The Cul-De-Sac Syndrome by John F. Wasik - History

The Cul-De-Sac Syndrome by John F. Wasik - History

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reviewed by Marc Schulman

The Cul-De-Sac Syndrome, is a slim book that is really two books in one. The first is an explanation of the financial crisis and the second is a prescription on what can be done to change American culture that was the underlying cause of the crisis. The author explains the crisis as the inevitable result of the American need to build ever larger homes that ultimately resulted in the building of Mac-mansions on Cul De Sac far from the inner city, thus the name the Cul-De-Sac Syndrome John Wasik believes that it has been part of the American ethos to strive for that ever larger home, and thus families over the last decades have stretched beyond their means to buy houses homes they could not afford, in areas that they could not afford to commute to especially once gas prices rose beyond their historic lows.

The resulting crisis according to Wasik was merely a natural result of a rubber band stretch too far and thus is finally snapped creating Americaís greatest economic crisis since the Great Depression. Too many Americans could no longer afford the homes they owned and the resulting defaults brought the American financial system to its knees. The Cul-De-Sac Syndrome also posits that the type of homes that Americans were building and their location are not sustainable environmentally.

The first half of the book does an excellent job of providing a coherent explanation of the causes of the meltdown, the second half of the book is more problematic. Here the author proposes the building of new environmentally friendly homes. By building in such a way the US can according to Wasik create a more sustainable economy. While I have no problems with any of the suggestions on how to build homes, the jump that the author makes that this will held lead an economic recovery is in itself unsustainable by the facts presented.

For a unique explanation of the causes of the crisis I recommend this book, it you are looking for a book that presents a roadmap of the future you may want to read this book, but I am not convinced that the authors prescription will lead to solutions to Americaís economic woes.

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The Cul-de-Sac Syndrome : Turning Around the Unsustainable American Dream

In The Cul-de-Sac Syndrome, Bloomberg News' John Wasik exposes the economic, cultural, environmental, and health problems underlying life in suburbia. Wasik provides powerful insights into how the U.S. suburban lifestyle has become unsustainable and what can be done to salvage it. His observations are firmly grounded in exclusive on-the-ground research, interviews with thought leaders, and the latest studies and statistics. The book

  • Exposes the untold truths about suburban home ownership: green isn't always so green, life isn't cheaper after accounting for gas, water, and taxes, and modern suburban living isn't so idyllic considering the toll it takes on our health
  • Includes exclusive research and analysis by experts in the field that debunks the many myths associated with suburban living
  • Explores innovative solutions being developed in cities across the country

The American Dream of moving further from a city to buy a bigger house and find better schools has become a costly nightmare. The Cul-de-Sac Syndrome examines why and what can be done.

The Cul-de-Sac Syndrome, by John F. Wasik

The Cul-de-Sac Syndrome: Turning Around the Unsustainable American Dream, by John F. Wasik, according to Kenmore, WA blogger kedamono:

. examines the recent period in our history when homeownership actually made many people poorer.

Sounds like something permies already get, but I wonder if it's a decent summation of current/recent economics and/or the current/recent mortgage crisis.

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in the summation it says this "They have been forced to tap their home equity, go into debt to finance their unsustainable lifestyle" which I beg to differ on. no one is "forced" to do this. it is a choice. I think home ownership is still one of the best pathways to prosperity, but it is not a slam dunk and must be managed properly just like any other financial decision. home ownership hasn't made anyone poorer. people made themselves poorer. as for the move every 5-7 years and make money you could do that for a while and it was therefore a good strategy, financial decisions need to be tailored to the times and people need to operate with the knowledge that times change and not let themselves take it to excess as with any investment you shouldn't take on more risk then you can handle/afford to lose.

i wonder what proposed solution he has to the problem. government provided apartments in the city?

"One cannot help an involuntary process. The point is not to disturb it. - Dr. Michel Odent

I agree with your thoughts, Leah.

Most people say "I need" when they really mean "I want."

Or, they say "I can't afford that" when it's really about choice, and they've chosen to spend a lot on high mortgages, credit cards and lattes, when they could be making choices that might matter a lot more to them.

Here's a shift though. I really hadn't meant this as a commentary on the financial part of things and I actually don't know much about the book.

For me, "The Cul-de-Sac Syndrome" represents the suburbs and all their isolation, materialism and lack of local economies and local or home food crops. These things make people poorer not just financially, but perhaps even more so in terms of lifestyles.

It's a cliche, but think about the empty lives spent working those draining 8 to 5 jobs, driving an hour (or more) each way just to get to the job, taking care of large, unused lawns (full of chemicals--yuk!) and watching TV during and after dinner. That's what cul-de-sacs and the suburbs bring to my mind.

