Sheila Bair, de facto real estate magnate?
As the mortgage market imploded over the past few years, the head of the Federal Deposit Insurance Corporation has watched as her agency became the owner of thousands of soured real estate properties, the Wall Street Journal reports this morning. In total, the FDIC currently owns $1.8 billion real estate, the WSJ notes.
Though the WSJ focuses on the agonizing process of unloading an Atlanta housing development named Dresden Heights -- located next to a Waffle House and a Motel 6, apparently -- the massive role the government is playing in propping up the housing market has come under increasing scrutiny of late.
The financial crisis and the real estate downturn have become linked in a vicious cycle. It goes something like this: borrowers default on their mortgages, banks holding mortgage assets fail, and, in bailing out the failed banks, the government is left owning thousands of shoddy real estate properties.
A quick scan of the some of the properties the FDIC is currently trying to unload, via the agencies website, reveals part of the problem. The agency is selling vastly different properties in very different markets (everything from a $1,800 single-family home in Detroit, and a $1 million property outside of Sacramento).
Here's the WSJ:
The financial crisis started with Americans buying homes they couldn't afford. It is ending with the government struggling to sell buildings it never wanted.
In the past two years, the FDIC has taken over 150 failed banks. In the process, it has seized more than 5,000 houses, subdivisions, buildings, parcels and other foreclosed assets. The current backlog of property stuck on the agency's books, with an appraised value of $1.8 billion, ranges from an $18,700 clapboard home with stained carpets in Birmingham, Ala., to a $1.7 million mountainside lodge with a heated driveway in Steamboat Springs, Colo.
Taxpayers will be grappling with this flotsam for years to come, one example of how the crisis will linger long after the economy begins to revive.
While no one expects the FDIC -- the body charged with regulating overseeing more than 8,000 banks -- to be particularly adept in the real estate game, the agency is just one of several government-controlled organizations that are wading through the detritus of the housing market.
The cash reserves at the Federal Housing Administration, which insures one out of every five single-family homes in the U.S., are at record lows. Fannie Mae, for its part, recently asked the government for $15 billion more in aid.
For 2009 alone, the government has spent a mind-boggling $300 billion propping up the housing market, according to a recent report from the Congressional Budget Office.
Worse, as the WSJ put it, some of the properties languishing on the FDIC's books are on their second go-around. "At a recent FDIC auction in Atlanta, the agency offered a four-unit condo building it had already sold once before -- after the savings-and-loan crisis two decades ago," the Journal reports.