The Canada ferry: Time for some public discussion

Now that the Port of Cleveland and its Canadian partner, Central Elgin, have a couple of ferry proposals in hand and are “developing an evaluation process and reviewing the proposals and the business cases they make”, maybe it’s time to inform that evaluation process with some public discussion of what this project is supposed to accomplish. On this side of the lake, I mean.

The 13,000 constituents of Central Elgin, the Ontario municipality that includes Port Stanley and now owns the harbor there, have had many opportunities — including a municipal election last year — to define the principles now being followed by its municipal officials: Port Stanley harbor under municipal ownership is for tourism and small fishing, not shipping. Paying for regular dredging costs too much. So passengers, especially tourists, are good. Shallow-draft vessels are good. Trucks are unacceptable. These are the non-negotiable conditions that Central Elgin baked into its agreement with Cleveland and their joint Request for Expressions of Interest from prospective ferry operators.

Ferry plan: 50 cars and 75 people?

I missed this May 12 story in the London (ON) Free Press:

Officials from Cleveland promoting a ferry across Lake Erie will visit Port Stanley next month for a tire-kicking exercise with its potential partner.

Central Elgin Mayor Bill Walters said the port will play host to the American delegation the same way Cleveland welcomed Central Elgin representatives in April….

“There is nothing going to happen this year,” Walters said in reference to a trial run. “There is a lot of work that has to be done in order to accommodate even a pilot project of this size.”

Primarily a passenger service, the proposed ferry would carry 75 people, 50 cars and potentially tour buses and trucks. It would dock in Cleveland alongside the Rock and Roll Hall of Fame and mere steps from Cleveland Browns Stadium and a couple of blocks from Progressive Field, home of the Cleveland Indians.

An original proposal to carry mainly truck traffic morphed into the new plan because of widely expressed opposition in the village to truck traffic and congestion.

Will Friedman, chief executive of the Cleveland port, conceded earlier the notion of the ferry is to be centred around passengers and tourism.

Okay, now, that’s a little strange. It takes a fairly big boat to carry fifty cars and “potentially” some buses. The Lake Express, the Milwaukee-to-Muskegon fast ferry that’s been touted as a possible model by Friedman’s ferry consultant HMS Global,  has a whole vehicle deck for 46 cars and ten motorcycles — along with a passenger deck for up to 248 people. What kind of vessel would only have room for 75?

Role model

Q. What city not far from Cleveland has all of the following:

• A county governed since 1984 by a home rule charter, with an elected County CEO, an Assistant CEO responsible for economic development, and a fifteen-member county legislative branch elected by district?
• An established downtown casino industry?
• A downtown waterfront free of industrial and port uses, with lots of park space, promenade access, hotels, office and residential development?
• A 2.4 million square foot downtown convention center — the nation’s 19th largest — with 700,000 square feet of exhibition space?

… not to mention thousands of recent immigrants, a growing feature film industry buoyed by an early-adopter state tax credit program, and a City Council elected entirely at large?

Where is this urban cutting edge, whose residents already enjoy so many of the reforms and innovations that Cleveland so sadly lacks?

(Hint: It’s not Pittsburgh.)

A. Detroit.

Yes, Detroit.

I said Detroit. Detroit. Detroit.

Feel better now?

Getting real about home rule

Henry Gomez reports that City Council members like Kevin Kelley and Kevin Conwell “fired a warning shot Thursday at [local] state legislators” who voted for the state anti-residency law that the Supreme Court upheld yesterday:

Their message: Start looking out for the best interests of our constituents — or look elsewhere when you need political support in our wards come re-election time.

The tough talk came at a special council caucus, one day after the Ohio Supreme Court upheld a 2006 law that bans Cleveland and other cities from enforcing residency requirements.

“I hope in the future we hold these people accountable,” said Councilman Kevin Kelley.

This is exactly the right way to look at the situation, as I pointed out when another big anti-city, anti-Home Rule measure passed in 2007 over the City of Cleveland’s strenuous opposition — but with the votes of 100% of Cleveland’s state legislators:

The end of local cable franchising is not quite law in Ohio, not yet. The Ohio Senate must accept the House’s changes to SB 117, or a conference committee must reconcile the two versions, and the Governor must sign the final product. But this will all happen in a matter of days. The argument is over, the deal has gone down. Time to move on.

I think there are two take-aways for Cleveland community leaders and citizens who actually give a crap about what will happen to the city’s ability to govern itself and survive through the next couple of decades.

Take-away one: Nobody in the Columbus power structure — including the people we send there to represent us in the General Assembly, and the people we’ve supported for statewide office with our votes — gives a rat’s tookus for that quaint old concept known as municipal home rule. Nobody. It just doesn’t matter to them, when weighed in the political scales against anything desired by an industry, a moderate-sized labor organization, or fifteen random guys on suburban barstools.

The reason is simple and self-evident: Voting to take away another piece of Ohio communities’ self-governing power has no political cost, even when it’s your own community. Oh, the mayor might make a speech, and city council might pass a resolution, and the local paper might even write an editorial calling on you (not by name) to preserve municipal prerogatives. You might be forced to explain to a few voters how deeply you believe in home rule and how agonizing it is to balance that deep belief with the other concerns you’re called upon to address. But in the end, you can safely cast your political lot with the check-writers — the police and fire unions, the gas drillers. the gun lobby, the phone company, the cable company, the phone company’s union — against your own community, knowing that nobody will remember at election time.

If Frank Jackson and Cleveland City Council members really want to preserve a shred of home rule for this city, some Democratic Representative from Cleveland must lose his or her primary election in 2008 for voting against it. Otherwise, stop whining.

What happened? In 2008, all those Cleveland legislators who voted to strip the City of its cable oversight authority, and then ran for re-election, won easy primaries without significant opposition.This includes Barbara Boyd, who represents most of Conwell’s Ward 9; Sandra Miller, whose District includes Kelley’s Ward 16;  and Eugene Miller, just welcomed by the whole Council to fill the Ward 10 seat vacated by Roosevelt Coats.

What did they and their colleagues learn from this experience about the depth of City leaders’ commitment to defend the home rule principle that they had all just trampled? What do you think they learned?

Wells Fargo: “Ghetto loans” to the “mud people”

In the New York Times yesterday:

As she describes it, Beth Jacobson and her fellow loan officers at Wells Fargo Bank “rode the stagecoach from hell” for a decade, systematically singling out blacks in Baltimore and suburban Maryland for high-interest subprime mortgages.

These loans, Baltimore officials have claimed in a federal lawsuit against Wells Fargo, tipped hundreds of homeowners into foreclosure and cost the city tens of millions of dollars in taxes and city services.

Wells Fargo, Ms. Jacobson said in an interview, saw the black community as fertile ground for subprime mortgages, as working-class blacks were hungry to be a part of the nation’s home-owning mania. Loan officers, she said, pushed customers who could have qualified for prime loans into subprime mortgages. Another loan officer stated in an affidavit filed last week that employees had referred to blacks as “mud people” and to subprime lending as “ghetto loans.”

“We just went right after them,” said Ms. Jacobson, who is white and said she was once the bank’s top-producing subprime loan officer nationally.

“Wells Fargo mortgage had an emerging-markets unit that specifically targeted black churches, because it figured church leaders had a lot of influence and could convince congregants to take out subprime loans.”

