Saturday, January 31, 2009

The Super Bowl of Tax Policy

What with all of the to-do over the Arizona Cardinals making the Super Bowl -- to the point where we know the family history of substitutes on the punt coverage team -- one salient fact seems absent from the discussion. The team wouldn't be in the game but for raising taxes in 2001, at the beginning of a recession. No new taxes, no stadium, no home record, no home field advantage, nada. All from raising taxes! Who knew such a thing was possible?

I strongly opposed the stadium tax in 2000 as I feared living in a state which would find spanking new revenue sources for fun and games but which would cut education, health care, and services for the disabled. People said I was too pessimistic. No, I was just early.

Tuesday, January 20, 2009


I couldn't watch. I spent the morning holding my breath until the Inauguration concluded, fearing that somehow Dick Cheney would find a way to scuttle our hopes yet again.

PS: Please click the link.

Tuesday, January 13, 2009

Marc Cooper Doesn't Like New Times Much

A long, long, long post by Marc Cooper on the limitations of the New Times version of journalism, to the extent that it's journalism. Yes, it's long but it's worth reading. (H/t Ezra Klein). Thanks to the miracle of corporate ownership, you can now read the same "turgid, under-reported and tendentious piece placed in the paper by none other than the guy who now effectively owns it" in both LA (as "Los Angeles News") as well as Phoenix.

There's an argument to be had over whether Gov. Napolitano did as much as she could for Arizona. See, for example, Jon Talton. Even though I'm probably way more liberal than the Gov (on second thought, I don't think it's ideological--I'm way more confrontational than the Gov), I don't agree, but it's an argument worth having on the terms Talton sets out. But Lacey? To paraphrase the British sitcom title, "Never mind the quality--feel the length!"

Note: Last sentence edited, I misremembered the original joke.

Monday, January 12, 2009

You Geezers Get Off My Lawn!

On a slow news Monday, the Arizona Republic reaches for the obvious. (But not too obvious for over 8 pages of commenters, so maybe they know their audience well.)
Worrying About Bias Is Biased!

I'm a bit late to this particular rodeo, but I've watched with amusement the "concern" that the new Arizona political reporting website, The Arizona Guardian, needs to be watched (we should wait and see if the cliche "wait and see" becomes overused) for signs of bias because my law firm helped form the LLC and because Democratic political consultant Bob Grossfeld is a minority owner. Here's the AZ Guardian's take, but I wonder about why only Democrats get put on probation when becoming journalists.

Funny, I don't recall similar hand-wringing when those fun-loving libertarians of Freedom Communications bought the Tribune newspapers, or when Bonneville purchased KTAR radio, or when Belo bought KTVK-Channel 3. Nobody seemed concerned about waiting and seeing if those more conservative owners would start to skew coverage in line with their political beliefs.

It reminded me of a story that former Phoenix City Council member Joy Carter used to tell. Once Mayor Margaret Hance, a staunch Republican, took Joy aside and said that it wasn't right and proper that Joy was involved in the Maricopa County Democratic Party's Nucleus Club. The Phoenix Council was, and still is, elected on a non-partisan basis, and Hance said Joy, instead of being a high-profile member of something as overtly political as Nucleus, rather should spend her time on community activities -- like Trunk and Tusk.

(For the irony-impaired or the recently-arrived, Trunk and Tusk was the GOP's version of Nucleus at the time.)

Saturday, January 10, 2009

Sometimes It's Nice Not To Be Noticed

One interesting sidelight of the Bernard Madoff financial scandals, at least here in Arizona, is the lack of any gossip about local investors or institutions who have lost money invested with him. I've heard nothing, and I spend a lot of time talking with some of the biggest gossips in the Phoenix Jewish community. (Cue faux outrage: I resemble that remark, sir!) We're perfectly capable of developing our own financial houses of cards, but apparently none of our machers achieved the level of status that allowed them the privilege of putting their money in the leading national Jewish Ponzi scheme.

In other words, in the American Jewish community hierarchy, in the contest of who you know (and is there any other game?), we in Phoenix rank behind Latin America.

Tuesday, January 06, 2009

Your Arizona Real Estate Bubble In Action: 10933 W. Hopi Street, Avondale

Anybody interested in just how screwed up the real estate market got in Arizona during the bubble needs to read this Wall Street Journal online article (complete with video and slide show) entitled "Would You Pay $103,000 for This Arizona Fixer-Upper? That Was Ms. Halterman's Mortgage on It; 'Unfit for Human Occupancy,' City Says."

The house is 10933 W. Hopi Street in Avondale, Arizona (map), Maricopa County Assessor Parcel No. 101-17-250; the legal description is Lot 70, Cashion Park South (MCR 89/14) for fellow real estate law mavens. The house is 576 square feet in area; the lot is 6,500 square feet. The County Assessor valued the property (full cash value) at $63,500 in 2007; the assessed value rose to $76,500 in 2008, but fell to $50,100 in 2009. (See link for Assessor valuations)

The owner originally purchased the house in the 1960's for $3,500. Effective February 15, 2007, she obtained a mortgage for $103,000, which is the value an assessor and hence the lender placed on the property. (The deed of trust is available here; enter the document number, which is 2007-0235982. I tried to put in a direct link but it decays if you haven't visited the County Recorder website first.) The loan was placed through a local mortgage lender, one of the non-banks which never had to worry much about the Community Reinvestment Act; it sold the loan to Wells Fargo, which in turn sold it to HSBC, which placed it into "HSI Asset Securitization Corporation Trust 2007-WFI" which is probably in your 401(k) or mutual funds portfolios as we speak.

Ms. Halterman, the borrower, used the "cash out" from the property for bills; she never managed to pay all much on the loan, which had an adjustable rate starting at 9.25% and capped at 15.25%. In 2008, the lender foreclosed, and the property has been sold to neighbors for $18,000; the neighbors plan to tear it down. (The City of Avondale has posted the property as condemned as unfit for human habitation.)

Anybody who thinks this made any economic sense as a global matter is just nuts. But nobody involved in the transaction -- not the borrower, not the local lender (which got a couple thousand in fees from the transaction), not the assessor, not the title company handling the escrow and lender's title insurance, not the bank bundler (which also got fees both for assembling and servicing the loan), not the underwriter of the mortgage-backed security, and not the rating agencies which called collections of subprime mortgages extremely safe securities (for a fee) -- had any incentive to say no at any point in the process. (UPDATE: Actually, it was a great deal for the borrower; she used the 2007 loan to refinance a home equity loan, rolling it all into the first loan on the property. She would have remained personally liable on the home equity loan but the anti-deficiency statute prevents the lender from pursuing the difference between the value received in foreclosure and the remaining debt. That wouldn't have been true if she had continued to have two loans on the same property, the second creditor could have pursued her after foreclosure. (Probably not successfully, but still.) If a business did this, we'd congratulate the savvy of the CFO.)

Sure, it may have been nuts for the state, national, and world economy, but why would anybody in the long chain of fees have any personal incentive to pass on this deal? The risks would get passed down the chain; the fees stayed with you. So they didn't. They would have been fired if they had, because somebody else would have made the deal instead.

So much for the "self-regulating market."