In just one week another example of free market hypocrisy has surfaced. In the May 13th edition of the AJC, there is a full page story about big developers seeking a debt bailout. Last week it was a story about the owners of the Atlanta Falcons seeking public monies to pay for a new stadium. With the Republicans occupying both houses in the General Assembly and the governor’s office, it would seem to be a no-brainer to summarily dismiss these two requests. Developers thrived during the good times, and they deserved to reap the rewards of their risk taking and hard work. The banks also deserved to prosper in turn for lending the money. Presumably the developers did their homework and studied the demographics, among other things, before deciding where to build and how much to invest in a project. The banks should also be presumed to have done their due diligence that the projects were credit worthy and would return a healthy profit to the shareholders. Capitalism at its best.
Then came the housing bubble and the collapse of the financial markets. Real estate development projects suddenly became worthless. Borrowers couldn’t repay the loans. Unfortunately for developers, the banks often require them to sign a personal guarantee that a loan will be paid back in full. I have to believe that anyone signing such a guarantee understands completely the risks of signing this promise. Two prominent Georgia public officials also signed such guarantees: Congressman Tom Graves, and Senate Majority Leader, Chip Rogers. Graves’ and Rogers’ project, in the end, failed. And then they sought to get off the guarantee provision. The last we heard is that they reached a sealed agreement with the trustee of the now defunct bank. Now the developers want to be taken off their promissory notes too. Somehow it seems wrong to them that if a bank sells their loans to a third party at a substantial discount, the third party should not be permitted to collect the full balance. What a strange notion for those of us who believe in free markets, keeping promises, standing by your financial commitments. I wonder if the same developers, if they held the mortgage of a homeowner who defaulted, would be as sympathetic to the pleas of the borrower about hard times, losing their job, uncompensated medical bills, or whatever.
The AJC article pointed out that both the bankers and developers had hired lobbyists to fight for their respective positions. Perhaps that’s why no action has been taken. This is another example of the need for campaign finance reform. What should be a screamingly obvious decision by our Republican lawmakers has been clouded by the one commodity that reigns when it rains: cash.