Here in Cuyahoga County, Wells Fargo mortgage originations went from 35 mortgages in 1999 to more than 4,564 in 2003.

Their annual foreclosure filings soared above 1,000 in 2005, hit a peak of 1,538 in 2007 and totalled almost 1.300 in 2008.

So far in 2009 Wells Fargo has filed another 479 new foreclosures in Cuyahoga Common Pleas Court — just under 9% of all new foreclosures filed this year.

Cold Lake Erie wind

You may have heard that the long-awaited feasibility study of the county’s proposed offshore windpower project was released last Friday. Maybe you read the PD story Saturday or the editorial yesterday, both of which acknowledge the project’s “eye-popping” cost but then shift quickly back into cheerleading mode:

"If Cleveland wants a big future commensurate with its big industrial past, it needs to start thinking bigger. The multimillion-dollar wind-energy pilot project in Lake Erie outlined last week by local officeholders, foundation officials, professors and developers would be a great start. Its mix of “green” industrial innovation with a broad public-private research partnership should set Cleveland apart and make the city a go-to destination for wind-energy manufacturers and innovators", etc., etc.

But perhaps you’d be interested in what the study, conducted by a German firm named juwi GmbH (through its Cleveland subsidiary JW Great Lakes Wind LLC), actually tells us about the issue of feasibility.

Let me summarize:

• Is it technically possible to build and operate a cluster of utility-scale wind generators a few miles from the Cleveland shore? Yes, of course it is.
• Are there impossible environmental or regulatory hurdles to such a project? No, nothing that can’t be handled.
• How good is the wind resource out there compared to other sites being evaluated for utility wind investments? We’re still not really sure, but the evidence so far says: Not so great for an offshore site. (See pages 4-21 and 4-22.)
• How much would it cost to build and operate the proposed capacity? In the neighborhood of $5 million per rated megawatt to build it and six to eight cents per kilowatt-hour to operate it, which would make the unsubsidized cost of its wholesale power more than twenty cents per kilowatt-hour — two to three times the unsubsidized cost of conventional land-based wind generation.(See page 11-33, especially Figure 11-7.)

Does this add up to “feasible”? The study’s authors (whose company is, after all, named “Great Lakes Wind”) say sure, no problem. After all it’s a pilot project, and besides there’s all that Federal stimulus money — let’s just go out and get some.

So, bottom line: The Great Lakes Wind Energy Center project is a feasible “demonstration project” as long as we can get the Feds to pick up most of the tab, and we remember that it’s really a $75-$90 million science experiment.

[A section of this post "after the jump" could not be recovered.]

Chickens, meet roost

The PD says my Councilman, Brian Cummins, is very upset about the ward redistricting plan that’s being circulated to Council members by Triad Research. Brian explains why in more detail at RealNEO, where the comments include calls for a neighborhood campaign to defend Brian, the Brooklyn Centre neighborhood, and/or Ward 15 from the redistricter’s axe.

From Henry Gomez’s PD article:

Council consultants favor a plan that would combine a tiny piece of the West Side ward that Brian Cummins now lives in and represents with a much larger portion of the ward now led by Joe Santiago. That would set up a potential showdown between the two in this year’s elections.

Councilman Joe Santiago could find himself in a race this year against colleague Brian Cummins.

Ward lines are being redrawn to eliminate two of 21 council seats, meaning wards like Cummins’ and Santiago’s will be sliced, diced and merged with others. Cleveland voters approved the population-based downsizing last November by passing a city charter amendment.

The plan that consultants shared with Cummins this week would strip the Ward 15 councilman of most of his political base. The charter does not require him to live in the ward he represents, but Cummins’ only other logical option would be to run against another neighboring incumbent.

“They’re only leaving me with a quarter of my ward, the area where I live,” Cummins said Friday afternoon, a day after being shown a map of what his new ward would look like. “Three-quarters of the ward is now in Ward 14.”

Strangely, Henry doesn’t mention that back in July, during the Charter Review process, Brian was Council’s most outspoken advocate of fewer ward Councilmen and bigger wards. My Councilman came to the Commission and asked us to recommend the elimination of at least six of the city’s 21 wards… instead of tying the number of wards to a number of residents, as Council President Sweeney had proposed. Brian got lots of ink from Henry for his effort, and even a PD editorial in his honor.

When we were at the Charter Review table, I asked Brian to explain how he thought a bigger ward would improve his ability to serve our neighborhood. I didn’t really get an answer. But what I really wanted to ask — and should have asked — was why he was so hot to get Ward 15 and his job eliminated, because that was the obvious inevitable consequence of his proposal.

Well, what we got — courtesy of City Council, the Plain Dealer and 60% of Cleveland voters — is a reduction to nineteen wards. (I’m not saying “courtesy of the Charter Review Commission”, because we didn’t recommend making it happen this year. And it probably should be seventeen, but since there’s no real data to base either figure on, who the hell knows?) So the absolutely predictable deal is now going down: Lose one ward on each side of town, ward lines pushed toward the west and south, Council Members scrambling for some rationale to keep “their” voters and stay in their current homes, activists and neighborhood groups starting to jump up and down for vague and contradictory reasons.

And my Councilman is shocked — shocked — that he might lose three-quarters of “his” ward and have to run against the Councilman whose existing (”Hispanic”) ward ends six blocks to the north of my Councilman’s house.

Be careful what you wish for. You’ll probably get it.

P.S. I guess I should say one obvious thing for the record:

Council President Sweeney, Councilman Kelley and Council in general are doing neither themselves nor the city a favor by keeping the Triad proposal, and the CSU population estimates behind it, under wraps. Council is required to act on new ward lines by April 1. That’s three and a half weeks from today.

Whatever work product Triad and its consulting partners have submitted to City Council needs to be put on public display and made available to the media right now. 

By “right now”, I mean no later than 9 am this Monday morning.

I don’t think it should be necessary — in a democracy where the government’s business is the public’s business — to explain why.

Update 3/8:In a comment at RealNEO, Councilman Cummins points out that he ended up voting “No” on the final legislation to put the ward reduction charter amendment on the November ballot, and that his proposals to the Charter Commission included more than just reducing the city’s wards — e.g. he advocated adding at-large Council members. Fair enough.

US Bancorp CEO: TARP was meant to fund bank takeovers all along

From coverage in Wednesday’s Twin Cities Pioneer-Press of a speech by U.S. Bancorp Chief Executive Richard Davis:

Davis went on to say in his talk that while government officials marketed the program as a way to entice banks to lend again, TARP actually was designed to give solid banks like U.S. Bancorp some extra cash to buy weaker banks in the system. U.S. Bancorp did just that late last year when it acquired the assets of two failed banks in California, Downey Savings and Loan and PFF Bank & Trust.

“We were told to take it so that we could help Darwin synthesize the weaker banks and acquire those and put them under different leadership,” he said. “We are not even allowed to mention that. … We were supposed to say the TARP money was used for lending.”

Presumably “Darwin” is Davis’ nickname for Bush Treasury Secretary Henry Paulson.

US Bancorp, the Minneapolis-based parent of US Bank, announced a “capital infusion” of nearly $7 billion from the TARP in November.

In the same story Davis is quoted as boasting that US Bancorp is “a strong player in a weak industry” because “We didn’t get into the stupid stuff two years ago that would have impaired us from doing the normal stuff today. So there.”

