San Francisco -- I've got an old leaky house with a great view. Its furnace is about to die. So I got a home energy audit and was about to sign up for $35,000 of energy
upgrades -- and get a very reasonable interest rate to pay off the loan as part
of my property tax bill, through a public finance mechanism called PACE
(Property Assessed Clean Energy bonds).
No more. The banks -- perhaps
concerned about the competition from low cost, public financing of my home
upgrade -- have just thrown a huge monkey-wrench in America's vision of green
jobs and a clean energy future. Some parasites -- like lamprey eels -- never let
PACE bonds go on my property tax. My property tax, if I were to
default and my home were to be foreclosed on, gets paid off first. (Property tax
liens are "senior," in bankerese.) The bankers claim this makes my PACE loan a
risk against my mortgage. Well, not really.
I've got a very low (20%) loan to value ratio. And if I did default, and
hypothetically had not paid two years of property taxes, the total additional
liability would be only $3600 -- two years of my monthly payment of $150. And my
house, because its monthly utility bills would be reduced by $200 a month, would
be worth more. So the bank can't really lose.
And these same banks
seemingly don't care at all about the carbon risk of the loans they make to coal
and oil companies.
So what's really going on? I'm not
certain. But let me offer a theory: When I asked one White House official how
the bankers think people like me are expected to get loans to upgrade their
energy performance in the absence of PACE bonds, I was told "they say you will
just put in on your credit card." Well, I don't know about you, but my credit
card carries a very high interest rate which I pay to... my bank. I actually
wouldn't use my credit card -- that's an insane way to finance a high-efficiency
furnace. I'd really turn to a second mortgage, which used to be called a home
improvement loan. Such a mortgage is issued at an only slightly less outrageous
interest rate, by... my bank.
It looks to me like the real flaw in PACE
financing was that it created low-interest-rate competition for the bankers, and, like all good monopolists, they leveraged their government
regulation to shut down that competition.
Now the question is: will Congress
and the White House let the banks protect energy and carbon waste with their usury, putting the banks back in charge of our economy?