Good deals on Florida swampland!

Posted in OPINION to From the Flyover Zone by Brenda Koenig on Thursday, April 16, 2009 at 9:00 am

Every spring break for the past eight years our family has camped on a rugged state park beach in an area of northern Florida relatively untouched by the real estate development so ubiquitous in other parts of the state. The key word here is “relatively,” because in the course of these past years, even in one of the sparsest populated counties of the sunshine state, we’ve witnessed large tracts of shore-front land turn from long leaf pine and palmetto forest to swank development, complete with manicured golf courses, tennis courts, and matchbox condominiums towering over fragile dunes and pristine beaches.

Every year, as we pass yet another new development, we give a chuckle about how it will all soon blow away in the next hurricane, and how taxpayers will be mined yet again for funds to restore the wealth of developers, banks and vacation-home owners. Pointing out this scenario and the irony of it all is par-for-course in our family; our elementary school kids have honed their critical thinking skills accordingly and can’t even enjoy reading the back of a cereal box without making comments like “Yea, right. Since when is eating this crud part of a 'healthy lifestyle'”? (and they raise their two fingers to indicate quotes).

However, this year, as we drove past the fledgling developments towards our protected sliver of a park, we noticed something different, something a bit more disturbing, something that is only vaguely entertaining in its irony. This something is the uncanny vacancy of all this new construction: the abandoned curving streets, the empty shells of half-finished homes, tar paper peeling in the breeze, the streetlights illuminating nothing but empty lots. The Florida real estate market, after decades of destructive environmental rampage and inflated value, has finally collapsed. This fact hits close to home, especially if you have a Busey Bank account.

If you didn’t know already, Champaign-Urbana-based Busey Bank and their subsidiary, Busey Bank N.A., has lost lots of money in the past two years, to the tune of almost 38 million dollars, mostly due to failed investments in the Florida real estate market. Yet most Busey Bank customers had no idea that their money was being invested in speculative markets so far from home. Busey is, after all, a community bank that has a history of solid investment in local interests and the average citizen, not to mention its unfailing support of community initiatives through charitable giving programs.

Indeed, before Busey's loss disclosure a couple of months ago, local folks might have considered Busey Bank as one of almost 7,000 "Main Street" banks that the Christian Science Monitor describes in a March 2009 article as a:

“Main Street bank, which, unlike those on Wall Street, did not invest in risky mortgage-backed securities or complex derivatives. And so their balance sheets remain relatively healthy. While they account for less than 10 percent of America’s total banking assets, their traditional, values-based approach contains plenty of lessons for their larger Wall Street counterparts, some analysts say.”

These banks, according to the article, are “small, community-oriented, and determined to keep their assets local.” Or are they?

Certainly, keeping assets local is one practice that has kept many community banks from getting into trouble. Unlike in the Great Depression, today’s economic woes seem to have affected the larger banking operations: Four large banks were responsible for half of the $26 billion in losses reported by the banking industry during the fourth quarter of 2008, according to the Federal Deposit Insurance Corp. (FDIC). The article goes on to point out that: “What troubles the community banks is that the whole banking industry is being painted with this broad brush as the bad guys, and they aren’t: They didn’t make those risky investments. They’re out there playing by the rules,” says Karen Tyson, a spokeswoman for the Independent Community Bankers of America in Washington, D.C.

Yet, unfortunately for community bank enthusiasts, the news coming out of Busey’s Urbana offices doesn’t quite tell the same story. While most of Busey’s investments are indeed local, aproximately twenty percent of their investments have been in the same “risky” category (in Busey’s case, Florida real estate speculation) that has crippled the larger banks. According to Busey’s website, "While southwest Florida has been severely affected by the economic downturn, we remain positive about the future of our southwest Florida franchise," (says Van A. Dukeman, President and CEO of First Busey Corporation). But perhaps the question for Mr. Dukeman (who has replaced former CEO Lee O’Neill after his resignation last month) shouldn’t be whether the Florida real estate market will recover, but why Busey is even there in the first place.

Busey Corporation includes two banking companies that have a combined assets of 4.5 billion, is still a community enterprise that applies its assets to small businesses and consumers in this area. The value of this personal approach cannot be underestimated. Spreadsheets simply can’t reveal the true worth of knowing the people to whom you are lending money. In this way, risk is reduced and good-will guarantees customer loyalty and trust. The bank recently accepted federal bailout money, money ear-marked for banking institutions that are still financially solid. So there’s hope that Busey can recover and redirect its failed investments back into the local community, where profit-margins aren’t as volatile and where investors and management alike can feel proud of being responsible economic stewards. This is good citizenship, and good business.

On the other hand, the scenerio for continued investment far afield doesn’t engender this kind of positive, solid relationship with the public. Although everyone likes high profit yields, the bad blood and environmental damage just isn't worth it. Yes, we’ve seen what happens when real estate lobbyists and franchises control large-scale decision-making in Florida. Last year, for instance, we watched millions of taxpayer dollars pour into beach replenishment projects that scientific research has demonstrated, over and over again, as ineffective, yet which produce huge short-term gains for real estate interests.

Who wouldn’t want to buy a vacation home on a immense white-sand beach? But what if you could only enjoy it for a few years, until the profiteers make off with the money and the storms carry the sand back to its original location, or new locations elsewhere on the coast? Who gives you that information? What happens then? And all the while funding is cut to the department of natural resources for coastline protection and environmental education. This year, there isn’t even money to pay a bare-bones staff to oversee natural resources. At Econfina State Park, a gem of a salt-marsh reserve on the Big Bend, a ranger stops by only once a week, with part-time volunteers (mostly out-of-state seniors) staffing a make-shift office.

Why should local investers here in Champaign care about the enviroment in Florida? Why should we care about how our esteemed local financial institutions spend money on our behalf? Because in the long-run, the health of our natural resources combined with the responsible, well-conceived investment of our hard-earned capital, will determine the greatness of our entire nation. The more we invest in this kind of thinking, the better we will all be for it.