“Stupid stuff” presumably refers to excessive, badly underwritten subprime lending leading to defaults and foreclosures. The article doesn’t say whether Mr. Davis mentioned or explained his bank being listed as the plaintiff in one out of every twelve foreclosure sales in Cuyahoga County in the last five years. (That’s over 2,600 US Bank sheriff’s sales in the county — 1,600 in the city of Cleveland alone.)

(h/t Calculated Risk commenter crispycole)

Fannie Mae and the flippers

As regular readers know, the Federal National Mortgage Association, a quasi-public corporation commonly known as Fannie Mae, is routinely one of the three or four largest filers of foreclosure deeds in Cuyahoga County.

Fannie Mae doesn’t lend money to homebuyers, so it doesn’t actually foreclose on them either. What it does is buy up mortgages from other lenders, providing what’s called a “secondary market”. This is essentially the same function performed by private securitizers; in fact, Fannie Mae was packaging its mortgages into “mortgage-backed securities” for years before Wall Street adopted the model. But Fannie Mae’s standards for the loans it will buy are supposed to be higher, so it’s generally assumed to be one of the good guys in the subprime/securitization foreclosure drama.

But Fannie Mae ends up holding a lot of properties as a result of mortgages originated and foreclosed by other institutions — 374 in Cuyahoga County at this moment, according to the Auditor’s database. A house with an FNMA-backed mortgage that goes into the sheriff’s sale with National City or US Bank as the plaintiff usually comes out the other end with Fannie Mae as the new owner.

What does Fannie Mae do with these properties? Generally, they sell them off through brokers. At the moment, for example, FNMA’s website lists 92 houses for sale in the city of Cleveland, at prices ranging from $4,900 to $114,900. (Go here and search for Cleveland.)

The Washington Independent’s Mary Kane wrote in January:

Most local officials in Cleveland reserve much of their ire for Fannie Mae, the government-sponsored enterprise that provides mortgage money…

Neighborhood groups complain, however, that Fannie Mae, more so than other lenders, aggressively sells off its properties to out of town speculators…

The Fannie Mae manager of foreclosed properties in Cleveland is based in Texas and wasn’t available for comment, a spokesperson said.

Fannie Mae enabling speculators and flippers? Oh yes. And here’s a new and striking case in point:

Since the beginning of 2008 Fannie Mae has filed deeds of sale for 211 properties in the county. 118 of these properties are in Cleveland and East Cleveland.

Of those 118 Cleveland and East Cleveland sales, 54 — almost half — were to something call “RECA Limited Partnership”.

What’s RECA Limited Partnership? It’s a South Carolina operation that buys houses to flip them, and invites others to do likewise. From their website:

RECA Limited Partnership buys real estate nationwide, primarily through bank REO departments. These properties are then resold “as is, where is.” All properties are sold for cash or with an Agreement for Deed…

Since 2002, the principals have purchased and resold hundreds of properties nationwide and have built a thriving investment and real estate firm.

Whether you would like to buy a single property or invest in dozens, RECA Limited Partnership has a great opportunity for you!

That’s about the clearest business-plan definition of real estate flipping I’ve ever seen — right there on RECA’s index page. (I presume Fannie Mae staffers have web access.)

The last dozen Cleveland transactions between RECA and Fannie Mae were filed on March 10 and March 12 — three on the West Side of the city, nine on the East Side. The Sheriff’s Sale prices listed for the twelve properties total $276,005 — meaning that their recent appraised values totalled as much as $414,000. (The Sheriff’s Sale minimum bid is 2/3 of the appraised value.)

RECA bought all twelve from Fannie Mae for $25,679. Not $25,679 each… $25,679 total.

Fannie Mae has a lot of good friends in this community, reportedly including Congresswoman Tubbs-Jones.

If you happen to be one of them, now might be a really good time to call up your friends at Fannie, point them to this post, and ask them what the hell they think they’re doing.

Sprechen sie Deutsche Bank? (Or, how do you say RMBS in German?)

At the close of business Monday — the close of business for 2007 — Deutsche Bank, a German corporation with no offices closer to here than New York City, was the “owner” of 970 Cuyahoga County properties. 616 of these properties are in the city of Cleveland.

All of them are, of course, foreclosed buildings or lots. Almost all are houses (many of which are multi-unit, which means the number of residential units in DB ‘s name is significantly larger than 970). And most, if not all, are vacant.

Who actually owns all these properties? Not Deutsche Bank, of course. Deutsche Bank is a trustee, a stand-in, for the real owners — large investors who bought shares in securitized investment pools of mortgages (Residential Mortgage Backed Securities, or “RMBS“es) created by the original mortgage lenders, and are now losing their shirts.

These real owners’ names don’t appear on the Auditor’s records. But you can often find some version of a RMBS’s name on the actual deed, or the Sheriff’s sale record. And then you might be able to deduce the name of the company responsible for servicing the property (i.e. disposing of it) by looking up the “pooling and service agreement” for that particular RMBS, which might be on line. If you’re lucky.

Remember when we did this for a house down the street from me?

Here are the real owners of a few other “Deutsche Bank properties” in Cleveland, picked at random:

• 1527 East 122nd St. — “Morgan Stanley Abs Capital I Inc Cdc Mor Cap Tr 2003-He3“
• 6611 Edna Ave. — “Argent Mortgage Loan Trust 2005-W1“
• 1355 East 88th St. — “Ameriquest Mortgage Securities Inc/Asset-Backed Pass-Through Certificates Series 2004-R11“
• 1268 East 115th St. — “New Century Mort Sec Inc Home Equity Loan Trust 2003 6“
• 3651 East 50th St. — “Long Beach Mortgage Loan Trust 2005-WL3 U.S. SEC Registrant”
• 6814 Hague Ave. — “GSAMP Trust 2005-HE3“

It seems at least two-thirds of the foreclosed houses for which Deutsche Bank is the named trustee are owned by RMBSes created (and originally serviced) by Cleveland’s subprime champ Argent Mortgage and its older sibling Ameriquest. Both companies have now gone belly up, with their servicing contracts absorbed by a Citicorp subsidiary, Citi Residential. But dozens of RMBSes bearing the Argent and Ameriquest names go marching on, under the Deutsche Bank flag.

Who are the others?

“GSAMP” is short for Goldman Sachs Alternative Mortgage Product. Goldman Sachs has created and peddled more than 50 RMBSes, one of which (not 2005-HE3, but also trusteed by Deutsche Bank) was dissected in this extremely enlightening Fortune article in October.

Long Beach Mortgage is a subprime subsidiary of Washington Mutual Bank of Seattle. There are at least thirty RMBSes under the Long Beach name, (and more than twice as many under “Washington Mutual”). Deutsche Bank seems to be trustee for most, if not all, of the Long Beach RMBSes.

New Century Mortgage was the nation’s second biggest subprime mortgage lender (after Countrywide) until it declared bankruptcy last April. It created more than 30 RMBSes before its demise, most if not all using Deutsche Bank as trustee.

Morgan Stanley is… well, Morgan Stanley. Huge investment bank and financial services company, currently writing off billions of dollars in losses from investments in RMBSes and other funky asset-backed securities. Among its hundreds of RMBS deals, in 2004-2005 Morgan Stanley created five investment pools of mortgages (apparently originated by Ocwen and Countrywide) with a company called CDC Mortgage Capital listed as “independent seller”. Deutsche Bank is the trustee of four of these pools and “custodian” of the fifth.

