The Amy H Remley Foundation  

February 19, 2009

Florida: One big Ponzi scheme

Published in the Citrus County Chronicle - February 19, 2009, under “Florida: One big Ponzi scheme”

It wasn't surprising that President Barack Obama came to Florida to push his economic stimulus package, because no place in the United States has fallen so hard, so fast.

And when the mega-recession finally ends, Florida will be one of the last places in the country to turn itself around. That's because other states have actual industry, while our employment base depends fatally on double-digit population growth and, to a lesser extent, tourism.

Everything was going gang-busters when a thousand people a day were moving here, but now the stampede is over, and the jig's up. Without fresh meat for the housing market, Florida basically hasn't got an economy.

Developers have controlled state and county governments for so long that no Plan B exists. Lost and clueless, lawmakers desperately hack away at public budgets while clinging to the hope that boom times will return.

For good reason, Florida has become the poster child for America's fiscal disintegration. We stand at the top of the leader board in rising unemployment, foreclosures and, of course, mortgage fraud.

Where else could a man step out of prison and straight into a job peddling adjustable-rate home loans to buyers with virtually no credit?

As The Miami Herald has documented, more than 10,000 convicted felons were welcomed into the mortgage business under the unwatchful eye of the state's Office of Financial Regulation. Believe it or not, many of those felons went on to perpetrate dishonest deeds and victimize gullible citizens.

The banks grabbed their piece of the action, too. Every major institution now standing in line for a taxpayer handout was an eager player in Florida's real-estate frenzy, throwing money at just about anybody who asked for a loan. If you had a pulse and a checking account, you could find a mortgage.

For a while it seemed like everyone caught the fever. Couples who could barely afford one house rushed out and bought two or three more, planning to flip the properties for a quick windfall. Rabid speculation warped the market and, by 2005, the price of most homes bore no credible relation to their true value.

A few experts voiced alarm, but nobody listened. The history of Florida is that of greed run amok, and old habits die hard.

'The Ponzi State'

The most recent issue of the New Yorker magazine features a scathingly accurate article about Florida called The Ponzi State. As one investment fund operator explained to journalist George Packer: "The Florida economy has been based on selling Florida. Our growth is all about population growth. When you take that away, what have you got?"

Today there's a new wave of growth in the Sunshine State: Ghost suburbs. They're springing up from one coast to the other — block after block of vacant, foreclosed homes, or houses that were built but never sold.

Obama's visit to Fort Myers was meaningful for many who attended the town rally, but the president didn't address the unique uphill challenges facing Florida's path to recovery.

For a state with 18 million residents, there are relatively few large factories or assembly plants, and not much high-tech enterprise. Agriculture — the one major sector that's not tied to population growth — has been waning for years, as vast tracts of groves and farm fields have been bought up by developers.

Yet besides orange juice, veggies and cattle, we don't produce much of anything that the rest of the country wants. The state never made an effort to diversify because it didn't have to.

As long as people kept pouring in, nobody worried. For the most part, those who migrated here wound up with jobs that directly or indirectly depended on more people coming.

It was, in fact, a Ponzi scheme of phenomenal proportions.

Now, lacking that daily fix of a thousand new warm bodies, Florida's in deep trouble. This is inevitable when the mechanism of your economy is modeled on that of a cancer cell.

Who knows when, or if, all those ghost suburbs will become neighborhoods again, all those empty condo towers and boarded-up shopping centers will bustle to life. One thing is certain: Government can't make it happen.

The state stands to receive billions in recovery funds from Uncle Sam, some of which might actually trickle down to people who need it. Still, the money will do nothing for the long-range, dead-end plight of a place where growth isn't the product of prosperous industry; it is the industry.

Nothing about Florida's frantic real-estate boom turned out to be enduring or real, except the suffering of those now losing their homes and their jobs.

They bought into a dream, and wound up in a nightmare.

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