Thursday, May 26, 2011

House of Cards

Here's a cautionary tale if there ever was one.

You want to know how Georgia's economy fell apart, read it. That kind of development situation, replicated over and over again - maybe not to scale - combined to crush the state's banks. Though not every situation was big enough to thoroughly derail the Jekyll Island redevelopment.

You'll also notice the absence of federal government culpability, so loudly touted as a way to explain the economic collapse. Instead, this is a story of a previously successful private developer borrowing hundreds of millions from banks while recieving tax breaks from the state government specifically to inflate the prices of real estate oversupply.

The collateral for the loans? Real estate oversupply with inflated prices.

I'd also like to point out how the state government (dominated by the GOP) directly subsidized the already wealthy development company to the point where the state would be losing money on the deal.

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2 comments:

Dante said...

My favorite line from the article:

"At the same time, a separate Reynolds-run investment fund was buying up distressed golf communities from weaker developers. That fund was to inject cash into the Jekyll project."

Talk about digging up. It takes a lot of arrogance to think that you can buy communities that failed, somehow make them successful by doing the same thing that failed in the first place, and expect to not only break even but make enough to fund another project. This is almost as arrogant as George Lucas expecting to take the money he made from Howard the Duck to fund the next three Star Wars movies.

It is important to see how a well-entrenched Party member can get subsidies for such projects. The rationalization is that it will be a net win for the state and local governments due to the increased tax revenues collected. In reality, that is rarely the case. I'd personally like to see an end to such public/private "partnerships." Unfortunately, switching Party vote won't reverse this problem. It'll only change which private firms get the payout.

Cousin Pat from Georgia said...

This is almost as arrogant as George Lucas expecting to take the money he made from Howard the Duck to fund the next three Star Wars movies.

You win the internet today with this one.