Cuyahoga County, which includes Cleveland, has about 17,000 vacant foreclosed properties — roughly 4 percent of its 395,000 houses. Baltimore has 16,000, up from 12,300 in 2000
"'Everybody's talking about smart growth, but nobody is talking about smart decline,' says Terry Schwarz, senior planner at Kent State University's Urban Design Center of Northeast Ohio. The center runs the Shrinking Cities Institute in Cleveland, a city that has lost more than half its population since 1950. 'There's nothing that says that a city that has fewer people in it has to be a bad place.'"
Almost all of the people involved in the transactions made huge amounts of money, then passed the risk onto someone else. Instead of keeping the dicey loans in their own portfolios, the big banks and giant mortgage companies that originally underwrote them, resold the mortgages to big New York investment houses.
Firms like Bear Stearns and Merrill Lynch sliced the loans into little pieces and packaged them up with other investments, then sold them to their best customers around the world as high-yield mortgage-backed securities, turning sows’ ears into silk purses, all with the blessing of rating agencies like Standard & Poor’s.
“At every step in the way, somebody has his or her hand out, getting paid. And everyone, for the time, is happy. The broker got paid. He or she was happy. The lending officer, ditto. The rating agencies got paid for passing judgment on these securities. They, too, were pleased, and their stockholders were happy. And on and on. And it would never end, except that it did,” Grant says.
2. Banks must take more responsibility.
When a bank touches a toxic loan, it should be held accountable for irresponsible lending. This is true even if the bank didn't originate the loan and even if the bank sold it off.
4. Home ownership isn't for everyone.
Just because someone gets approved for a mortgage doesn't mean he or she can afford to own a home. The mortgage payment is only a part of the cost of home ownership.
The extras that homeowners are on the hook for can cost as much as 50 percent more than the mortgage payment. Property taxes, homeowner's insurance and mortgage insurance can total several hundred dollars a month, even on a modest home.
KALAMAZOO, a medium-sized post-industrial city in Michigan, shares the problems of countless such others across America. Its population is shrinking and its poverty rate hovers around 30%. But in November 2005 it received good news: in an effort to revitalise the city, anonymous donors would pay the college tuition fees of every graduate from Kalamazoo's public schools.
The so-called “Kalamazoo Promise” made national headlines, a change for a city used to insisting that its name isn't a joke. Some 80 towns and districts have contacted Kalamazoo to learn about the promise—and a few have even copied it.
The programme's central premise is that investing in human capital helps to ensure a town's economic future. The offer of free education, Kalamazoo enthusiasts hope, will retain middle-class residents and attract new ones, tighten the housing market and help the city to lure businesses that are keen to take advantage of a new skilled workforce. This attention to the labour supply, says Tim Bartik, an economist at Kalamazoo's Upjohn Institute, is a markedly different approach from the more usual one of tax incentives. [cf.]
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