This column is being written for publication on Jan. 20, which means that somewhere north of 90 percent of the New Year’s resolutions made by readers have by now been abandoned or forgotten.
Too bad, because there probably were some good ones in there.
The one we’re most interested in, and that we hope isn’t already in the discard pile, is this: “I resolve to take better care of my money.”
Not a bad resolution at any time, but the cost of neglecting it has been all too obvious in the five years of the Great Recession followed by not-quite recovery.
If that experience wasn’t enough to jolt us into enthusiastic adherence to monetary watchfulness, then nothing will, at least nothing we’d ever want to see happen to our economy.
The question is: Was it enough? Will we pay more attention?
That will be one of the interesting questions to track in 2013 as the economy stumbles, falters and fumbles toward something that looks like growth.
One more reminder of the importance of fiscal vigilance came in the news of regulators taking over Westside Community Bank. It’s the 17th in Washington to go under since the start of the unpleasantness, according to FDIC’s list (which puts WaMu under Nevada because that was technically where it was chartered; move it to its headquarters state and that’s 18). The tally doesn’t include those forced to sell at distress prices.
Westside Community, like so many others on the list, was done in by land development and construction loans that went south with the real estate market generally.
Some have blamed the collapse of the entire residential real estate market on fraud (by lenders and borrowers alike). Others credit inattentiveness to the standards of prudent lending and getting caught up in a bubble mania and not wanting to get left behind when others were making big money in the sector. Both contributed.
Now that the real estate market is recovering, sort of, and housing construction is rebounding, kind of, one would think that those bankers and builders who managed to survive will be so chastened by what they experienced that only the most rational projects will be financed, and those only after considerable due diligence.
If one thought that, one would think incorrectly. Oh, sure, you hear from borrowers about the reluctance of banks to let loose with their funds and the onerous documentation the banks insist upon. In other words (if it’s true), they’re exhibiting some of the tight-fistedness that might have kept the banking industry out of trouble had it been in place less than a decade ago.
How long will this revival of caution last? This isn’t the first real-estate meltdown we’ve been through, although most in recent memory have been far more regionally focused. After each incident, all involved swear they’ll never ever behave like that again.
Which they don’t – until they do. Memories fade. Already we’re seeing talk of spec development (building in anticipation of a customer, not with a purchase order already in hand). The greater the distance from the last calamity, the more comfortable everyone will be with loosening the rules and requirements. As we all know, real estate never loses its value, interest rates never go up and the economy never stops growing. And thus we shorten the distance to the next debacle.
“Dear God, please send us another oil boom. We promise we won’t screw it up this time.” That bumper sticker, or some variation of it, was supposedly displayed on the cars and pick-up trucks of the oil patch of Oklahoma and Texas. The expectation of permanently high oil prices, and subsequent collapse of same, led to a bust that took down the real estate market and a lot of banks with it.
The Almighty will send us another oil boom or another tech boom or another housing boom or an airplane-order boom (some analysts have warned we might be experiencing one now). And of course, we’ll screw it up. We always do. What matters to the economy is how badly caught up in one sector’s fervor everyone got. What matters to you is how long after Jan. 1 you kept up the resolution not to be among them.