Horizon, Host: Ted Simons

September 19, 2008


Host: Ted Simons

Journalists Roundtable


  • Don't miss HORIZON's weekly roundtable where local reporters get a chance to review the week's top stories.
Guests:
  • Catherine Reagor - Arizona Republic
Category: Journalists Roundtable

View Transcript
Ted Simons:
>>> Tonight on "Horizon" we focus on the economy in Arizona. We'll look at what the future holds for jobs and the real estate market.

Ted Simons:
>>> Also we'll talk about the latest on the town of Guadalupe being policed by the sheriff's office.

Ted Simons:
>>> The board of supervisors may have to hold another meeting and a challenge to the employer sanctions law fails. That's next on "horizon."

Ted Simons:
>>> Hello and welcome to "horizon." I'm Ted Simons. Joining me tonight are Catherine Reagor of the Arizona republic, Daniel Gonzalez of the Arizona Republic and Mike Sunnucks of the Business Journal.

Ted Simons:
>>> While the country faces and economic crisis, we examine the picture in Arizona. Mike, is sounds like we have a crisis here and a crisis there followed by a bailout here and bailout there. What's going on?

Mike Sunnucks:
>> this start with the housing market. J.P. Morgan came in and acquired bear sterns and then they had to take over Freddie Mac and Fannie Mae the mortgage giants and bailed out a.i.g. that's 85 billion. And bank of America took over Lehman brothers. There's a trillion dollar bailout and taking over bad mortgages and ensure the money market funds. They had a horrible week and bounced back 350 points and ended up even for the week. We had a lot of money in fused in the central markets.

Ted Simons:
>> It sounds like hundreds of millions of dollars for worthless mortgages and bad debts.

Catherine Reagor:
>> These are the bundled loans that the investment houses sold from investors to china and Europe and there was a huge appetite. We saw the writing on the walls when the foreclosures started to rise and subprime problems. And then all the losses on the investment houses. We haven't peaked on foreclosures.

Mike Sunnucks:
>> It was backed by both parties and it lifted the depression-era laws that had walls between insurance and mortgage lenders. You come to me for a mortgage and i will give it to you. I can sell it to Kathryn and I don't have a risk anymore. The person who writes the loan didn't have any risk. That's the basis of our market economy. Is if I've going to give you a loan, it's my interest that you pay it back. If I can sell it, I don't care.

Catherine Reagor:
>> It's a lack of regulation. Here in Arizona really didn't--they got--they passed regulating mortgage originators. There were 15,000 that were not licensed and that doesn't start for another year and take to the top level lack of regulations.

Ted Simons:
>> There has to be risk in order for the formula to work. What kind of risk is there when you take the risk and you fail and you're so big and connected, the government won't let you fail.

Mike Sunnucks:
>> Fannie Mae and Freddie Mac are too big to fail. If I'm a small business and consumer and run up the debts, I don't get help. If you let them fail, you are looking at financial collapse. A.i.g. is an insurer and of bonds. If they collapse it's a domino effect. The fat cats the rich people get bailed out and little guys don't. There is a Rasmussen poll that supports this. Unless we want to see a huge financial collapse, we have to pump money in there.

Ted Simons:
>> As far as what we saw in Arizona and still see--I want to get to foreclosures in a second--was that canary in the picture coal mine what we saw in the state?

Catherine Reagor:
>> Oh, yes. We are a perfect example of what happened. The housing boom loose guidelines and people got loans with no documentation and putting nothing down and adjustable rates and subprime problems and there's no way you could make the payments. Those loans were backed. If they were less than 300,000 Fannie Mae and Freddie Mac were buying them and passed on investors. We haven't hit bottom.

Mike Sunnucks:
>> They have been resold. Credit unions in Germany ended up with the end product. You come to me for a loan. I'm a bank. I hold your note for 30 years and you pay it off. I make sure you qualify and you pay it off. If you have problems, there's a way to work it out. These guys was willy-nilly and the c.e.o.'s that ran the operations and big investment houses are not getting hurt. They are getting severance packages.

Catherine Reagor:
>> Many knew they were going to fail and there was no regulation and oversight. There was a point 10-15 years ago you had to have 20\% down and FICA scores of 800. Now you have scores of 500. Someone tells you, we'll give you a loan. We believe you can pay it back. People got swept up. It's sadly greed on every level.

