General Growth Properties Files for Bankruptcy

This is pretty big news, and the story is across many levels - consumer spending, commercial real estate, mortgages, etc:

General Growth Properties, one of the largest mall operators in the nation, filed for bankruptcy early Thursday morning in one of the biggest commercial real estate collapses in United States history.

Despite bargaining for months with its creditors, General Growth faced increasing pressure to handle its more than $25 billion in debt, largely in the form of short-term mortgages that will come due by next year. The company has been severely wounded by the recession, which has wreaked havoc upon the retailers who inhabit its more than 200 malls in 44 states. Many stores have shuttered, depriving mall operators like General Growth of revenue.

What fascinates me going forward is what is going to happen to all these eventually abandoned properties. There is so much over capacity in America, so many millions (!) of extra square feet of retail space, that realistically there may never be a need for it. Especially as more and more people shop on-line. The closings/bankruptcies of retailers and whole malls will drive even more people to turn to the web (when consumption picks up). There is such a mess to unwind, it may be the story for the next several generations.

Yeah, we are so screwed

This video from Bill Moyers Journal is pretty amazing http://www.pbs.org/moyers/journal/04032009/watch.html.

The financial industry brought the economy to its knees, but how did they get away with it? With the nation wondering how to hold the bankers accountable, Bill Moyers sits down with William K. Black, the former senior regulator who cracked down on banks during the savings and loan crisis of the 1980s. Black offers his analysis of what went wrong and his critique of the bailout.

Time to Raze America?

There are some alarming if not perhaps anecdotal trends and memes shaping up on the American landscape - and I think there is one that will have direct effect on the real landscape - and that is worthless housing (to be followed by worthless retail space). America, and the thousand of communities that make up America, needs a real plan for the future in places like Flint, Michigan and other cities where the homes are crumbling, the economy has crumbled, and there is probably not any good solution other than tearing things down. How we as a nation deal with this challenge will be a real test. Perception and reality -of home, work, community, neighborhood - have to change in America. I hope we as a nation can make it through to the other side.

A couple of examples:

Banks Starting to Walk Away on Foreclosures - after being foreclosed on, the bank suspends the sheriff's sale, and now this worthless property is the responsibility of the owner again.

Off-the-cuff suggestion prompts discussion on what to do with abandoned neighborhoods in Flint:

Property abandonment is getting so bad in Flint that some in government are talking about an extreme measure that was once unthinkable -- shutting down portions of the city, officially abandoning them and cutting off police and fire service.

There are no easy answers to these issues. These people are all going to need help - financial and physical (as in moving, etc.). Unfortunately the "right" is going to cry socialism or Marxism at every chance they get, but if tax dollars are not spent on these issues, then what else is there to do? Abandon your citizens? Fuel despair and poverty until there are starving looters running through the streets? I hope somewhere in the federal, state, and local governments people are working on plans for these issues.

Ping Pong

Stereolab sums it up:

it's alright 'cos the historical pattern has shown
how the economical cycle tends to revolve
in a round of decades three stages stand out in a loop
a slump and war then peel back to square one and back for more

bigger slump and bigger wars and a smaller recovery
huger slump and greater wars and a shallower recovery

you see the recovery always comes 'round again
there's nothing to worry for things will look after themselves
it's alright recovery always comes 'round again
there's nothing to worry if things can only get better

there's only millions that lose their jobs and homes and sometimes accents
there's only millions that die in their bloody wars, it's alright

it's only their lives and the lives of their next of kin that they are losing
it's only their lives and the lives of their next of kin that they are losing

it's alright 'cos the historical pattern has shown
how the economical cycle tends to revolve
in a round of decades three stages stand out in a loop
a slump and war then peel back to square one and back for more

bigger slump and bigger wars and a smaller recovery
huger slump and greater wars and a shallower recovery

don't worry be happy things will get better naturally
don't worry shut up sit down go with it and be happy

dum, dum, dum, de dum dum, de duh de duh de dum dum dum... ah ah
dum, dum, dum, de dum dum, de duh de duh de dum dum dum... ah ah

D.I.Y.

This is definitely going to be a growing trend - and I hope it will have long lasting benefits for American society as a whole - even if the short term affect is negative to some of the people providing these services:

A few months ago, as her family’s income fell, Laura French Spada, a real estate agent in Glen Rock, N.J., began dyeing her hair at home and washing the family cars herself. Her husband, Mark, started learning how to do electrical repairs.

Susan Todoroff, a personal trainer in Ann Arbor, Mich., has begun brewing espressos at home and cutting her hair and cleaning her house herself. And Tamar A. Zaidenweber, a health care market researcher in Astoria, Queens, is spending more time walking her dog instead of taking it to day care each week.

All of these consumers could praise themselves for their newfound frugality in the midst of an economic downturn. But every step they take toward self-reliance — each shrub they prune themselves, each cupcake they bake from scratch — hurts the people and small businesses that have long provided these services professionally.

Getting back to doing things for yourself, realizing that every "free" moment isn't about shopping, vacationing, gambling, getting drunk and watching TV, while paying someone else to do the little things in life for you that actually make up real life - I think this is an important step for Americans to take and perhaps a longer term silver lining in this economic disaster.

If you're not scared yet...

... you must be in a coma. The wheels are coming off this thing - and this is after the bailout has begun!

A Sea of Unwanted Imports:

And for the first time, Mercedes-Benz, Toyota, and Nissan have each asked to lease space from the port for these orphan vehicles. They are turning dozens of acres of the nation’s second-largest container port into a parking lot, creating a vivid picture of a paralyzed auto business and an economy in peril.

"This is one way to look at the economy,” Art Wong, a spokesman for the port, said of the cars. “And it scares you to death."

Consumer Prices Fall by Record Amount:

"This month it's more than slowing, it's outright contraction," said James O'Sullivan, United States economist at UBS. "And yes, if you extrapolate that, it's deflation."

The heart of the matter

Largely because of what Mr. Hanson called the “widespread creation of wealth,” the number of domestic hotel rooms in the luxury segment almost doubled, to more than 80,000, in the last 10 years, according to Smith Travel Research. At the same time, luxury hotel companies were also planting their flags in every major city in the world.

Is this true? Was there really a “widespread creation of wealth,” - or was most of the world just involved in the biggest Ponzi scheme (Credit Default Swaps, etc.) ever for the last ten years? Unfortunately I think it was the latter. The excess capacity of luxury hotel rooms, luxury real estate, luxury retail stores, etc. (brought on by the former enormous excess of credit) will probably all have to be worked off in the coming years, and it could be a long and ugly time economically (and literally) as this happens.

Mortgage Equity Withdrawal

Graph courtesy of the fantastic Calculated Risk. What can you say about this chart? How about one word - RECESSION.

Oh my god you are so naive!

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WTF

... is wrong with these people:

Senator Mitch McConnell of Kentucky, the Republican leader, quickly went to the Senate floor and declared Mr. McCain’s proposal "an outstanding idea."

An outstanding idea? McCain has no clue what is going on. His stunt of suspending his campaign is just that - a cheap stunt to try to get out of the debates, especially the VP debate. But McConnell is just warming up:

“Americans want to know that their home values and college funds and retirement accounts are safe. In other words, that the problems on Wall Street are not going to spread to Main Street. So I appreciate my colleague’s proposal and I hope that it is given serious consideration.”

Hey Senator, the problem is on main street, i.e. record foreclosures - and is headed back to Wall Street in the form of MBS and other toxic paper they invented - to supposedly avoid the very such problems they are in - not the other way around.

Do they just let anybody who is rich become a senator?