15 June 2012
No city on earth could be more sympathetic to capitalism than Las Vegas. There, the get-rich-quick and to heck with the rest ethos of capitalism reigns supreme. Nothing matters except the almighty dollar. In reality, most visitors go broke even quicker as homes, businesses, and life savings are lost in minutes at the gambling tables. There is nothing of any permanence in Las Vegas, in fact, it is the only city in North America to have two phone books printed each year as people come, lose money, and leave. A casino employee once told this writer, 'There's not a scam known to man that hasn't been practiced in Las Vegas. Living and working there forces one to toughen up, you become the hard person.' Certainly, there is nothing there that remotely resembles altruism.
With the above being the case, it should not be surprising to read in the Toronto Star of May 26, in "Rolling the dice in the Las Vegas Snake Pit", that vacant and ownerless houses are regularly auctioned there. Reporter Bill Schiller comments, "Every weekday morning at the stroke of ten, the faithful gather at 930 South Fourth Street to gamble. But this isn't a casino, it's the parking lot of the Nevada legal News. Here, fifty to sixty realtors congregate to bid on American broken dreams, homes wrenched from people's grasp by banks and put up for auction." Here, realtors study the lists of foreclosed houses and their details including previous selling prices, current condition, neighbourhood, square footage, number of bedrooms, bathrooms, and amenities.
Using laptops and phones, some beam the auction to unseen buyers taking instructions from investors some of whom do not even live in the US. Las Vegas real estate prices are down sixty-two per cent from their peak in 2006, compared to the national average drop of thirty-four per cent. For twenty-two consecutive months Vegas was the foreclosure capital of the US and remains in the top ten. Since the housing market went belly-up in 2007, four million American homes have been foreclosed. This year 1.25 million homes will be auctioned, up twenty-five per cent from last year.
True to form, some people are doing well in this situation, some not so well. One realtor buys about one hundred houses a year then clears the liens, pays back taxes, secures the deed, renovates, and sells for a handsome profit that could be up to one hundred per cent. Some are reported to be making up to $20 000 a week. Some realtors will buy a house for $60 000 and rent it for $1 000 a month, making their money back in five years. When property values return to previous levels, and, in the crazy anarchic capitalist system they will, investors can sell houses at a huge profit. Buying a house to live in while millions are homeless is not a consideration. Some may be empty for years, but the great god of profit rules.
To put it bluntly, Vegas is on sale and money is coming in from Canada, Mexico, and China. According to Warren Buffet, "A single family house in America is a better investment than stocks, but you have to hold it long and the risk here in Vegas is low." Not everyone in Las Vegas feels they are living in an investor's paradise. Realtor David Fahrny said, " It's the biggest fraud ever. Federal investigators found last year that a number of major banks had fraudulently forced people into foreclosure and sometimes told employees to use fake titles because they didn't have the documents necessary to legally foreclose." According to Fahrny, "They basically had Excel spread sheets of mortgages and then started trading among themselves and there was no real record of where each mortgage went. So now we are in this predicament of who really owns what. We don't really know."
In 2003, the era of the 80/20 mortgage dawned in Vegas. Buyers signed up for eighty per cent mortgages and were allowed by the banks to get the other twenty anywhere they could. It was, in effect, a one hundred per cent mortgage with no down payment. Investors were buying up new houses and builders didn't care who bought them. They just couldn't build them fast enough. Bidding wars broke out and people were offering tens of thousands of dollars over list prices with agents bearing gifts to get the sellers to take their offers. Fahrny bought properties, too, for his retirement and probably expressed it better than anyone, " Sure, it's a crapshoot. It's a roll of the dice, but if it all collapses, it won't matter, we'll all be in the same boat."
The frenzy of buying began, flyers encouraged homeowners to re-finance to make money out of their home's equity, buy a car, go on a vacation, or even buy another house. Some people were buying three and four properties at a time. Then the housing bubble burst, stocks and securities that were tied to the real estate market plummeted and the global financial crisis exploded. The banks called in Fahrny's loans as they did millions of others. There are now $800 billion worth of mortgages in arrears in the US. A report last month from the Federal Reserve Bank of Cleveland estimates that one quarter of the 500 000 vacant homes in America are so badly damaged, probably due to neglect and vandalism, that they will have to be bulldozed, or as W.S. Gilbert said, "Here's a pretty mess."
Since Las Vegas is one of the showcases of what capitalism stands for, it is to be expected that there it would reveal itself in all its corruption and stupidity. All of the above is the result of a massive deregulation of the financial services sector that has been going on for decades through Democratic and Republican administrations. Some have argued that this should have been allowed and that capitalism can't be blamed if some behave dishonestly, but it is the essence of capitalism to maximize profit at all costs, and if that means bending the rules, then so be it. In white-collar crime, greed is the mother of dishonesty and capitalism encourages greed to the extent that some say 'greed is good'. Profligate accumulation is possible in capitalism because the surplus-value that is produced by the worker and appropriated by the capitalist is converted into the money form, so accumulation is endless.
The power of Wall Street (capital) to buy influence by Republicans and Democrats alike is evidenced by the fact that in the decade leading up to the 2008 crash, the US financial sector spent $5 billion on lobbying and on campaign donations to senators and representatives in congress. Nor has any Wall Street senior executive gone to prison. Instead, the government bailed them out while they continued to collect rich bonuses. Obama may well be a decent and honest man but nevertheless it would be hard for him to prosecute when Wall Street is a major financial contributor to his presidential campaign. According to Lorrie Goldstein, in his article "Crooked Capitalism" (is there any other kind?), Toronto Sun, May 10, 2012, "…the people that Obama has appointed to consider whether there should be prosecutions or not used to work for firms that defend Wall Street from such charges." Nor can it be argued that it would be different if John McCain had won in 2008, since Wall Street heavily contributed to his campaign fund as well.
To describe the whole situation as insane would be an understatement. The Las Vegas real estate situation maybe a case of insanity gone ballistic, but wherever one lives under capitalism, life is a crapshoot.