Ted Simons:
>> What's going on around town in the valley and state in general. Let's say I want to go out and buy a house, will I get the once-over twice now. Is it difficult to get the loan now?
Catherine Reagor:
>> You're going to get the once-over 10 times. Credit standards are high and tough. 700 plus and 20\% down and there's great bargains on the market. It's very tough. The market rally today with the stocks because this will infusion to free up capital. We are not seeing it yet.

Mike Sunnucks:
>> If we go too far the other way and need walls with the types of businesses that do lending. Go too far with regulation, it will increase the cost of mortgages. We need capital and liquidity flowing through the economy.

Ted Simons:
>> Thousand do you the get the capital? How does the money get back in there? Taxes.

Mike Sunnucks:
>> You look at bonding. They continue to bond. There was no appetite for tax increases at the level. Federal level Obama has backed away from fax increases. As much as we don't like rich folks they invest and create jobs. If you are going to scare capital away, they are not going to use it here or ship is offshore.

Ted Simons:
>> New home permits quickly were down and down by a whole lot.

Catherine Reagor:
>> Yeah, we are at a low that we haven't seen since the last real estate crash in 1991. 970 permits for the month. On tractor 15,000 this we're. To put that in perspective. Phoenix led the nation. Home building is the backbone of our housing real estate industry, led the nation in 2005 with 64,000 new homes. We are really down.

Ted Simons:
>> That's a big deal for the economy in Arizona in general.

Catherine Reagor:
>> construction jobs are down 15-20\% and home prices--what's tough the new homes are pulling back and surplus of new homes much I saw new numbers that said we overbuilt by 50,000 to 75,000 homes during the boom. It will take three or four years to absorb that. People who might be buying a new home because their's great deals and buying homes taken back by lenders and through foreclosures being sold for much less.

Ted Simons:
>> Foreclosure numbers looking astronomical.

Catherine Reagor:
>> We thought we were hitting the peak. Foreclosures stopped 7,000 and that translates and the number of people behind on mortgages in Arizona hit a high, I mean, since we haven't seen in the '80s.
Mike Sunnucks:
>> Economists are saying the second quarter of 2009 we will be doing. It will add confidence to lending and let skittish. You are looking at private equity folks coming in. If you have cash and hold on a couple of years, you can get a good deal and resell it and make money. We're seeing a little bit of that and no way out of the woods.

Catherine Reagor:
>> Rebound in economy and job growth in 2009. I don't think we will have hit bottom by mid-2009 now. The cycle of foreclosures and even if you're an investor you have to put 20\% down. It's the hope that the rebound is farther and farther out 2011.

Ted Simons:
>> Before we do that quickly back to the housing business. The stories that abound. Mortgages limited still a big story in this part of world. What the latest with the ill-failed company.

Catherine Reagor:
>> Arizona's largest private lender billion dollars on loans and center point and downtown. It drags out in bankruptcy court. Investors got a few payments and accumulated payments of two or three months were 15\% of what they were getting. The fight is over a different lender over a different group of investors not getting paid. On the big hearing on Monday to try to decide if the big creditors are secured and not secured and where they get in the process and other investors gets paid. There's no money. There's no money and projects are not going forward. There's a fight in they will get additional money. It's everything's stalled.

Ted Simons:
>> Projects like hotel Monroe sits there.

Catherine Reagor:
>> Sits there because it needs money.

Ted Simons:
>> Center point gets more.

Catherine Reagor:
>> It needed 75 million plus. After we get that to finish, it will be three months. First they wanted to open in November. They got 2.8 of five. Still months away. To have the money they have to bring in additional lenders. For center point to get the additional money and they had to find another lender and the rate is 18\%.

Ted Simons:
>> Wow.

Catherine Reagor:
>> That's tough.

Ted Simons:
>>> let's move on to sheriff Joe Arpaio and what's going on. Before we get too deeply. We had a supervisors' meeting that sounded big.