That’s just a small sample of the scores of RMBSes that now own nearly a thousand Cuyahoga County properties (with something like two thousand more in the foreclosure pipeline for 2008) just in Deutsche Bank’s name.

What’s this Boyko / Deutsche Bank thing all about, anyway?

Here’s 4111 Archwood, a vacant foreclosed house four blocks down the street from me. (Click on it to get a closer look.)

The County Auditor’s database says the owner of this house is Deutsche Bank National Trust Company. It says Deutsche Bank NTC paid $50,000 for the house in a sheriff’s sale in March 2007. The sheriff’s sale was the outcome of Case CV-05-554639, an action for foreclosure against the previous owners, filed in Common Pleas Court in February 2005 by Deutsche Bank NTC “as Trustee”.

But Deutsche Bank never held a mortgage on 4111 Archwood. And Deutsche Bank doesn’t really own 4111 Archwood now.

We’ll get back to Case CV-05-554639 and that magic word “Trustee” in a minute. But first, a short tour of the New Mortgage Industry, courtesy of the Chairman of the Federal Deposit Insurance Corporation, Sheila Bair.

Chairman Bair testified before the U.S. House Committee on Financial Services last April. Her entire testimony is well worth reading, but it’s modestly famous for two charts.

The first chart depicts the mortgage transaction as many (most?) of us still understand it:

Simple. Straightforward. Ancient history.

Here’s Chairman Bair’s second chart, “Borrowing Under a Securitization Structure”, depicting the typical mortgage transaction in 2007 (click to enlarge):

As Chairman Bair explained to the Committee:

Securitization takes the role of the lender and breaks it into separate components. Unlike the more traditional relationship between a borrower and a lender, securitization involves the sale of the loan by the lender to a new owner–the issuer–who then sells securities to investors. The investors are buying “bonds” that entitle them to a share of the cash paid by the borrowers on their mortgages. Once the lender has sold the mortgage to the issuer, the lender no longer has the power to restructure the loan or make other accommodations for its borrower. That becomes the responsibility of a servicer, who collects the mortgage payments, distributes them to the issuer for payment to investors, and, if the borrower cannot pay, takes action to recover cash for the investors.

And she listed some of the roles in this modern mortgage transaction:

• Issuer – A bankruptcy-remote special purpose entity (SPE) formed to facilitate a securitization and to issue securities to investors.
• Lender – An entity that underwrites and funds loans that are eventually sold to the SPE for inclusion in the securitization. Lenders are compensated by cash for the purchase of the loan and by fees. In some cases, the lender might contract with mortgage brokers. Lenders can be banks or non-banks.
• Mortgage Broker – Acts as a facilitator between a borrower and the lender.The mortgage broker receives fee income upon the loan’s closing.
• Servicer – The entity responsible for collecting loan payments from borrowers and for remitting these payments to the issuer for distribution to the investors. The servicer is typically compensated with fees based on the volume of loans serviced. The servicer is generally obligated to maximize the payments from the borrowers to the issuer, and is responsible for handling delinquent loans and foreclosures.
• Investors – The purchasers of the various securities issued by a securitization. Investors provide funding for the loans and assume varying degrees of credit risk, based on the terms of the securities they purchase…
• Trustee – A third party appointed to represent the investors’ interests in a securitization. The trustee ensures that the securitization operates as set forth in the securitization documents, which may include determinations about the servicer’s compliance with established servicing criteria.

“Bankruptcy-remote”. What a great adjective.

So what does this all have to do with 4111 Archwood? While I explain, you might want to keep that second chart handy.

In August 2003, the couple that had owned 4111 Archwood since 1996 refinanced it for $93,500. Their lender was Argent Mortgage Company, LLC, a division of ACC Holdings of Orange, CA, which also owned Ameriquest Mortgage and AMC Mortgage Services. Argent was the biggest single subprime lender in Cuyahoga County between 2003 and 2005, going from no originations in 2002 to nearly 2,400 in 2003, 4,900 in 2004, and 3,800 in 2005. (Following several years of lawsuits and other problems, ACC recently closed Ameriquest’s doors and sold Argent, AMC and Ameriquest’s servicing contracts to Citigroup. Argent is now doing business as Citi Residential Lending.)

Less than two months after the mortgage on 4111 Archwood was signed, Argent Mortgage Co. LLC transferred it to Argent Securities, Inc., which “deposited” it, along with thousands of other Argent mortgages into something called “Argent Securities, Inc. Asset-Backed Pass-Through Certificates Series 2003-W5″.

Let’s just call it “ASIABPTCS2003W5″ for short.

As you may have guessed, ASIABPTCS2003W5 is one of those “bankruptcy-remote special purpose entities” Chairman Bair mentioned. It was set up by Argent to be the vehicle by which all that mortgage paper, with a face value of $1.5 billion, would be sold to investors. Once that was accomplished, the mortgage on 4111 Archwood became a tiny piece of the paper assets owned by ASIABPTCS2003W5, a corporate entity owned not by Argent but by its investors.

The “Pooling and Service Agreement” that created ASIABPTCS2003W5 named Argent’s sister company, Ameriquest Mortgage, as “Master Servicer” for all those mortgages.

And it named Deutsche Bank National Trust Company as the “Trustee” of ASIABPTCS2003W5 — the party paid to represent the interests of the investors and oversee the Master Servicer’s performance.

This all happened at the beginning of October, 2003.

Sixteen months later, in February 2005, the borrower was in default and Deutsche Bank — as the Trustee for ASIABPTCS2003W5 — filed an action for foreclosure in Common Pleas Court.

But — funny thing — nobody had bothered to tell the County Recorder, who’s legally in charge of keeping track of these things, that Argent Mortgage had sold the mortgage to ASIABPTCS2003W5. Ten months into the foreclosure proceeding, the magistrate somehow figured out that Argent was still the mortgagee of record and that Deutsche Bank lacked standing to foreclose on the property. (As the case summary, entry for 12/21/05, puts it: “PLAINTIFF’S MOTION TO VACATE CASE AND PLACE ON THE ACTIVE LIST IS DENIED. THE PARTY PURPORTEDLY GRANTED RELIEF FROM STAY IS NOT THE PLAINTIFF IN THIS ACTION.”)

The lawyer for Deutsche Bank quickly filed a motion to make Argent the “substitute plaintiff” in the case. The magistrate agreed to this, putting the foreclosure back on track. Then Argent’s lawyer got it together to file the correct document — it’s called a “Release Assignment” — with the Recorder’s Office in February, confirming the sale of the mortgage on 4111 Archwood to, ahem…

“DEUTSCHE BANK NATIONAL TRUST COMPANY AS TRUSTEE OF ARGENT SECURITIES INC., ASSET BACKED PASS THROUGH CERTIFICATES SERIES 2003-W5 UNDER THE POOLING AND SERVICING AGREEMENT DATED AS OF OCTOBER 1, 2003″

Finally, seven months later — after the foreclosure was granted to substitute plaintiff Argent, which had sold off its interest in the mortgage three years earlier — the magistrate granted a second plaintiff substitution, swapping Argent out and “Deutsche Bank National Trust Company as Trustee of ASIABPTCS2003W5″ back in.

