Monday, September 8, 2008

Closed door at The Washington Post

It's tough to get an op-ed piece published by The Washington Post. The editorial page department gets hundreds weekly, so even if you're No. 3 or 4 in the sorting process, you're likely to be zapped as unceremoniously as submitter No. 150 or 250. I know, because I've had many submissions rejected, probably more than the 25 or so I've had published over the years. So I didn't stamp my feet too loudly when my most recent submission -- a reply to the Aug. 4 op-ed titled "Housing Collapse Ahead?" -- was rejected. But I did ask editorial page editor Fred Hiatt to run an important correction regarding the identity of the published piece's three authors -- Charles W. Calomiris, Stanley D. Longhofer and William Miles. They were identified as academics, when, in fact, all three were also creatures of the real estate industry. I received no reply from Hiatt, or from Deborah Howell, the Post ombudsman, whom I copied. The Post is a great newspaper -- I spent many years working there as a reporter and editor. So why is it permitting itself to be part of such a blatant deception? Contrary to Calomiris & Co. in their op-ed, the real estate crisis is not going to go away -- and housing prices are likely to continue to fall in many key markets -- as almost everybody but the real estate industry acknowledges. The Post is not part of that industry, but by refusing to own up to how its op-ed page was used by three industry creatures, it blemishes its reputation.

Here's my rejected op-ed:

Real Estate Industry Cheerleaders
Find a Home in Groves of Academe

By Tom Grubisich
Why wouldn’t Post op-ed writers Charles W. Calomiris, Stanley D. Longhofer and William Miles be optimistic about where home prices are headed? (“Housing Collapse Ahead?” – Aug. 4, 2008.) All three of them are tied umbilically to the real estate industry – a fact not disclosed in the op-ed.

Calomiris is, as described, Henry Kaufman professor of financial institutions at Columbia University. But he is also board chairman of Greater Atlantic Financial Corp., whose Greater Atlantic Bank in suburban Northern Virginia and Maryland sells, among other mortgage instruments, the infamous “no documentation” loans that helped to trigger the U.S. financial crisis that he and his writing colleagues find overblown. Greater Atlantic Bank advertises its aggressive lending practices on its website.
Greater Atlantic Financial was de-listed from the Nasdaq exchange in 2007 for not maintaining minimum stockholder equity and has lost two thirds of its stock value in the past four years. It is in the process of merging with less-battered Summit Financial Corp. of Moorfield, W.Va.

Calomiris’ op-ed co-author Stanley D. Longhofer is, as described, director of the Center for Real Estate at Wichita State University’s business school, and William Miles is, as described, an associate professor of economics and Barton fellow at Wichita State. But most Post readers may not know that the WSU center is an appendage of the local real estate industry – a fact about which the center, the university and its business school proudly boast on the center’s website: “Leveraging the Center's close ties to the real estate community, the real estate degree programs at WSU also give students the unique opportunity to gain educational, technical, and practical experience by working and interacting with some of the areas best and brightest real estate professionals. This unique blend of education and networking give students the foundation they need to get started in their career, and to propel them to the top of their profession.” Sinclair Lewis’s George Babbitt, the top Realtor of Zenith, couldn’t have said it better.

The center’s “close ties” to the Wichita real estate industry are personified by the industry’s complete domination of the group’s advisory board. There is only one official on the 24-member board who doesn’t work for a real estate company, bank, builder or other part of the industry – Terry Cassady, who is in the Wichita city manager’s office. But what does Cassady do? She’s director of the candidly named Development Assistance Center, whose mission, as described on its website, is: “To improve service to the real estate development industry by streamlining processes and cutting through the red tape of City Hall for developers.”

Calomiris, Longhofer and Miles, like anyone else, should have access to the Post’s op-ed page. Self-interested opinions are not, by definition, evil. Counter-intuitively, they may throw light on a complicated issue that is in danger of being reduced to simplicities that don’t jibe with reality.

The home mortgage crisis is just such an issue. Sometimes confounded by all the swirling “facts” of this crisis, I would love to know everything that’s important to know. But do Calomiris, Longhofer and Miles help us to really understand the crisis?
Unfortunately for millions of financially threatened home owners, desperate stockholders in Fannie Mae, Freddie Mac and other institutions heavily invested in mortgages, and, most significantly, American taxpayers who will pay for a bailout of the real estate industry that has no defined cap, Messrs. Calomiris, Longhofer and Miles are the anxious emperor’s soothsayers.

They argue that the decline in housing prices has been hugely exaggerated. I could serve up a lot of contrary conclusions, from experts. Instead, here are some home-sale metrics from the metro Washington, DC, community of South Riding in eastern Loudoun County. Greater Atlantic Bank has an office there.

The metrics, compiled by real estate agent Mike Murad, whose blog covers activity in the South Riding area:

· Net price of second-quarter sales in 2008: $423,956 – down 15.7 percent compared to 2007.
· Short sales (where the mortgage owner accepts less than is owed) for the same period: 8 – compared to none in 2007.
· Foreclosures: 24 – compared to two in 2007.
I wonder how much comfort home sellers in South Riding were able to find in the op-ed by Calomiris & Co., and how much of it was cold?

The writer is a former reporter and editor at the Washington Post. He is reachable at

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