[sustran] Re: Fw: Sprawl in Hungary

[Wendell Cox]

Dear Walter...

Thank you for your note.... A few comments...

I have not closely reviewed the S&L debacle and so cannot comment directly on the ownership relationships you cite (as examples) in Dallas. And, certainly as a European liberal and American conservative, I do not remotely condone the loss of any amount of taxpayer funding, as occured in the S&L crisis. But you have picqued my interest, and if you have any recommendation on a book that provides an objective review of the experience I would be interested.

Nonetheless, to make a strong S&L-suburbanization connection would require a good deal more research than I am aware of at the moment. Such issues as the following would need to be considered (my perceptions are indicated)...

1. To what extent were the S&L losses attributable to residential v. commercial development. I would argue that virtually all of the residential development would have occured regardless of the S&L crisis --- and the extent of suburbanization (primarily residential) in the 1980s was the lowest in actual and percentage terms in the 1980s than in any decade since urbanized area data was first compiled by the Census Bureau for 1950 (measured in square miles added to ua's that at some point had one million population --- reason for this strange definition is that Buffalo used to have more than a million, but has fallen below).

2. As regards the commercial development, it is not at all my perception that the explosion in suburban commercial development was a Texas or Calif phenomenom. It was a phenomenom associated with population growth --- virtually the same thing occured in all major metropolitan areas that experienced significant growth --- Phoenix, Washington, DC, Atlanta, etc. Again, I would argue that it is entirely possible that most of the commercial development would have occured regardless of the influence of the S&L crisis. If we were still seeing substantial suburban (or even downtown) vacancies, the connection might be easier to make, but both suburban and downtown vacancy rates are now near their market optimum (10 percent or so), except in the basket case of downtown Dallas.

3. The  commercial development financed by S&Ls was by no means limited to suburban areas. I suspect that a review of downtown construction would show that the 1980s saw more downtown office building development than any other decade in history (in square feet) --- it is possible that the 1970s or 1920s may have been greater, but not by much.

4. The extent to which the S&L losses were attributable to real estate investments --- this may have been 99 percent, or it may have been much lower.

I wouldn't be surprised if such an analysis might develop some relationship. I just doubt that it would be significant. The expansions of previous decades were, I suspect, also financed to a substantial degree by the S&Ls... the difference is that they didn't fail. 

And, to the extent that financial deregulation is the culprit (again I am insufficiently familiar with the dynamics to know the extent of that), we should remember that Reagan and Regan could do nothing without the Congress, one house of which was always in the control of the opposing party during Reagan's time, and could have blocked deregulation. In those days, Democrats were much more open to deregulation --- witness the crucial role played by Senator Kennedy in airline deregulation.

Finally, speculative commercial building investment was radically reduced with the last of the Reagan-Congress tax reforms (1987 or so). Tax policy, not only financial deregulation, contributed to the building.

Best regards,
Wendell Cox


  ----- Original Message ----- 
  From: ITDP 
  To: sustran-discuss at jca.ax.apc.org 
  Sent: Thursday, February 03, 2000 12:14 PM
  Subject: Re: Fw: Sprawl in Hungary


  Dear Wendell, 
  Thanks for your comments.  The debates over subsidies to auto users are well known to us all, and I guess we can be allowed differences of opinion.  In any case, the connection to the S & L crisis was indeed the interesting point that had somehow eluded me before. 

  I don't think you can say that all that real estate would have been developed anyway.  Sprawl in the Sun Belt, particularly in Texas and California, was quite rampant in the 1980s, exactly where the majority of the worst S & Ls were located.  There is a film from the period shot from a helecopter showing endless rows of strip malls and condominiums on the outskirts of Dallas, completely vacant at the time, built by real estate firms, many directly owned by the S & Ls.  These developments would certainly not have been built if it weren't for the deregulation of the financial services sector under Reagan and Regan.  The end result, of course, was that the taxpayers, whether or not they subsidized the roads, also subsidized the sprawling real estate development.  The figures of this subsidy, $500 billion, (even if its only $200 billion) still dwarf the annual US spending on highways ($40-$50 billion these days, I believe, and closer to $20 billion in those days), subsidized or not. 

  Best, 
  Walter Hook 

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