Daniel Gonzalez:
>> The supervisors were deciding whether to continue with the contract with Maricopa sheriff's office with the police contract in Guadalupe. It happened to be coincide with the weekend that there were big festivities tied with some other kinds of cultural activities taking place. Tons of protestors came out and a lot of confrontation with tense situation of the mayor accused of sheriff on camera. The television cameras were rolling. He accused the sheriff of profiling and coming in and pulling over Latino citizens and Americans looking for illegal immigrants. There was a lot of back and forth between the mayor and sheriff. Essentially the sheriff called the mayor's bluff. He said okay, you don't want police protection. We're going to ask the supervisors to discontinue that police protection. In the meantime Guadalupe was scrambling where they could find police protection. They approached phoenix and dps. Both of agencies said they were not in the position to provide police protection. That brought us to the vote on Wednesday where the supervisors essentially held Guadalupe's police protection, the fate of it in their hands. I guess it was big in the sense that protestors came into a meeting. They were heckling some of the supervisors. They were asked to leave. The doors were barred and the supervisors took their vote and they basically voted to end the contract. They left some wiggle room where they would be allowed to negotiate possibly some kind of agreement. For now as things stand, that contract will end i believe it's in six months. Guadalupe will be left without police protection.

Ted Simons:
>> It sounds like the old mayor and sheriff had the dust up much there's a new mayor in Guadalupe that sounds like he's on board. The sheriff says I do what I want to do or I do nothing. That's pretty much it, isn't it?

Daniel Gonzalez:
>> Old mayor was pressured out in the meantime. They have a new mayor now. New mayor as you said, is a lot more willing to work with the sheriff. He recognized the situation and didn't want to lose the police protection. But the sheriff is playing a tough hand. He's saying essentially, look I'll be willing to discuss continuing with the contract for Guadalupe but only if I will allowed to continue to do what i want. I'm not going to take any stipulation that says I can't conduct immigration crime sweeps, immigration sweeps in that town. It's interesting to see what happens.

Ted Simons:
>> As far as the sheriff is concerned, there's an audit. We talked about this last week. I.c.e. audit of Joe Arpaio's office. I.c.e. officials in Washington say pro forma it's routine. Is it? It sound more than the standard audit.


Daniel Gonzalez:
>> I think you have to question what's really going on here. As you said the i.c.e. folks said we are aware of auditing all of the law enforcement agencies in the country who have these agreements. There's about 62 of them, law enforcement agencies across the country that have agreements with i.c.e. that allows trained police officers to go out and enforce immigration laws. The question is, why would they begin with the sheriff's office? They have done two of these already. This is the third audit they are going to do. There's a lot of pressure being put on i.c.e. not just here in Arizona but a lot of national media has raised questions about the sweeps. Although they are saying this is routine audit and eventually audit all of the agreements, I think you have to wonder, you know, why this one and now.

Mike Sunnucks:
>> It's interesting to see what's happening with the change in the administration Joe and McCain are not best friends. Indications he would probably not be best friends with Obama either. I.c.e. has been promising the sweeps and big one in Mississippi and meatpacking plants. They have raided a few places. Nothing like they promised. They said a couple of years we will get out there and get the violators who hired the undocumented folks. They have done a little bit. I think that will change once we have a change in administration and start over again. I'm interested to see how it moves forward after the November.

Ted Simons:
>> It brings up the presidential race. Talk, if you will, what you are hearing from both presidential candidates regarding immigration. Are the stances the same or morphing a little bit?

Daniel Gonzalez:
>> There's something interesting going on, too. Something that mike said. That is the--what the next administration is going to bring in terms of this audit. The whole accusation of racial profiling that's something forbidden by i.c.e. there's not been a single investigation by the justice department under the bush administration. So I think that's what's going to be interesting to see when there's a new president in the white house whether there's more pressure on the justice department to bring an investigation to see whether there's any kind of racial profiling taking place underneath this agreement. In terms of presidential candidates, they have been very quiet when it comes to immigration in the English media. You really hear nothing about immigration in the English media. It's been completely overshadowed by the issues of financial crisis, the economy, gas prices, the war in Iraq. What's interesting is the immigration issue has blown up in the last week in the Spanish media and started a week ago when john McCain started airing hard hitting ads in the Spanish media saying I'm the person who stood up for comprehensive immigration reform which included path for legalization for undocumented immigrants. And senator Obama tried to kill comprehensive immigration reform by voting for amendments that he called poison pills. Obama fired back in the Spanish media only trying to link senator McCain with folks like rush Limbaugh who are very critical of comprehensive immigration reform and label comprehensive immigration reform as amnesty for undocumented immigrants. A lot going on in the Spanish media. Almost little going on--almost nothing going on in the English media. It speaks of the tightrope that especially senator McCain is trying to wire. He knows there's a lost Latino voters that have trying to come out of Republican Party. He's trying to regain them by going after them in the Spanish media. At the same time he doesn't want to turnoff the base. That's why it's silent on the issue in the English media.