So it was “Deutsche Bank National Trust Company as Trustee of ASIABPTCS2003W5″ listed as plaintiff on the sheriff’s sale notice, and as the grantee (buyer) on the sheriff’s deed. And now it’s “Deutsche Bank National Trust Company” listed as the owner on County records — with a tax mailing address at 505 City Parkway Suite # 100, Orange, CA, which just happens to be the last-listed address of Ameriquest Mortgage. (Remember them? Master Servicer for ASIABPTCS2003W5. Now defunct. Mortgage servicing contracts bought by Citigroup.)

But of course Deutsche Bank NTC doesn’t actually own 4111 Archwood, any more than it actually ever owned the mortgage.

ASIABPTCS2003W5 — that “bankruptcy-remote special purpose entity”, a paper creation owned by nobody in particular — owns 4111 Archwood.

Deutsche Bank, as Trustee, just represents ASIABPTCS2003W5 for certain purposes. Ameriquest Mortgage was supposed to take care of ASIABPTCS2003W5′s properties, but Ameriquest is out of business; this job may have passed to Citi Residential.

So who’s actually responsible for 4111 Archwood? Good question.

That’s just one house. Deutsche Bank currently “owns” over 900 houses in Cuyahoga County through foreclosures in which it acted as Trustee for some “special purpose entity”, commonly an entity created by Argent. Argent alone organized at least thirty-one of these billion-dollar mortgage-backed investment pools from 2003 through 2006.

So maybe you can see why Judges Boyko, O’Malley, Rose, et al are making a big deal about checking Deutsche Bank’s paperwork.

Two down, thousands to go (or, Eloise Anderson’s amazing summer)

PD this morning:

A Solon builder who has been tied to mortgage fraud has agreed to get out of the construction business as part of his punishment.

Edward Emery Jr. pleaded guilty Thursday to submitting a false loan application for a woman who bought a $490,000 home on Sedge Circle in Solon that he built. Emery also admitted to similar schemes involving 37 homes that he built in Solon and Glenwillow.

Eloise Anderson of Richmond Heights pleaded guilty to using bogus job and income information to buy the Solon house, two houses in Cleveland and another house in Pepper Pike — closing more than $1.3 million in deals over a five-month span in 2005.

Emery was not connected to Anderson’s other homes, Assistant Prosecutor Michael Jackson said. A title company owner, a mortgage broker and two officials from another mortgage company also face charges in the case.

Anderson, a 60-year-old postal clerk, was passed off as a postal inspector earning twice her $55,000 salary.
She planned to quickly dispose of the homes under rent-to-own deals, Jackson said. Solon police broke the case when neighbors on Sedge Circle complained that the tenants were not keeping up the property.

Here’s the indictment, courtesy of the excellent Mortgage Fraud Blog.

So who lent Eloise Anderson all that money?

• For the house on Sedge Circle in Solon, she got $490,000 from Argent Mortgage. Then seven weeks later she got a $392,000 mortgage from First National Bank of Arizona, which somehow allowed her to pay off Argent. (This mortgage was sold a year later to Deutsche Bank — apparently serving as trustee for an entity involving JP Morgan Chase, because these two companies were co-plaintiffs in the foreclosure action against Anderson that resulted in the sheriff’s sale of the Sedge Circle house a couple of weeks ago.)
• To buy the two houses in Cleveland, at 3606 West 45th and 4081 East 64th, she got a total of $177,210 from Long Beach Mortgage, a major subprime subsidiary of Washington Mutual of Seattle.
• Finally, Anderson got $650,000 from Meritage Mortgage of Jacksonville to buy 2485 Lander Road in Pepper Pike, apparently with zero down payment. Meritage is a now-defunct subprime subsidiary of the now-also-defunct NetBank. (This mortgage was also acquired by Deutsche Bank, as trustee for an unidentified entity, in January 2007. It’s about to go to sheriff’s sale, too.)

The First National of Arizona and Meritage loans were actually provided by Mortgage Electronic Registration Systems, Inc., which would have gotten the applications from the local mortgage broker(s) working with Anderson, signed up the two lenders, and then peddled the paper to Deutsche Bank.

Anderson got all of these mortgages approved between the beginning of May and the end of September, 2005!

None of the lenders listed above are implicated in Anderson and Co.’s fraud — in fact, they’re mostly listed in the indictment as victims. But think about it: She faked her income, faked her credit, applied to borrow a million and a half dollars in five separate steps over a five-month period, from four different subprime lenders, and they all bought it.

Maybe they were all just too busy to notice.

Or maybe they liked what they saw.

If you ran the county, what would you buy for $400 million?

The Commissioners want to raise at least $400 million (by spending upwards of $700 million in sales taxes on bond payments over the next thirty years) to buy a new public Convention Center.

The $400 million is not an actual investment which the Commissioners expect to earn back, e.g. through rental revenue. It’s a straight-up expenditure. The “return” it’s supposed to produce is private-sector jobs and taxes, in hotels, restaurants, the Medical Mart, etc.

So: If you were going to raise and spend $400 million in public money to spur private economic activity in Cuyahoga County, would you buy a Convention Center?

Here are a few alternatives to consider:

• One Convention Center @ $400 million, or

• 400 megawatts of utility-scale wind generators (with no debt to pay off, so the power would be very cheap)
• Full-ride tuition at Cleveland State for more than ten thousand county residents
• 8,000 street miles of optical fiber at an average cost of $50,000 per mile (1,300 miles would cover the entire city of Cleveland)
• Major weatherization and furnace replacement for 60,000 to 80,000 homes. (While you’re at it, you could probably throw in lead paint abatement.)

That’s just off the top of my head. What’s your $400 million idea?

Make a wish.

SB 117 and the city: Moving on

The end of local cable franchising is not quite law in Ohio, not yet. The Ohio Senate must accept the House’s changes to SB 117, or a conference committee must reconcile the two versions, and the Governor must sign the final product. But this will all happen in a matter of days. The argument is over, the deal has gone down. Time to move on.

I think there are two take-aways for Cleveland community leaders and citizens who actually give a crap about what will happen to the city’s ability to govern itself and survive through the next couple of decades.

Take-away one: Nobody in the Columbus power structure — including the people we send there to represent us in the General Assembly, and the people we’ve supported for statewide office with our votes — gives a rat’s tookus for that quaint old concept known as municipal home rule. Nobody. It just doesn’t matter to them, when weighed in the political scales against anything desired by an industry, a moderate-sized labor organization, or fifteen random guys on suburban barstools.

The reason is simple and self-evident: Voting to take away another piece of Ohio communities’ self-governing power has no political cost, even when it’s your own community. Oh, the mayor might make a speech, and city council might pass a resolution, and the local paper might even write an editorial calling on you (not by name) to preserve municipal prerogatives. You might be forced to explain to a few voters how deeply you believe in home rule and how agonizing it is to balance that deep belief with the other concerns you’re called upon to address. But in the end, you can safely cast your political lot with the check-writers — the police and fire unions, the gas drillers. the gun lobby, the phone company, the cable company, the phone company’s union — against your own community, knowing that nobody will remember at election time.

If Frank Jackson and Cleveland City Council members really want to preserve a shred of home rule for this city, some Democratic Representative from Cleveland must lose his or her primary election in 2008 for voting against it. Otherwise, stop whining.