The Cul-de-Sac Syndrome: Turning Around the Unsustainable American Dream

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Subtitled “Turning Around the Unsustainable American Dream,” this book analyzes the housing crisis and reflects upon ways that America can move forward with affordable, environmentally sustainable architecture.
The Cul-de-Sac Syndrome is a good companion piece to James Howard Kunstler’s A Geography of Nowhere. Author John F. Wasik offers a cogent overview of the current housing crisis along with an analysis of the unsustainability of the current fads in American housing. He explains trends in environmentally conscious architecture and building, and offers his ideas about what it will take to put the American dream back to rights.

I was most interested by his discussion of “spurbs,” housing clusters that are not connected to a metropolitan area, offer no public transportation, are not walkable, and are interspersed with strip malls and shopping centers. I grew up in a suburb of Baltimore and now I live in Queens, NY, so I’m not intimately familiar with these areas. They sound like nowhere I’d want to live. I love what I read about the New Urbanism, one of whose central tenets is “get people outside.” I love that I can walk everywhere–sure, it’s a 30 minute walk to the park but that’s great exercise, and it’s so fun to bump into people I know along the way. ( )

Other LibraryThing reviewers seem to share my view: What's good about this book is a breezy, reporter's flow of facts put in a reasonable sequence. What's bad about this book is the other side of the same coin: the breezy reporter's take on things is fine in the short run, but stretched to a book, I found it lacking in substance. Its facts need more context than an article but rarely get it in this compendium, which feels very much like Mr. Wasik adapted his earlier writing to somehow string articles into a book.

Wasik's references to Bloomberg, his employer, and even to his own seemingly prescient reporting about the coming collapse in mortgage debt, also detract: no other facts are so referenced.

And this negative review from someone who agrees with the thesis. ( )

The Cul-de-Sac Syndrome : Turning Around the Unsustainable American Dream

In The Cul-de-Sac Syndrome, Bloomberg News' John Wasik exposes the economic, cultural, environmental, and health problems underlying life in suburbia. Wasik provides powerful insights into how the U.S. suburban lifestyle has become unsustainable and what can be done to salvage it. His observations are firmly grounded in exclusive on-the-ground research, interviews with thought leaders, and the latest studies and statistics. The book

  • Exposes the untold truths about suburban home ownership: green isn't always so green, life isn't cheaper after accounting for gas, water, and taxes, and modern suburban living isn't so idyllic considering the toll it takes on our health
  • Includes exclusive research and analysis by experts in the field that debunks the many myths associated with suburban living
  • Explores innovative solutions being developed in cities across the country

The American Dream of moving further from a city to buy a bigger house and find better schools has become a costly nightmare. The Cul-de-Sac Syndrome examines why and what can be done.

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The Cul-de-Sac Syndrome and the Future of Housing

How did the U.S. succumb to one of the most devastating housing recessions since the 1930s? Was it as simple as saying that everyone from mortgage brokers to Wall Street just got greedy? Or did it have to do with Americans&rsquo obsessions with ever-bigger homes? Weren&rsquot homes supposed to be the safest investments on the planet?

Much of what happened in this flood of exuberant optimism did not just happen overnight. The underlying causes of the debacle have been ingrained in Western culture for almost half a millennium, myths that came to full blossom precisely at a time when Americans&rsquo view of themselves, their post 9/11 security and their shaky financial future was being tested like never before.

As it stands now, the housing bust may shake out as one of the biggest financial blow-ups in history, rivaling the Great Depression as more than $4 trillion in wealth evaporated. A bubble where demand exceeded realistic economic fundamentals was triggered by a number of uniquely American cultural values, desires and economic shortcomings. Millions entered a financial cul-de-sac during this period of irrational exuberance. It may take years for them to escape from this dead end.

The stereotypical villains in this story have been Wall Street bankers, the government and greedy participants from speculating &ldquoflippers&rdquo to the Federal Reserve. Although there&rsquos plenty of blame to spread around when it comes to who was motivated by pure avarice or criminal exploitation, much of that picture has been illuminated. Those who thought they would profit handsomely have already been exposed, have taken their losses and are well known to anyone following this debacle. It&rsquos far too easy, though, to point fingers at the purveyors of the usual human excesses. Something deeper and more profound triggered this crisis, something that lurks at the core of the American experience.

