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Thursday, February 21, 2008

Un-Definitive and Taking Up Space

- I really didn't have too much to say, but I wanted to get the last post off the "front page" due to my embarrassing gaffe in completely mis-reading the Bloodhorse article on the Synth Summit (that was good at least, wasn't it?) in California. Hopefully, you'll all misremember that really soon.

But as long as I'm here, there was an Associated Press story the other day about some parcels of land that NYRA is seeking permission from the bankruptcy court to sell. I guess this is the land that reader theiman, whose favorite hockey team presently stands at the crossroads between fulfillment of its wondrous potential and the all-too-familiar descent into ignominy, was wondering about. And this sharp Anon commenter found the relevant clause. NYRA told the court that the $31 million it received from the state over the last year is "almost fully expended.".

In documents filed Tuesday with the U.S. Bankruptcy Court in Manhattan, NYRA said that selling the properties could help it maintain its operations, pay administrative expenses related to its bankruptcy case and continue negotiations with the state on a "definitive" settlement agreement.
Huh? You mean the agreement is un-definitive?
Brian Rosen, an attorney representing NYRA, said in an interview Wednesday that the definitive settlement agreement is aimed at resolving outstanding litigation and clearing up other issues, such as how the racing association will give up ownership of the racetracks.
I thought they were just going to hand over the deeds! Sounds like a chance for Brian Rosen to add some more hours to the bill. I wonder if the $15 to $20 million that NYRA hopes to gain from the sale will cover their legal expenses?

Also un-definitive is whether or not Belmont will ultimately get slots. A bill to permit them was introduced, in the State Assembly by Assemblyman Tom Alfano (R) and in the Senate by Republican Senator Dean Skelos, who many consider to be the heir apparent to the present Senate Majority Leader. (If they're still in the Majority after this year, that is.) A copy of the measure can be found here. Senator Bruno and Governor Spitzer both favor VLT's at Belmont; Sheldon Silver remains opposed; but with the issue now intertwined with the upcoming budget negotiations ( Spitzer's proposal includes $250 million from the sale of development rights to a Belmont racino), I wouldn't bet against the Speaker being open to some bargaining.

- Off topic, and to get that last post even further down on the page, I wanted to mention that we were really taken aback by all the 'For Sale' signs that we saw in Florida. I guess that we're somewhat isolated from the mortgage crisis here in New York City, where the outrageous property values are only slightly less so, if that. But down there, there was not a block we passed that didn't have at least one house for sale, and that was true in the more affluent areas as well as the more modest ones.

And while we were there, Spitzer was in DC testifying before Congress, and appearing on CNBC, where he basically blamed the entire mess on the Bush Administration.
Spitzer recalled that several years ago the U.S. Office of the Comptroller of the Currency went to court and blocked New York efforts to investigate the mortgage activities of national banks. Spitzer argued the OCC did not put a stop to questionable loan marketing practices or uphold higher underwriting standards.

"This could have been avoided if the OCC had done its job," Spitzer said in the interview. "The OCC did nothing. The Bush Administration let the housing bubble inflate and now that it's deflating we're dealing with the consequences." [Yahoo News]
Spitzer and his insurance Superintendent Eric Dinallo told Congress that, when considering rescue plans for bond insurers, the municipal bond markets should receive particular consideration as opposed to the Wall Street firms that they (also) blamed for the crisis. This drew two Op Ed articles on the same day in the Wall Street Journal that blasted the governor. The Journal has long loathed Spitzer from his AG days picking on poor victims like Richard Grasso; and that was before Rupert Murdoch bought the paper!

OK, that's long enough, I'm done.


Anonymous said...

One of the reasons, Gov. Spitzer drew fire for his WashPost Op-Ed and testimony was because it was wrong, if not intentionally misleading. The vast majority of subprime loans causing the issues today were originated by state-lecensed brokers and lenders where state executives, like Gov. Spitzer, had exclusive authority to act and didn't. See Comptroller of the Currency John C. Dugan's response at

Anonymous said...

The franchise bill is one week old and NYRA's looking for an additional bailout? This does not bode well.

Alan Mann said...

hubbardbk - Thanks for the link. I'm not going to pretend that I'm sufficiently knowledgeable of this particular subject to take sides. However, as much as I blame the Bush Administration for a lot of things, it certainly seems a stretch and an oversimplification to pin the mortgage crisis on it, or on any single entity. Takes a lot of participants to create a bubble. Latest horrible news is on the front page of the Times today.

However, the Wall Street Journal pieces that I was referring to, one an editorial (not available online) and the other an Op Ed article, don't address that aspect of Spitzer's statements and testimony. Instead, it's the familiar complaints about his "zest for meddling in private markets without much wisdom;" "[reprising] one of his earlier, more successful roles as scourge of Wall Street and defender of the little guy;" and "trying to turn themselves into heroes to political officeholders everywhere."