Take-away two: “Our” cable company, headquartered in Connecticut, and “our” phone company, headquartered in Texas, have decided they’ll no longer accept a cooperative, accountable relationship with us to operate their networks over our municipal rights of way. The General Assembly has eliminated the necessity for them to do so. So Cleveland now loses its free institutional network and other bandwidth services, its right to ensure citywide deployment of fiber, its ability to negotiate support for community technology training (i.e. getting the networks to help pay for community programs that train new customers for them), etc.

If there was ever a good reason for Cleveland to hesitate to build our own community-owned, multi-user network infrastructure, that reason is now history.

This “City of Choice” needs affordable real broadband in every neighborhood, we need it in the next couple of years, and we need to stop pretending that “the private sector” is going to provide it.

The city’s real private sector — thousands of small and mid-size companies trying to make a buck in a global marketplace — needs robust connectivity like it needs paved streets. It’s time for this community to start paving our own Information Streets so that the whole community can use them, not just one or two mammoth Triple Play vendors who are never going to consider our future to be their problem.

The Mayor’s wireless initiative is a good first step, but it’s just a first step. I recommend Bob Frankston’s current commentary at MuniWireless for a good place to start a more strategic consideration of Cleveland’s new situation.

****

Above all, people who care about Cleveland must learn the lesson that these people — AT&T, Time Warner, Ohio politicians of both parties — are not our friends. Not that they’re our enemies, either. But it’s time to stop mistaking smiles, handshakes, writing the occasional charity check or showing up at the occasional fundraiser for friendship. They’ve just demonstrated exactly how much they care about this community. Let’s learn our lesson and move on.

SB 117: Breaking other people’s eggs for AT&T’s omelet

Q. What do these Ohio cities have in common?

Athens. Newark. Mansfield. Ashtabula. Brunswick. Portsmouth. New Philadelphia. Lorain. Elyria. Norwalk. Hudson. Medina. Marion. Wapakoneta. Lima. Defiance. Bryan. Van Wert. Oregon. Bowling Green. Ashland. Wooster. Carrollton. Piketon. Lorain. Amherst. Oberlin.

A. These are just a couple of dozen of the hundreds of Ohio municipalities that are about to lose their home rule authority to negotiate and oversee cable franchises, and get absolutely nothing of value in return.

The House Public Utilities Committee is holding its proponent hearing on Senate Bill 117 right about now. Much is being said about the wonders of the competitive video service AT&T is ready to deliver to lucky consumers, just as soon as we get rid of those pesky local franchises. The Communications Workers spokesman is telling everyone how this is the next step Ohio has to take to get a thousand new jobs and a 21st century network. (No, I’m not there but trust me, I’ve got it memorized.)

But no one is talking about exactly where these marvels are going to take place, or more important, where they aren’t.

No one is explaining to Rep. Hottinger that SB 117 will bring Newark no closer to cable competition that it is today. No one is showing Rep. Distel and Rep. Barrett how the 21st century network will bypass Ashtabula, Lorain, Amherst and Norwalk. Unless Rep. Goyal or Rep. Stewart asks, no proponent witness is likely to mention Mansfield or Athens. It’s even less likely that any of today’s witnesses have brought along a map like this…

… showing just how much of Ohio is eligible to benefit from a law designed solely to propel AT&T into the competitive broadband video business.

Yes, to make an omelet you have to break some eggs. But normally, if the eggs you’re cracking belong to me, I expect to get some breakfast.

It’s remarkable how free AT&T and SB 117’s other cooks are with other people’s eggs.

P.S. There’s a simple amendment to SB 117 that would fix the “other people’s eggs” problem. Just make the change from local franchising to a state “video service authorization” system effective only for communities where a new video service is actually entering the market.

No competition, no change. Fair enough?

SB 117: Where’s Verizon?

If all goes according to plan, an amended version of SB 117 will be voted out of the Ohio Senate Energy and Public Utilities Committee this afternoon. The vote to approve will be lopsided, possibly unanimous. There will be much praise for Senator Jeff Jacobson, the sponsor, for listening to the legitimate concerns of cities and public access providers and tweaking the bill in response. (Which is BS, but that’s another post… see Pho.) And there will be promises of wondrous benefits to Ohio consumers from the unleashing of “cable competition” throughout the state.

Of course the room will be packed with lobbyists. But there’s one important player who won’t be represented — or whose representative will be very, very quiet. And nobody will notice.

No one will ask: Where’s Verizon?

The single purpose of SB 117, Ohio’s “state video franchising reform” bill, is to clear the way for major telephone companies (”incumbent local exchange carriers”, or ILECs) to sell video and “triple play” services over fiber-enhanced versions of their existing infrastructures, without getting approval from the local governments that own the rights of way where those enhancements will take place. Versions of this bill have been moving through legislatures across the country. Early iterations, as in New Jersey and Texas, encountered serious lobbying opposition from the cable industry, which saw them correctly as an attempt to grab a big competitive edge in markets where phone companies are losing customers to cable VOIP. To blunt this inconvenient opposition, the telcos cut a deal last year in the Michigan legislature which was then imported to Ohio and other states: No more local video franchises for anyone! Thus, we got SB 117.

In this national march through the statehouses, state video franchise legislation has had two major backers: AT&T and Verizon. (In some states like Massachusetts, it’s known to opponents as “the Verizon bill”.) The nation’s two giant telcos are both banking on big-bandwidth converged services, video-VOIP-Internet, to recover and grow their shrinking telephone markets. And they’re both pushing “video competition” as their selling point to policy-makers.

In the national arena, Verizon is actually pretty far out in front of AT&T. Its “FiOS” product — optical fiber all the way to the premises — is simpler and faster than AT&T’s beefed-up DSL service (”U-Verse”), though more expensive to install. Verizon reported over 300,000 FiOS video subscribers at the end of the first quarter of 2007, compared to fewer than 20,000 for U-Verse.

But here in Ohio, Verizon’s contribution to the video franchising debate has been deathly silence.

Verizon hasn’t offered testimony on SB 117. Its name doesn’t appear with AT&T’s as a sponsor of www.ohiotvchoice.com. Its spokespeople have been completely absent from news coverage of the bill.

The whole SB 117 narrative is about AT&T. It’s all about AT&T competition, AT&T jobs, AT&T’s political clout. All the red Communications Workers t-shirts at the hearings are worn by AT&T workers.

Most important, the “buildout requirements” in SB 117 apply only to AT&T. That is, they apply only to telecommunications companies with more than a million access lines in Ohio. As you’ll see below, that’s one company.

Hmmm. Is AT&T the only phone company in Ohio? Or the only company that’s able to deploy modern network technology?

Are cable rates and “competition” a concern only to consumers who have AT&T phone service?

Will cities and villages lose their cable franchising authority under SB 117 only in AT&T’s service territory?

No. No. No. And noooo.

Yes, AT&T is Ohio’s biggest ILEC by far. In 2005, it served about 53% of the state’s 5.1 million reported access lines, and 51% of residential lines. It dominates all of the urban/suburban areas except Cincinnati, where Cincinnati Bell rules; and it has a pretty fair share of more rural markets as well.