The nature of the American Dream &ndash and what it has cost us &ndash is what my book explores. How did we come to think that each home should be a worthy investment that propelled millions to leverage beyond their ability to pay? In an age of burgeoning info-technology, why are we still building homes with the latest 19th-century techniques? What was the market behavior that drove homeowners into subprime loans and moving ever further out from jobs and cities? How did we come up with this idea that we should &ldquobuy as much house as we could afford?&rdquo

We&rsquove gotten stuck in an unsustainable cul-de-sac. After following the bubble and its aftermath for the past seven years as a personal finance columnist for Bloomberg News, I&rsquove gained some insights into urban planning, resource depletion, homebuilding techniques and economics that are disturbingly critical of the American dream of homeownership. I am more intrigued at how America created what I call spurbs. These are car-dependent sprawling urban areas, unconnected to core cities by public transportation and beset by unsustainable costs for infrastructure, services and resources. As highly leveraged places now ravaged by foreclosures and falling property values, they will suffer the most in coming years.

How do we heal this syndrome? Even if the home market superficially recovers with higher prices, home starts and sales, there are some deep-seated problems that will haunt future generations if we don&rsquot correct them.

Doubtless, it had been a great run. From 2000 to 2006, U.S. median home prices rose about 50 percent to an average $221,900. Whatever Americans were losing to inflation and stagnant wages during those boom years for housing, they were more than making up in their home values. Family income only inched up 14 percent during that period. Yet home prices can only outpace family income for so long. After a while, the aberration had to disappear by what economists call "regressing to the mean," or returning to a historical average return, which is less than the rate of inflation when you subtract the myriad expenses of homeownership.

Was there something about the role of the home in American culture that convinced millions in a relatively short period of time that they could win the lottery just by taking out a mortgage? Could they suddenly re-invent themselves as passive investors and successful speculators who could ride the treacherous waves of the bond market, Wall Street&rsquos propensity for bundling securities like frayed pieces of fabric and the property markets?

I submit that we need to do nothing less than reinvent the American Dream. Homes were unaffordable to begin with for nearly half the population. We can build them cheaper in factories within environmentally sound technologies. In the process, we can create millions of jobs and export technologies.

What about the communities that embraced the ever-expanding American home? What will enable a metropolitan area to grow in an age of expensive energy, rising taxes, constrained resources and an aging population? There are a host of approaches that I&rsquove culled from leading thinkers, research organizations and environmental groups.

  • De-Link Property Taxes from School Funding and Local Development. In a handful of areas, this has been done. The key is to provide a diversified source of school and infrastructure funding from local, regional, state and federal sources. This will help address the reason why families move ever further out from central cities to find better schools and housing values. Educational quality simply needs to improve in every school district if America is to stay in the global economic game. &ldquoThe problem with U.S. education is a problem of inequality,&rdquo says Fareed Zakaria, a skilled observer of geo-politics. &ldquoThis will, over time, translate into a competitiveness problem, because if the United States can&rsquot educate and train a third of the working population to compete in a knowledge economy, this will drag down the country.&rdquo
  • Prioritize Transportation Funding. Channel the majority of federal transportation subsidies into public transportation and road and infrastructure repairs. Rebuild the bridges, overpasses, grade crossings and roads we have now. Direct a greater proportion of federal dollars into urban light rail, zero-emission buses, trails, public transit, bike paths and inter-city high-speed trains. Provide funding to new communities that emphasize grid layouts to minimize street traffic. Minimize the building of high-speed, multi-lane highways. Provide tax incentives and financing for transit-oriented developments that are within walking distance of public transportation.
  • Create Model Zoning Codes. This can be done on the local, county and state level. Allow for mixed-use zoning that encourages pedestrian and bike traffic and discourages sprawl while promoting green buffer zones. There should be model ordinances on the books for areas that want to create livable, walkable and bikeable communities.
  • Update Building Codes for the 21st Century. Require that all new construction and communities be required to meet the standards set forth in the LEED, Energy Star or other local programs. Montgomery County, Maryland, for example, is mandating that new homes meet Energy Star guidelines. Mandate water conservation measures in homes and subdivision design. A national energy building code needs to mandate conservation for every new or remodeled building. On a local level, building permit fees can be reduced for green improvements. The city of Chicago, for example, will waive up to $25,000 in fees, depending upon the level of improvements.
  • Create Green Jobs, Particularly in Blighted Areas. Millions of jobs can be created to refurbish sub-standard housing, installing energy appliances, building public transportation and retrofitting buildings. According to the Apollo Alliance, for every $1 billion invested in public transportation, 47,500 jobs are supported. Wind power creates 2.77 jobs for every megawatt produced solar photovoltaic manufacturers generate 7.254 jobs. A comprehensive energy program should mandate all new buildings follow national efficiency guidelines and provide as much funding that was invested in the Space Race of the 1960s to carbon-neutral energy technologies. A tax on carbon emissions on every level &ndash industrial, commercial and residential &ndash will finance this research and development. In addition, take away the $47 billion in subsidies to the oil and coal industries and invest it in clean energy and building research and tax credits.
  • Trim Real Estate Tax Breaks. Write-offs for mortgage interest, property taxes and capital gains distort and artificially inflate home prices. It effectively provides subsidies for those in the most expensive areas, ranging from $26,285 per owner-occupied unit in the San Francisco Bay area to $12,759 in Hawaii, according to a University of Pennsylvania-Wharton School study. Start with repealing the mortgage-interest deduction. Desirable areas would still be in demand if these tax breaks go away and prices may fall in others. That will enhance affordability.
  • Fund a Smart Grid. Provide the necessary funding to update the electrical grid for this century. Ideally, the grid should be able to respond automatically to power surges without breakdowns. Supplement the grid with substantial investments in clean energy and modern electrical storage. Mandate that utilities provide services to tell customers when off-peak power is available and provide tax incentives for homeowners who want to create their own clean power supplies. Require net metering and buy-back of home-generated electricity. Enhance the tax credit package to a 20-year horizon for those who want to invest in clean energy production. De-couple utility industry profits from sales through tax credits. Reverse the paradigm: the less power they sell through energy-conservation measures, the more money they can make.
  • Create Private Incentives for More Affordable Housing. Mandate that new developments offer a variety of housing by size and price, including rentals and high-density townhomes. When home prices rise by $1,000, another 217,000 are priced out of purchase. Offer builders tax breaks for keeping homes under 3,000 square feet and increasing density.
  • Personalized, National Health Care. American mobility is largely based on employment. Millions not only want a better job with higher wages, they want freedom from catastrophic health expenses. The only way to achieve this is to de-link health coverage from employment (and the tax breaks provided to employers for offering health care). In a personalized, national program, the government can contract with private companies who bid for the business to underwrite policies that cover the entire country. This will enable people to be more productive, take any kind of employment and move wherever they want. It will indirectly help housing because Americans won&rsquot be locked into communities. They may be able to move to less-populous areas and pursue telecommuting. A guaranteed universal savings plan for all Americans is also essential.