Mike Sunnucks:
>> Both of ads are false and disingenuous. Limbaugh would hit McCain pore months. Obama basically has the same stance on a lot of things. He's for guest worker program and pathways and for h1b visas. For Obama to come along and say Obama killed this.

Ted Simons:
>> You know we're not hearing the debate as hot and heavy as it was months or year or two ago regarding immigration. Is the fact that we have an employer sanctions law in Arizona, some are saying that can affect the economy? Some are saying it is affecting the economy. Do you see anything happening in the real estate world because of this.

Catherine Reagor:
>> Very much, very much. There's not a lot of construction jobs out there. 13 they say we will not have the labor force we need. On the construction side antidotally it could impact people leaving and homes going into foreclosure and in phoenix not the demand or rentals and very of the economy. It's hard with the downturn hard to separate the foreclosures, and people leaving because of employer sanctions.

Mike Sunnucks:
>> The chicken and egg thing. It's more the economy than anything. Anytime people immigrant, they want a better life and better job. The folks that came up from Mexico have very poor and the jobs are not here now. The sanctions and Joe Arpaio are part of it and the economy is driving force.

Ted Simons:
>> You mentioned employer sanctions. It was Okayed by the nineth.

Mike Sunnucks:
>> They said they have right to go after businesses on the licensing front. The nineth circuit is no haven for conservatives and Joe Arpaio types. What will happen is you can come back once it's enforced, then you can see on due process and profiling part and see how it treats businesses if they get the fair day in court to defend themselves.

Ted Simons:
>> It sounds like it was an opened if someone brings a case.

Mike Sunnucks:
>> If somebody is accused, they need a day in court.

Catherine Reagor:
>> It's hard to tell what kind of impact it is. We know for sure this will slow the recovery. We won't have the labor force and fewer residents and demands 14 for homes will be smaller.

Mike Sunnucks:
>> It will raise wages because it will force businesses operating under the table and hiring illegals to pay more and market rates. Folks say that's the economic benefit.

Ted Simons:
>> Any affect on the jobless rate. It's up again and up a will the over this time last year and employer sanctions and jobless rates.

Mike Sunnucks:
>> It was 5.6\% and lower than the national average. When this first started you saw construction employment level out. That showed a lot of people the construction guys were getting rid of under the table folks, the undocumented folks. The economic numbers we don't show a picture there because we have underground economy and folks undocumented and operating under the table. Employer sanctions doesn't help job and probably the best a neutral and could be a negative.

Daniel Gonzalez:
>> Something interesting will happen the voters will face the ballot initiative in November that will make changes to the employers' sanctions law. One of the big changes is if the ballot initiative passes employers will not only be required to only use the e-verify. That's what's put the chock on hiring illegal workers. It used to be that if you were undocumented, you went on the street corner and bought some bogus social security number, bogus greeting card and good enough to satisfy the i9 requirements for the employer verification. Now with the e-verify, employers are required to run all of the those names through electronic system and make sure they are valid.

Ted Simons:
>> We'll have to stop you right there. Obviously we'll keep an eye on that one and talk about propositions next week.

Ted Simons:
>>> Monday, we start a four-part series to tell you about some of the propositions on the ballot this November. We start with a look at a measure that would change the constitution to ban same-sex marriage. That's Monday at 7:00 on "horizon."

Ted Simons:
>>> Tuesday, we continue our series with a look at proposition 101, which according to opponents, would ban universal health care.

Ted Simons:
>>> Wednesday, we'll talk about proposition 200, the initiative regarding payday loans.
Ted Simons:
>>> Thursday, a look at proposition 202, which deals with employer sanctions for hiring illegal aliens.

Ted Simons:
>>> Friday, we'll be back with another edition of the "journalists' roundtable."

Ted Simons:
>>> Next on "now," women, power and politics a look at women in politics worldwide. That's it for this week. I'm Ted Simons. Thank you so much for joining us. Have a great weekend.

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