But AT&T’s local exchanges still cover less than a third of the state. Here’s the map, courtesy of the PUCO:

Who’s minding the phone in all those other counties and fractions of counties? There are more than forty other ILECs reporting to the PUCO. Some are tiny; fifteen of them served fewer than a thousand home access lines in 2005. The big guys are:

Verizon, with over 800,000 access lines in 80 counties;
Cincinnati Bell, with almost 700,000 access lines in six counties;
Embarq (fm Sprint/United), with about 550,000 access lines in 45 counties;
Windstream Western Reserve, with 170,000 access lines; and
Windstream Ohio (fm Alltel), with 120,000.

With the exception of Verizon, these are “second tier” players in the national telecom pecking order. But Verizon, with annual revenue in excess of $80 billion, is definitely first-tier.

Unfortunately, in Verizon’s pecking order, Ohio appears to be very near the bottom.

I've written before about Verizon’s reported desire to sell off its Ohio access lines, as it recently did with its operations in Maine, New Hampshire and Vermont. Given this desire, it’s not surprising that this state is not to be found in Verizon’s announced plans for FiOS deployment. In fact, Verizon only got around to making regular ADSL Internet service available to most of the communities in its Ohio territory five months ago — and only because it was required to by PUCO rules for “alternative regulation” of its basic phone service.

I recommend that you scroll down to the bottom of that last link and take a look at some of the Verizon communities that didn’t have normal ADSL access six months ago. Brunswick. Wadsworth. Oberlin. New Philadelphia. Norwalk. Portsmouth.

So what do you think are their chances of getting “cable competition”, via Verizon fiber to the premises, if SB 117 becomes law and Ohio gets state video franchising?

If you said “slim to none”, go to the head of the class. But under SB 117, all those cities are going to lose their cable franchising authority, just like those in AT&T territory, just like every other municipality in Ohio. And all their Senators and Representatives are being told that their voters will get “cable competition” in return.

It’s a lie.

Take another look at that map of Verizon’s Ohio service territory. Very few if any of the communities and consumers in that blue territory are going to get what they’re being promised by the sponsors of SB 117. No fiber to their homes. No video competition. No new broadband access. No jobs. Not… gonna… happen.

No wonder Verizon is keeping its head down and its mouth shut.

Any halfway responsible Senator or Representative who represents Verizon households, and who’s thinking about voting for SB 117, has a duty to make a simple phone call to the president of Verizon North, Todd Colquitt. (He also happens to be chairman of the board of the Ohio Telecom Association, which is pushing SB 117 — I’m sure they can provide his phone number). The phone call should consist of a single question: “Mr. Colquitt, if SB 117 becomes law, when can households in my district expect to have Verizon FiOS video service available?”

The Chainlink Towpath

I thought you all might like a peek at the newly opened section of the Towpath Trail running through Stripmall Steelyard Commons. Click on the picture for a short slideshow…
 

The pictures were taken walking south from the rear of Home Depot to the rear of Target. As you can see, this is basically a long, narrow chainlink tunnel with the Mittal railroad yard on one side and, um, the back of a brand new strip mall on the other side. So lucky Towpath visitors can now glimpse Cleveland’s recent industrial past juxtaposedwith the symbols of our postindustrial future — prefab architecture, loading docks, dumpsters, the whole exciting World Class Retail package.

(Soon, I’m sure, the view through the chainlink will include 21st-century Clevelanders grabbing a smoke on their break and watching other 21st-century Clevelanders root through the dumpsters.)

It’s hard not to admire such a compelling representation of Cleveland’s modern economic history. And though the new stretch of Stripmall Steelyard Towpath may seem isolated and constricted — maybe even claustrophobic — it isn’t really that unfriendly; the eight-foot fences aren’t topped with razorwire. You can get over that sucker if you really need to.

But it sure seems a long way from the canal.

Update 5/7:  There’s been some debate about this post in comments at BFD.  My friend Laura says I’m being a curmudgeon and wonders where I buy my underwear.

I reply at curmudgeonly length.

If you’re unfamiliar with Stripmall Steelyard Commons, here’s a recent panorama.  Here’s a closer view with the mills behind it. And here’s one of the Towpath tunnels that Adam and Phil were talking about.

The Markos vs. the Menace

I’m not a Kos reader, so I didn’t know The Markos had posted this trash job on my Congressman till I read about it at MaxSpeak. It’s eleven hours old and there are already a thousand twelve hundred comments, so, you know, why bother? — whatever I’m gonna say is already in there somewhere.

But I would like to point out to whoever wanders by here that Kucinich’s’ so-called “urban 58 percent Kerry district” (the Ohio 10th CD), where I live, was held by a Gingrich Republican for two terms before Dennis ousted him in 1996, and that three-fourths of the precincts in this district are in the suburbs, not the city of Cleveland. Running for his sixth term last year, Dennis won 66% of the vote, 616 out of 641 precincts, and every single city, village and township in that mostly suburban district.

The western 25% of the 10th CD is the same as the 16th Ohio House District, which had a Republican state rep until Jennifer Brady squeaked out a 51% win this November. The 16th HD consists of five upper-middle-class suburbs, of which three have Republican mayors. Kucinich carried all five of those communities in November, winning 58% of their votes and 114 of their 138 precincts. (P.S. The 16th HD went for Bush over Kerry 53%-47%.)

I’m not claiming Dennis has a broad national or even statewide appeal; see the quote from Max below. But the idea that he’s just a city lefty whose message automatically alienates middle-class, suburban swing voters is refuted by the electoral evidence.

Not that I think The Markos gives a shit about evidence.

Also I would just like to mention that anyone who cites this book as evidence of anything needs to get off the freaking airplane and visit an actual city. Dennis screwed up his mayoralty in many ways, but refusing to “negotiate” Ralph Perk’s debts with Cleveland Trust by trading off Muny Light to CEI was not one of them. He preserved the asset, he got an income tax increase passed, and he handed both successes off to Voinovich who used them to become Mr. Solvency. Cleveland residents (and many suburbanites) know this, and have voted accordingly for the last twenty years.

Otherwise, I think Max’s response to Kos is about right. Yes, even this part:

Hear me now and believe me later: mockery of Dennis Kucinich is founded on fear of progressive politics, either from enemies on the right, or those who feel it threatens electoral viability and professional interests on the left.

And it’s true. Progressive ideas do threaten electoral viability for Democrats. This is a feature, not a bug. We want to threaten the viability of business as usual, whether in Iraq or in the homeland, because business as usual sucks. There are better and worse ways to do this. DK is acting the good Democrat, participating in the primaries. Wherever you are heading, he has already been there.

What will the casino initiative do for Cleveland students?

Not much, as far as I can see.

With Frank Jackson and other local political leaders jumping on board the so-called Learn and Earn ballot issue — the Constitutional establishment of a couple of big downtown slot machine parlors controlled by Al Ratner and Jeff Jacobs, throwing off money to a Board of Regents scholarship fund and to local governments — it seems wise to ask if this is actually a serious tool for increasing the number of Cleveland kids going to college.

Here’s how the proposed amendment describes its tuition assistance program:

Eligibility criteria for such scholarships and grants, and the amounts, shall be established solely by the Ohio Board of Regents. Such scholarships and grants shall include only the following:

(A) Individual learn and earn scholarship accounts for current and future students who, prior to enrolling in college, take core and advanced academic courses, participate in college readiness programs, assessment, and testing at any accredited public or non-public high school in this state, and contribute to public life through voluntary civic activity, and who attend any public or independent not-for-profit institution of higher education authorized by the Ohio Board of Regents and that has its principal office within this state.

