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Elizabeth Warren on the next real estate crisis

The Senate passed sweeping financial services reform this week after two years of intense debate.

The 2,300 pages of the Restoring American Financial Stability Act of 2010 comes as home foreclosures have hit a historic high but another potential real estate crisis looms. Many commercial real estate loans will mature soon, and community banks will feel the strain if property owners can’t pay — much in the way bigger financial institutions did before the $700 billion Troubled Asset Relief Program began.

Can financial reform repair a broken credit market given these huge challenges? And what’s in it for the average American?

Need to Know asks Elizabeth Warren, chair of the Congressional Oversight Panel that has been monitoring the bank bailout and keeping tabs on all of the TARP money. Warren is now believed to be the frontrunner to head up the new Consumer Protection Agency, which has been proposed to help consumers better understand financial products.
Blueprint America
Produced in collaboration with Blueprint America. Support for this segment provided by The Speedwell Foundation.

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  • Abby Goldman

    I enjoyed listening to Elizabeth Warren, but felt a cringe when the reporter commented that people don’t want to default on their mortgages because their local banker worked so hard to get it for them. Huh?!!!!!!!! You mean Wells Fargo & CountryWide and all the other internet companies who could care less about you or your community? And could it be that people are hesitant to default on their loans because they will destroy their credit, and end up with a JUDGEMENT for the amount of the mortgage (plus costs and interest) which can be collected for twenty years, even through garnishing of wages? Someone in the press needs to get this fact out, to all the people who thought it was all a game. The moral fabric of our society is already destroyed.

  • Shelley Lewis

    Actually, Alison Stewart said that in previous generations people would have avoided defaulting on their mortgages because they knew their local bankers, not today’s mortgage holders.

  • Frank W

    I hope Elizabeth Warren reads this. Financial consumer protection will fail simply because both the financial institutions and the regulators refer to and think of customers, clients, and citizens as “consumers” and consider financial services as consumer “products.” They are called “accounts,” and people do not consume them. They consume us.

  • Alex

    If you don’t get the sense from listening to Elizabeth Warren that, here is a woman who that if her perspective on governing not just an economy but a people were adopted universally our country would be guided by Wisdom and not expediency, then chances are your outlook is part of the problem. She seems incorruptible; figures a woman would give off that motherly aura, whereas men have been eminently bribable and seducable as we’ve witnessed from the avalance of media reports over the years. Make her Czar and I’d conform to anything she requires out of a bedrock in Faith.

  • Stewart

    Your article with Elizabeth Warren lacked the real punch of the empty commercial property
    examples we already have in Phoenix AZ.

    We have 5 empty tower blocks. In Tempe there are another 3: one 22 storey tower has fitted
    granite kitchens and recently failed to attract a starting bid of only $8Million.

    We already have the situation Elizabeth Warren speaks about.

    Why is the current economic situation introduced to us by dribs and drabs?

  • Jim

    I agree with Alex. She’s a business and government watchdog and consumer advocate who cannot be bought, a real straight shooter. I also agree with Jon Stewart who said when she was on the Daily Show that he wanted to make out with her. You gotta like her and what she stands for.

  • Ruth E. Bergeron

    This was an excellent interview because Ms. Warren answered the questions clearly, and obviously she has a passion for this new agency. She would make it work in the very best sense of that claim. This lady is no “loose wing nut” looking to make a lot of waves for the sake of self glory. I do hope that the internal politics of the administration do not prevent her appointment. I have 3 words for Mr. Geithner (who is said to oppose her appointment) “Get over it!” This is a lady you can work with and there will be a very healthy tension – it will not be acrimonious unless he makes it so. She has earned this appointment.

  • Rick Rybeck

    This real estate crisis is nothing new. Every major recession/depression in our history has been preceded by a boom and bust in real estate. Unfortunately, our economic system (tax laws, regulations, etc.) encourage real estate speculation in both the residential and commercial sectors. This parasitic activity burdens the average household and business during both the boom and bust times. Ms. Warren notes that trust is the foundation for a successful economy, and the boom and bust cycles in real estate erode that trust.

    Rather than “quick fixes,” we need to reorient our economy toward production and away from speculation. Fortunately, several jurisdictions have reformed their property tax to reward production in lieu of speculation. A wider application of this reform could begin to put these vacant properties into use, employing people, housing people and getting the economy on a more sustainable footing. For more information, see or . This is the type of fundamental reform that might meet with Ms. Warren’s approval.

