Charm City Baltimore Real Estate: Baltimore, Maryland Real Estate & Homes

You have to feel sorry for Ben Bernanke… He finds himself in the unenviable position of following one of the most well-known and (still) respected Fed Chairmen in the history of the organization. But you especially have to sympathize when the aforementioned Wise Old Man criticizes you in public.

A recent headline in the Wall Street Journal — page one, above the fold — said it all. “Greenspan Sees Bottom in Housing, Criticizes Bailout.” Ouch.

Now, I’m pleased that someone of Mr. Greenspan’s reputation sees the end of this coming in the next few months — actually sometime in the first half of 2009. (I think Baltimore is in the process of seeing it now, but that’s just my opinion.)

The real knife in the back came later in the article where Mr. Greenspan takes issue with the entire Fed-backed, Treasury-backed bailout of Bear Stearns and Freddie and Fannie. The two mortgage giants, the Government Sponsored Entities (GSEs) Fredde Mac and Fannie Mae, should have been nationalized, he argues. Shareholders should have been wiped out, assets taken over, and their function split up into as many as ten separate entities and then sold off to individual investors.

Ya know, at this point, I don’t think that TOTAL reliance on the private marketplace would reassure ANYONE. After all… wasn’t it the private marketplace that got us IN to this mess in the beginning?

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There are some morsels of good news, even encouraging trends, in the current housing downturn. As the inventory of unsold Mini-Mansions on tiny lots that used to be cornfields grows, and major builders tighten their belts and lower profit forecasts, there is emerging a trend toward smaller, community style, energy efficient homes. No, this is not the Disney-esque Plantation, Florida model of community where Stepford wives patrol the sidewalks with big smiles.

A recent Wall Street Journal article reported the success of two developers in the Pacific Northwest who have taken to designing 1,000 square foot cottages, on small town-size lots. Over the last ten years, these pioneers have made a good deal of money building about fifty Craftsman-style cottages, ranging anywhere between 800-1,500 square feet. Think 1920s-style “bungalow courtyards.” These homes, all within a comfortable commuting distance to Seattle, were built in various communities and surrounding a “commons” shared by all the residents.

They can’t build them fast enough.

Who is buying these? Certainly NOT first time homebuyers, since they are significantly more expensive per square foot than the usual tract mansion. In many cases, they are refugees from the modern American suburb, willing to downsize significantly to be able to buy into a real community, where people interact with their neighbors and they can lessen their carbon footprint. Not to mention lowering their energy usage and utility bills.

Builders in other parts of the country are taking notice. Boston and Indianapolis are on track to get similar developments in the coming months, as the children of the baby boom start to look for new ways to organize society and step back from the expansive post-WWII style of suburbs that chew up forest and farmland at ridiculous rates, cause an expansion of utilities and infrastructure that become expensive to maintain and use, and cost time and money in commuting longer distances.

If this disruption in the housing market and the concurrent rise in energy prices can have the effect of making dramatic changes in the way America houses its population, then perhaps some of the pain will have been worthwhile.

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The current uproar of recriminations over the supposed financial instability of FannieMae and FreddieMac — the two pillars of America’s residential mortgage industry — is designed to obscure the growing problems in the private banks and lending institutions who have made a colossal mess out of our financial system. Its so much easier to take issue with the way the Federal Government has organized the semi-public institutions. And its so unpleasant for business-oriented Republican politicians to admit that the lack of regulation and public oversight in the financial markets has AGAIN led do a massive failure. This one may just dwarf the financial mess that the LAST Bush presidency created.

The fact is that human nature tends to excess. When you can make a gazillion dollars by bending time-honored and respected lending rules, why not bend them a little further and make a billion gazillion dollars, eh? Government in a democratic society is supposed to rein in the excess and even out the greed of human nature. When “small government” Republicans get in power, they throw rules to the wind and pray to the gods of the free market to take care of it. This is the result.

We can at least hope that new rules will be written that will be even more effective than the last. Perhaps that’s too optimistic, but I will always tend toward the healthy balance of rule, regulation and invention. Because my living, my career, my livelihood depends upon this mess getting sorted out and put right, as soon as possible. So does the economic stability of millions of similar middle-class Americans who just want to make sure that they can have access to their deposits and qualify for a mortgage. Its not that much to ask of a government.

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