(B) For the first twelve such high school graduating classes, uniform tuition grants, in an amount not to exceed the average undergraduate tuition charged by Ohio public universities, shall be awarded to the top five percent of students at each accredited public and non-public high school who attend any public or independent not-for- profit institution of higher education authorized by the Ohio Board of Regents and that has its principal office within this state. Such tuition grants shall be based solely on academic merit.

So, we have heavy tuition subsidies at Ohio colleges for the academic top 5% of each school’s graduates, classes of 2009 through 2020 only, who go to those colleges. Then, from what’s left of the 30% of casino proceeds going to the Regents — which the Learn and Earn backers say will be about $850 million a year — each Ohio K-12 schoolkid gets a “Learn and Earn account” with a deposit for each year the kid completes a curriculum specified by the Regents. When the kid graduates, he/she gets to use whatever he/she has accumulated to help pay tuition at an Ohio college.

Neither the “top 5%” scholarships nor the account deposits are tied to financial need. The top 5% of graduates of Hathaway Brown and University School who decide to attend Ohio schools will get the same dollar subsidy as the top 5% of Cleveland Public School graduates. And all two million kids in Ohio K-12 schools, public and private, will get the same annual account contributions if they complete the Regents’ requirements… no need-based`targeting permitted. (If anything, the targeting is to middle and upper-middle income kids who are more likely to be on the college track.)

So… what will this do to help Cleveland kids go to college?

While exact numbers are not easily available, a liberal estimate of Cleveland residents now graduating from public and private high schools is 3,500 a year. If 60% of these kids go to college, and 90% of them attend Ohio institutions, that’s a total of 1,900 eligible for Learn and Earn assistance of some kind, starting with the class of 2009.

The top 5% of this group would include fewer than 100 Cleveland graduates each year. That’s the top 5% of Ohio-college-bound graduates in each CMSD school building — the top 5% from Arts, the top 5% from Rhodes, the top 5% from East, from Glenville, from Max Hayes, etc. — plus the Cleveland kids (if any) who make it into that top college-bound 5% at St. Ed’s, Ignatius, Magnificat, St. Joseph’s, et al.

It will work out to one, or two, or three, or five kids at most from each high school — the kids nearest the top of their classes, many of whom will already be in line for scholarships from other sources.

Other than this very thin upper academic crust, how much help will Learn and Earn provide to other graduates trying to finance college? Well, this is all very iffy because the proposed amendment leaves so much up to the Regents. But here’s a way to estimate it:

For each year from 2009 on, take the proponents’ own estimate of $852 million a year going into the L&E fund by 2012. Assume we reach this amount by steady increments in the first four years (2009-2012), and remain there in subsequent years, adjusted for inflation. Assume that the current average tuition at state-run colleges rises from $8,000 today to $8,500 by 2009, and continues to rise only at the rate of inflation, i.e. remains stable in 2009 dollars. Assume that there continue to be two milllion Ohio kids in grades K-12, that one out of thirteen (154,000) graduate annually, that the top 5% for L&E’s purposes is thus 7,700, and that about half of all graduates will actually use their L&E accounts by attending Ohio colleges (which is about right based on current numbers from the Regents).

Then we get this formula, for, e.g., 2012:

$852 million - $262 million in “top 5%” subsidies = $590 million, divided by one million qualifying K-12 students = $590 available for deposit into each student’s L&E account in 2012.

From a spreadsheet based on this formula, here are the amounts I calculate that students in the first ten graduating classes could hope to “save up” in L&E scholarship money by the time they need it:

Remember, the four year tuition cost at Cleveland State or KSU is already over $30,000. So if I’m right, by the tenth year after the casinos open, an Ohio graduate heading for a state university could hope to cover less than one-sixth of tuition and fees with Learn and Earn money. In earlier years — for kids now in grades six through nine, for example — the impact of Learn and Earn on college affordability would be, well, negligible.

So for Cleveland, the big educational payoff of Learn and Earn would come down to fewer than twelve hundred significant scholarships to Ohio colleges between now and 2020, along with “college accounts” for other students that would be very little help to at least the next ten graduating high school classes.

Anyway, that’s how it looks to me. I await better information from anyone who can provide it.

WSJ: Boardroom profiteering on 9/11 stock slump

Amazing how many tales are hidden behind that Wall St. Journal paywall. A couple of weeks ago I wrote about the apparent fact, covered only in the Journal, that Verizon is trying to sell off its entire phone business in Ohio and three other Midwest states. Today we learn this (WSJ story as quoted by The Big Picture):

On Sept. 21, 2001, rescuers dug through the smoldering remains of the World Trade Center. Across town, families buried two firefighters found a week earlier. At Fort Drum, on the edge of New York’s Adirondacks, soldiers readied for deployment halfway across the world.

Boards of directors of scores of American companies were also busy that day. They handed out millions of bargain-priced stock options to their top executives.

The terrorist attack shut the U.S. stock market for days. When it reopened Sept. 17, stocks skidded more than 14% over five days, in the worst full week for the Dow Jones Industrial Average since Germany invaded France in May 1940. But for recipients of options, the lower their company’s stock price when options are awarded the better, since the options grant a right to buy shares at that price for years to come. The grants set recipients up for millions of dollars in profit if the shares recovered.

A Wall Street Journal analysis shows how some companies rushed, amid the post-9/11 stock-market decline, to give executives especially valuable options. A review of Standard & Poor’s ExecuComp data for 1,800 leading companies indicates that from Sept. 17, 2001, through the end of the month, 511 top executives at 186 of these companies got stock-option grants. The number who received grants was 2.6 times as many as in the same stretch of September in 2000, and more than twice as many as in the like period in any other year between 1999 and 2003.

Ninety-one companies that didn’t regularly grant stock options in September did so in the first two weeks of trading after the terror attack. Their grants were concentrated around Sept. 21, when the market reached its post-attack low.

I urge you to read the whole Big Picture post.

Please note, this is not the old conspiracy-theory tale of insider trading before the September 11 attacks. No, this is the WSJ documenting another kind of conspiracy — a concerted rush by some of the country’s richest, most powerful “leaders” to make as much money as possible from the ruined lives around them. As Big Picture notes:

What makes this so pathetic is that corporate executives could have stepped up AND BOUGHT STOCKS IN THE OPEN MARKET if they believed they were so cheap. It would have been reassuring to a nation to see the leaders of industry voting with their own dollars. It might have made the subsequent economic slow down and period of tense aftermath less painful.

Instead, these weasels decided to loot the treasury at the first opportunity. America was smouldering, the WTC lay in ruins, and this group of classless pigs decided it was time to pocket some cash. (Heads-up from MaxSpeak.)

Update: More details at The Raw Story including this WSJ excerpt (emphasis added by me):

The 91 companies included such corporate icons as Home Depot Inc., Black & Decker Corp. and United Health Group Inc. It included two companies directly touched by the tragedy. Merrill Lynch & Co., across the street from the Twin Towers, lost three employees. On Sept. 24, Merrill granted its president options to buy more than 750,000 shares, at a price 15% below the pre-attack level. At Teradyne Inc. in Boston, an employee delayed a business trip until Sept. 11 to attend a son’s soccer game and died on American Flight 11. Teradyne that month gave its CEO more than 600,000 options at a price enabling him to buy stock at 24% below its pre-attack level.