  • Mary

    Everytime she is on a program I listen to Elizabeth Warren. Another is Crystia Freeland. The best we can do is pay down our debt, keep our money at home where you surely don’t gain but you don’t lose either or share names of ethical financial people. Allyson mentioned her parents and their home mortgage payments, back in those days the banking industry operated in mostly a moral ethical pattern, today banking is a mystery and 1+1 never equals 2.

  • MIke

    I learned a lot about the HAMP (Home Affordable Modification Program) that authorized $79 Billion to help homeowners who were scammed for 8 years with, as one Congressman put it “We suckered you into buying a home you cannot afford”. The banks and Congress acknowledged that 80% of the loans were enabled by Mortgage Brokers who falsified loan applications. So far, in the 16 or so months, with two months to go, less than 8% of those eligible for the HAMP has been granted, about $340 Million out of the $79 Billion authorized. The Congressional hearings when the major bankers were asked why so few have been “Approved for HAMP” and so many disqualified, the 4 million homeowners Congress knows are in danger of losing their homes, the bankers “lie by not telling everything when asked a question by the Congressmen”. A term, lying through omission.
    They say, people are not qualified, not primary residence, not turning in the paperwork, or income. But if you listen really carefully, they let slip out “Have a duty to the lenders (as servicers like Wells Fargo). In other words, if you have retirement, 401K, IRA’s, other assets, no loan modification will be approved. The banks also scam people with “Forebearance” short term six month loans with no disclosures that it is nothing more than a six month loan with all payments including arrears due along with a full month of Mortgage payment in Interest, a short term 33% Interest loan that puts someong who is struggling to lose their homes. The banks when asked if it is more profitable for a bank to see a homeowner go into bankruptcy, they say NO. Well, No might be appropriate in the short term but in the long term, since to construct a home per square foot is not going down, only up, in the long term, they make money in the long run by taking over a home. With the property values dropping 40% in 12 months, it is impossible to re-finance to take advantage of the lower interest rates unless you had 50% or more in equity that now is 10% or less. The question I have, how could a home, built at $100 a square foot now be worth $60 a square foot? Kind of like the stock market, banks are controlling the value of the homes for their advantage.
    So where does that lead us, going forward into the commercial market? As Elizabeth Warren stated, scary. Will Corporations walk away from their contracts like 30% of homeowners are doing with their house “upside down”?
    I think so, employees will “telecommute” and work out of their homes. Cheaper for the Company, transfer job sites to homes, and business will be transformed into something, that will probably escalate the Outsourcing of jobs to cheaper labor countries. Who knows but it will change a lot.
    The question I ask, is why the banks are doing what they are doing. How can a home, that cost $100 a square foot to build, now has a value of $60 a square foot? Manufactured homes aka mobile homes cost $75 a square foot to BUILD.
    It is not supply and demand, driving people out of their homes, 900,000 foreclosures in 2009 and more than a Million in 2010 is being manipulated. Normally, the amount of foreclosures nationally is about 100,000. A million homes in foreclosre is a Thousand per cent increase.
    When I come across cynics saying, “these people deserve what they get” they should have known better, buying a home they could not afford”, usually someone who has lived in their home for decades. When I remind them, that the foreclosed homes being dumped on the market by the banks will drive the price of their home into the ground and they will not be able to sell it with the hopes of downsizing and retiring with equity from their home, they quit smiling. The Poulson, Henry’s cousin?, hedge fund manager who made $Billions, where do you think the money came from? How about Home Equity?
    Thanks to Elizabeth Warren. I certainly hope the new Consumer Protection agency will stop the stranglehold of the banks on America. But, I am reminded of Ms Borne of the Commodity Future Trading Commission who “blew the whistle on the Sub-prime mortgage fiasco in 2000″ and was promptly put “into a bottle and corked” by the Fed, Greenspan, Summers, and other Wall Street thieves.
    I certainly hope, going forward, the laws watch out for the American People and not Wall Street and the Banks but judging from the hiring that is going on in Wall Street and NOT main street, the Consumer Protection might be more of the same, Nothing to protect the public from the predatory banks and Wall Street.
    The HAMP progam is a failure because the “FOX (banks)” that created this debacle is in charge of a program to fix it (HAMP). The Fox is still in charge. Unless, the rules of HAMP are changed, the 4 million out of 50 million homes will flood the market. Good luck on selling your home in the meantime.
    But don’t worry, the banks are funding lots of 800 square foot rental apartments and storage units that are a bit less than your mortgage but you have no equity..
    The landlords appreciate your business.

