Miami’s housing crash and The Miami Herald failing its readers
By Alan Farago (aka Gimleteye)
From Eye on Miami
In the run up to the biggest collapse of construction, development and housing in South Florida history, I often railed that The Miami Herald was failing its responsibility to readers by deliberately avoiding the extent of the growing bubble. My point of view was informed by the lopsided battle to protect the Everglades from predators. It was also informed by awareness that Herald executives had killed important stories: like the massive conversion of farmland in Homestead and South Dade to tract housing. It seemed possible, at the time, that an informed electorate might make other choices and that the Herald could play an important role. But the more I learned about the Herald, the clearer it was that the Herald had a very, very limited interest in any exposure of the fraudulent underpinnings of the South Florida real estate conflagration.
It was obvious at the time that Miami real estate had run so far out of control that the aftermath would bestow a number of dismal “firsts” on our region, including the latest: that Miami leads the nation in homeowners with mortgages under water. What we know today is that an economic recovery will take a very long time, during which — as economist Robert Shiller noted recently — “bouncing along the bottom” is the best we can expect. But we might have known yesterday and exercised precaution, had we been better informed. If there had been comprehensive reporting by the Herald, Miami Dade taxpayers might not be saddled with such a sad sack cast of elected leaders at county hall.
Today, the extent to which banks and mortgage companies made outrageous loans to financially unqualified individuals is coming out in dribs and drabs: hairdressers, policemen, and even “the highest ranking female firefighter” in Miami, recently charged, with four others, by a federal grand jury with taking part in an $11 million mortgage fraud scheme. But the latest news that caught my attention was in Miami Today and it was about the Miami Herald parking lot fiasco; a story EOM can’t let go.
“McClatchy Co., owner of the publication The Miami Herald, reported that 10 acres west of the newspaper building it had been under negotiation to sell for five years for $190 million is now valued at $49.6 million.”
There is a bigger story that EOM can’t write because we aren’t paid journalists and research is expensive, but if any journalists are reading, this story goes along the following line: that the Herald’s intense interest in land speculation at the time, put the paper on the same side as the fraudsters and elements of the Growth Machine who drove the economy into the ground. That’s why readers weren’t getting fair and accurate news about the housing bubble in Miami. The paper’s executives were protecting their own pensions and compensation packages.
As Knight Ridder was marketing itself to McClatchy in 2005, the question arises: what role did inflated real estate values play in the compensation formula of top executives at the Herald when the transaction closed. Wikipedia offers of McClatchy: “The company’s biggest acquisition occurred on June 27, 2006, when McClatchy purchased Knight Ridder. Because McClatchy was so much smaller than Knight Ridder at the time, one observer equated the deal as “a dolphin swallowing a small whale.”[3] The purchase price of $40 per share and 0.5118 shares of McClatchy Class A stock was valued at about $4 billion in cash and stock. The company also assumed $2 billion in debt.”
One can’t blame former newspaper executives at Knight Ridder for over-selling its properties or blame them for earning tens of millions in compensation for embracing the dictum of PT Barnum, but a good forensic exploration should be able to determine the extent to which the collaboration between the Herald and downtown land-use lawyers like Greenberg Traurig overvalued the parking lot and contributed to the sales price of the Herald to McClatchy. Readers, then, could have an assessment of how well they were served by subscribing to The Miami Herald during the biggest looting of the economy since the Great Depression.
Gimleteye is the name used by Alan Farago in his Eye on Miami blog. For the past 20 years Farago has written, worked and volunteered to advance civic engagement and issues related to the environment and politics.
