Last year about this time, I wrote a column about the impending disaster in America’s housing market, including condominiums. I specifically noted that former Federal Reserve Chair Alan Greenspan went too far in lowering interest rates after the "exuberance" of the Internet-inspired economic boom of 2000.
This week, Florida’s St. Petersburg Times reported that none other than "The Donald" and his famed Trump name might suffer a major setback on a planned condominium high-rise project in Tampa.
In fairness to Trump, his relationship to the project is a marketing one. The problems, apparently, are on the backs of others, who pledged financial resources they may no longer be able to back.
Donald Trump is not alone. America is finding that the warnings raised by myself and a few others in the spring of last year are quickly becoming a source of a national economic nightmare.
It’s no secret that the housing market has slowed in America, or that sub-prime loans are now leading to defaults and thereby creating shaky ground for sub-prime lenders. Don’t be surprised if this spills over to major banks and other financial institutions.
Meanwhile, high-rise condominiums continue to sprout in Sun-Belt cities such as Atlanta, Miami, Tampa and St. Petersburg. The problem is that there may be no one to live in them.
America’s "great land grab," fueled by Greenspan’s rock-bottom interest rates, led millions of people down the primrose path of buying anything they could get their hands on. In so doing, many leveraged themselves to the hilt.
Worse, they used what little equity they had in these homes and condominiums to take advantage of additional credit, and it’s too often been spent already, with payment now overdue.
This is no small problem. In my estimation, it’s the tip of the iceberg.
Congress is now looking for ways to discontinue the Bush tax cuts, passed in a previous Republican Congress. What they’re failing to recognize is the urgent need for tax and other incentives to keep afloat the housing industry — and all those who have tied their livelihoods to real estate in one way or another.
All the while these problems develop at home, we hear nothing but talk of a healthy global economy from Treasury Secretary Henry Paulson Jr. During an international tour this week, Paulson used the term "global economy" repeatedly.
His rhetoric isn’t hard to understand. He’s talking like this because China, as I’ve noted before, holds the key to propping up the U.S. currency. And those who would suffer the most should the global economy collapse would be the millions of Americans who took the bait and ran with low interest rates and "great land deals."
The guiltiest party in this precarious scenario remains Alan Greenspan. If I didn’t know better, I could believe that he set up this house of cards just to enjoy watching a tumble.
When Greenspan’s term ended, he painted a relatively rosy picture of the economy. He proclaimed that his measures had worked. But now that the Fed has a more measured chairman, Greenspan suddenly sees the potential for a recession. What a shock.
He knows darn well that his "exuberant" cuts in interest rates enticed Americans into falling in over their collective head by scooping up every land deal in sight. Now this castle in the air may be ready to dissipate.
And who might trigger its collapse? None other than Greenspan himself. His very words have sent the stock market into a tailspin.
No, it’s not The Donald’s fault that a high-rise project in Tampa is teetering toward disaster. He’s just the face that marketers put their chips behind.
The real problem is that the market has been called in and the bank is busted.