That brings us to the American project itself, which dictated that ordinary homeowners could indeed start over as housing investors. Investment homes would become not only their retirement fund but their college savings vehicle. Castles could be profitable as long as land became scarcer. After all, they weren&rsquot making any more of it.

What's The Real Story Behind Bitcoin?

Sometimes we elevate belief beyond factual truth. This a core principle of religion and politics. When belief supersedes reason in finance, we call it speculation.

Is belief crowding out reason when it comes to Bitcoin and other cryptocurrencies? While I think that blockchain technology is promising, I don't know if we should be betting on Bitcoin and other virtual currencies as if they're a new discovery of gold or silver deposits.

Prof. Robert Shiller, who teaches economics at Yale and is an expert on bubbles and speculation, says we should pay close attention to the story behind Bitcoin. He claims it bears some huge similarities to the Wizard of Oz, which was really a veiled satire on the folly of the gold standard (the "yellow-brick road").

Yale University professor Robert Shiller.(AP Photo/Jessica Hill)

As someone who has carefully analyzed both the housing and bubbles - and won a Nobel Prize in economics for his research - Shiller has called the Bitcoin craze a bubble. This is what he told Quartz earlier this year:

“I think that has to do with the motivating quality of the bitcoin story. And I think, what’s so exciting? You have to think like humanities people. What is this bitcoin story?”

For one thing, millions believe that Bitcoin will make them rich with little or no effort. After all, the virtual currency's reference price has climbed more than 600% in recent months, although it's retrenched this month - off 50% from its peak value.

Then there's the allure of blockchain technology: The government doesn't control it, computers around the world monitor it and it's embedded in cryptic code, so it would be hard to hack. So goes the story, although there are some strange aspects to it.

When I saw Shiller speak recently, he elaborated when I asked him a question about Bitcoin. Shiller was lecturing at the Chicago Humanities Festival.

I've seen Shiller several times in the past and have interviewed him for two of my books: The Cul-de-Sac Syndrome and Keynes's Way to Wealth.

How do you value Bitcoin when there are no earnings, dividends or price/earnings ratios? I asked Prof. Shiller.

While he didn't offer a direct reply on the valuation question, he gave me his observations on the story behind Bitcoin and why it's valued so highly.

"Bitcoin is the best narrative possible," Shiller replied with a smile. "It's a great story. It's a mystery based on a person who wrote a brilliant paper that nobody seems to have found (Satoshi Nakamoto)."