One laugh line in the editorial is that the bond insurers "grew their business smartly [emphasis mine] during the credit boom by venturing beyond their traditional municipal business and into riskier securities backed by home mortgages." Seems about as "smart" as trying to grow one's equine business by paying $16 million for unraced two-year olds. It's stuff like that which makes me hesitate to pick up the WSJ, even though, its editorial policy aside, I think it's probably the best newspaper in the least before Rupert Murdoch got his hands on it.

Anon - I don't know if you can classify this as a bailout. That NYRA is now running low on funds comes as no surprise; and the sale of this land has been part of the plan to make it through the 12-18 months, depending on who you believe, until slots are up and running. But I'm wondering what happens if the agreement remains "un-definitive" past the time when the money runs out.

Anonymous said...

The signed legislation isn't an agreement of any kind, definitive or otherwise. It's a sketch of the conditions NYRA must meet to be awarded the franchise and what rights and obligations it will have as franchisee. Before NYRA can meet the conditions, it needs to run everything by its creditors and the Bankruptcy Court. As that process goes forward, I can imagine there are lots of details to be ironed out. For example, NYRA may be conveying all of its racing assets, but it still needs to be able to use those assets to run the business. Presumably, there needs to be some sort of lease and/or license agreement specifying the rights and obligations of NYRA and State with respect to those assets. I even read some speculation by Steven Crist that, given the haste with which the final legislation was pulled together, there may be some need to amend it after everyone has a chance to digest what it contains.

On the subject of the synthetic surface symposium, there was a nice summary in the San Diego Union Tribune of the various statements made at the symposium regarding the Del Mar surface (which seems to have drawn the most criticism). Of particular interest:

“I can assure you that the track at Del Mar will be faster and better (in 2008) than it was last year,” said Martin Collins, head of the Polytrack company.

The article makes no mention of the changes he has planned. As one reads the coverage of the symposium, it becomes obvious that a comprehensive study of horse health would be useful. But, of course, that can't happen because trainers (particularly those in the claiming game) don't necessarily want other trainers to know what problems their horses have and tricks for dealing with them.


Anonymous said...

There are many parties that actually pushed for "fairer" lending standards and more creative loans, from liberal activists to the GOP Federal Goverment.

Some of these were bound to fail when interest rates went higher.

There are two distinct crises.

First are individual homeowners, the poor people that were hoodwinked into believing they could afford a home by disengenous real estate brokers, who will now lose their down payments (for those that actually made one, some of these loans did not even require a down payment).

These are the only folks for whom we should have any concern, and they should be helped.

I have little sympathy for the greedy folks who gambled on the refinance game, knowingly mortaging their homes to the hilt in order to purchase fancy new cars and appliances or make upscale home improvements.

And no sympathy for the individual speculators that suddenly decided to gamble in the real estate market.

The second crises involves institutional "investors" who also are truly speculators.

The mortage brokers, banks, and private equity firms deserve absolutley no help. You reap what you sew.

Let them reduce dividends to make up for their losses.

Goverment has no business bailing them out.

Read a proposal the other day where instead of sending out rebate checks totalling $150 Billion they should lend that money to principal residence owners (not speculators or second homes) at 1% to buyout there existing mortgages.

This is gaining steam and appears to be a much fairer solution.

The banks lenders get back their principle, true victims keep their homes, the government finally does something good, and the speculators take their losses as they should.

ljk said...

I don't believe it's the "mortgage crisis" you're seeing in Sarasota. Sarasota median pices dropped about 10% from 2006 to 2007. I think many areas are faring worse. The local numbers are skewed too by the large number of speculators who are now forced to dump poorly timed investments.

If there's a crises here it's folks forced to sell because they can't keep up with the property taxes after the insane run up in property value earlier in the decade.

Alan Mann said...

A wise analysis, in my opinion, by Anon 12:07. That stimulus package makes for good politics, but it won't do much good if people have to use it towards getting out of debt. Has to be a more creative way to help the homeowners who were victimized as you describe.

And ljk - perhaps you're right, but call it what you will, bottom line is that a LOT of people there are trying to sell their homes, whether on Longboat, Siesta Key, or in Sarasota, and I don't imagine that too many are succeeding.

Anonymous said...

Two things are driving the economic downturn, home morgtage crisis and high price of oil.

Any bail out package should have been targeted more specifically to those most effected.

Perhaps partially a mortgage bail out package as described above, and a reduction in federal taxes on heating oil and gasoline.

A NYC resident in a rent stablized apartment that commutes via public transportation is getting the same check as a rural Minnesota home owner that has no choice but to drive to work and who is saddled with high heating bills.

Has to be a better way.

Anonymous said...

"I guess this is the land that reader theiman, whose favorite hockey team presently stands at the crossroads between fulfillment of its wondrous potential and the all-too-familiar descent into ignominy, was wondering about."

"Descent into Ignominy" sounds Larry Brooksish

It is truly an honor to be mentioned on your blog regarding my two favorite subjects, Hockey and Horses.

Welcome back to hockey weather.

The Florida market started to go down before the RE/Mtge situation we have had now. After the 03/04 Hurricane seasons the rebuilding process and the costs of insurance skyrocketed and I saw that as the start of the get out of and/or dont buy in Florida.