  • groubal | Pigs and Politicians…share one very frightening common thread! | Don't gripe, groubal!

    [...] Again people I continue to tell you all wake up and Get in The Game. By the end of this year “…Many commercial real estate loans will mature, and community banks will feel the strain if property owners can’t pay — much in the way bigger financial institutions did before the $700 billion Troubled Asset Relief Program began…” says Elizabeth Warren, chair of the Congressional Oversight Panel, to PBS. PBS also says that “…Warren is now believed to be the frontrunner to head up the new Consumer Protection Agency, which has been proposed to help consumers better understand financial products.” Everyone must read this article / watch the video and pay close attention: [...]

  • Tim Harvey

    Bravo for real Americans like Elizabeth Warren who represent the values that have made this country outstanding, and especially for PBS for resisting pressure to become the mouthpiece of greed and the fast buck to continue to inform a democratic people with real information.

  • Glenn Melcher

    This is just media and political fluff.. The contributors to this financial reform were the same groups that were in place two years ago, the FED, the NASD, FINRA and the FDIC… Expect the same plays by the same players…………

  • Mark Lymer, architect

    I’m a big fan of Liz and also Brooksley Borne, need to get BB back into action! Chrystia Freeland is a new name to me, will look her up.
    the cost of construction has not radically changed in the last 10 years. at least not in comparison to the land valuations. the land valuations based on zoning, etc and the egregious profit margins by the developers are responsible for the overvalued properties. dont get me wrong here. i like buildings, we need developers and builders. but the return on investment can be more something like 25% (like a credit card?!) and not 50% or 100% as ive seen here and there. the easiest example is wood stud homes in suburban sprawl areas of Phx metro that i know the materials are somewhere around $65 a foot plus labor. so why were homes being marketed and sold at $300 sf? ok, this is capitalism, and the only real rule in capitalism is to maximize profit. but to see it in a slightly different way, would be to keep doing it over and over, at smaller margins, be a little more patient, keep the ball rolling. i mean, what are you going to do if not working, buy and island and play golf 8 hours a day. may be good for some, but not typically in my profession. the joke is ‘we drop dead at the drafting board’, but why not? so here’s one more thing, i’m not totally sold on ‘bluelines’ like Portland, but it did work somehow. but one of the things that has plagued the Phx metro area, since i grew up in the 50′s till now, at 57, has been leap frog development. but to encourage also infill, there has never been much incentive. something i thought of sometime ago, but not polished the idea, is a kind of incremental tax system by ea city on property in areas deemed infill or inner city or whatever. i’ve seen properties in infill locations lay vacant for 50 years now, and am clueless as to why nothing has happened there. even if i know the story. so if a developer or investor buys a property in an ‘infill’ area, what if they are regulated to do something with the land in say 3 years? start turning shovels or the tax rate jumps up appreciably? and it they can’t get it done by then, sell the prop and the clock is reset. and one other note, in Tempe, AZ, where AZ St Univ is, the local council members have time and again, made disastrous decisions in ‘urban redevelopment’ starting notably in the early 70′s. land that was ‘iminent domained’ near downtown is still asphalt parking lots, where once were old, if not historic single family residential. and now, on top of that land, stand two hi-rise at 22 and 36 story, unfinished. and because of the precedent to allow that kind of height, at least 10 other sites have site development approval and some graded, some of it small scale fully occupied commercial, and now the city is using the land for guess what, parking. my guess is these sites will not be built-out for 30 years. similar to the asphalt parking areas graded in the 70′s. cities need to grow more thoughtfully, there is an natural organic type of growth typically. yes there are lots of exceptions. but the foundation has to be there. it means not usually jumping over or ‘adumbrating’ the next logical growth step. and i’ve forgiving city staff generally, since for the most part, they serve at the convenience of the elected council. the profit margins for a select few, sometimes even supported by tax dollars does not build a city that is inhabitable and sustainable and a viable entity, not just green. please excuse the poor spelling, syntax, and jumpy sentences, this is a brief. i like bullet lists usually. nevertheless i havnt completely given up, i’m composing a 3 minute presentation to our present council at this time.

  • mc

    Bail out Fannie Mae and Freddy Mac again? Mortgage industry is already in deep trouble, due to their own making and by unwanted disbursement of loans. As it is, we (the taxpayers) have lost more than $150 Billion by means of bail out. And now they want more? That is ridiculous.
    People who made these loans are not taking the tab but simply expect it from the taxpayers? Where are these people and where did they go? What happened to Countrywide and other so-called mortgage gurus? We have no answers for that.