part to protect Main Street from unsound business practices by entrusting its future to the people who live there.
