Way back in 1983, four years before the great collapse of the American savings and loan industry, we invested peculiar financial mortgage foreclosures at what would soon become the nation’s largest S&L, State Savings [later American Savings] of Stockton, California.
We discovered, after visiting county records offices in no fewer than 13 county seats in California, that the S&L had been making strange loans to shopping centers, housing developments, office complexes, and other major real estate projects, then foreclosing after refusing to lend the five to ten percent of total project costs needed for completion.
We witnessed the same pattern again and again: Developers unable to convince other banks to get loans since the original lender had declined to provide completion funds [a red flag to other lenders] were forced into default.
But then the story got really interesting. The projects were bought up by limited partnerships, which were in turn controlled by other limited partnerships which were in turn owned by other limited partnerships. . .sometimes in chains of as many as seven and eight links.
Coming to the top of the pyramid, the ultimate link at which scores of chains finally coalesced, we discovered that the ultimate buyers were two brothers in San Francisco who had made their fortune decades earlier scooping up property seized from Japanese-Americans after their incarceration in concentration camps after Pearl Harbor.
“We’re the largest buyers of foreclosed property in the world,” Donald Werby bragged to us back in 1983.
Donald, a onetime member of the Church of Satan, was subsequently indicted, as the Los Angeles Times reported, of “21 counts of having unlawful sex with minors and paying for it with money and drugs” in a case that may have led to the still-unsolved murder of a San Francisco policeman who knew too much.
And as Gus Russo reports in his excellent book, Supermob, federal investigators believe Weby and his brother Ronald Werbe [yes, they spelled it differently even though they were business partners] were dispatched to the Golden State by none other than Sacrface, Chicago’s own Al Capone.
For more on this strangest of tales, see this post.
Our reporting, done for the Sacramento Bee, was killed after a leading advertiser threatened to pull his bank’s ads from the paper unless we were removed from the story, and no other papers picked up what we rightly believed was a clear sign of massive corruption in the S&L industry.
When the S&L finally did go bust, it was the largest single bank failure in American history at the time.
The American press singularly failed to determine who were the real beneficiaries of the Reagan era S&L collapse, a story that remains untold to this day.
Needless to say, we were very intrigued with a story just published by The Bay Citizen, reporting a similar wave of limited partnership purchases of foreclosed property in the the latest real estate collapse.
As the website’s Aaron Glantz reported yesterday:
According to a report released today by the Urban Strategies Council, a nonprofit think tank, real estate investors have purchased – usually with cash – 42 percent of the 10,508 homes in Oakland that went into foreclosure between January 2007 and October 2011. Many of these investors are turning the homes into rental properties and charging rent that is significantly higher than the monthly mortgage payments many families would make if they purchased the homes.
“They are massive landlords in neighborhoods that historically have had high rates of homeownership, and very few people are aware of the investor activity that’s taking place under feet,” said Steve King, the organization’s housing and economic development coordinator.
We don’t see any indications that today’s buyers are, like Donald Werby, mobbed-up Satanists. But Americans do deserve who’s reaping the profits from a crisis brought on by Bill Clinton’s destruction of the financial regulatory regime created in the wake of the last Great Depression.
As Americans are forced out of the homes, who’s picking them up? Where’s their money coming from? Whose campaigns are they funding?
We’re sure you can think of a lot more questions.
But with the press corps gutted and papers increasingly consolidated into a few very rich hands, we may never know.