"Who is this person? Maybe he doesn't exist. But when I'm lecturing at Yale, my students wake up when I talk about Bitcoin. I can see it in their eyes. I'm interested in the narrative."

For now, you'll also need to pay attention to the other parts of the Bitcoin story. It's unregulated, although government agencies are casting a gimlet eye on it. Big banks hate it. Drug dealers reportedly use it on the dark web. Transactions are really hard to trace, if at all.

The CBOE and CME Group is offering derivatives that allow you to hedge or speculate based on the cryptocurrency's price.

Certainly blockchain and Bitcoin and its many cousins aren't going away. But their popularity will hopefully not obscure the need for more transparency. I would refrain from adding them to your retirement plan until more is known.

Then there's the underlying narrative. Every story has its ups and downs. Although I have no idea where Bitcoin will end up, keep in mind that all bubbles don't end well.

The Unattainable Home

Even before the home bubble burst, homes cost too much for more than four out of ten Americans. Only 56 percent of Americans could afford a modestly priced home in 2002, the first full year of the bubble. And as Americans went deeper into debt to finance their dream, they accumulated less and less of a tangible ownership stake. Home equity as a percentage of market value peaked in 1982 -- at 70 percent -- after a brutal recession. More than half of American homeowners with a mortgage would owe more than they owned at the end of 2008. About 7.5 million were spending more than half of their income on housing costs.

The craving for upward mobility through home ownership escalated even as families on the edge of "making it" were falling behind economically. The think tank Demos said that 23 million families became "economically insecure" from 2000 to 2006, while 4 million experienced economic decline. This erosion in prosperity was triggered by a 22 percent decline in financial assets (following the dot-com bust), loss of health benefits, and an overall rise in the cost of homeownership (up 9 percent during that period). The reaction to this backsliding -- buying a home as an investment -- was the equivalent of a couple on the verge of divorce deciding to have a child in hopes that it would save their marriage. For more than 3 million in or facing foreclosure in 2009, this thinking proved financially catastrophic.

The housing bust represents a profound loss of wealth since few households had significant savings outside of their homes, as values dropped to a median $200,000 in early 2009 from $221,900 at the height of the bubble in 2006. In California, always on the fault line between profound innovation and multiple disasters, the boom and bust was a tragic manic-depressive episode. The median home price in Southern California alone slid to $285,000 by the end of 2008, 44 percent below the peak of $505,000 in 2007. Although the decline allowed more people to afford homes, even during the bust only one-fifth of Los Angeles residents could afford the median-priced home -- up from 2 percent during the boom.

The housing bust created a firestorm of collateral damage.

Lehman Brothers, one of the oldest and most venerable investment banks, was forced into bankruptcy and liquidation during a run on its assets in the late summer and fall of 2008. Its subprime mortgage and credit default swap holdings were essentially to blame, creating the largest business bankruptcy in U.S. history. Its demise released a tsunami of securities- and derivatives-related demons. Basically, when home prices collapsed, the value of the securities holding mortgages also went south. These "toxic assets" imperiled any institution that held them.

When the run commenced on Lehman, it drove Merrill Lynch, the country's largest brokerage house, into the arms of Bank of America, creating the world's largest brokerage with more than $2.5 trillion in assets and 20,000 "financial advisers." Merrill, whose symbol was an optimistic though ferocious black bull, had also invested billions in tainted subprime securities. Government regulators also forced the sale of Bear Stearns Companies, another major mortgage securities player, to JPMorgan Chase for a bargain-basement sale price of $10 a share (the initial price was $2 a share). Like Lehman, Bear effectively evaporated.

The U.S. government seized Freddie Mac and Fannie Mae, the two largest mortgage issuers and guarantors, and promised to infuse the companies with cash to keep them afloat. Their liabilities vastly exceeded their assets and they were losing a total $50 billion in the third quarter of 2008 alone. Since they insured, loaned, or sold securities representing $5 trillion -- about half of the U.S. mortgage market -- they were deemed "too big to fail."

Caught in the opaque business of insuring mortgage securities through the shadowy and then-unregulated world of credit default insurance, the government effectively took over AIG, the world's largest insurer. The Federal Reserve lent it more than $80 billion
by early 2009, part of a $150 billion bailout. It, too, was deemed too large to go bust, because its mortgage and derivatives positions threatened the global financial system.

Seeking refuge in the regulated banking system, the remaining Wall Street investment banks morphed into old-fashioned, deposit-oriented banks. Goldman Sachs and Morgan Stanley applied to become regulated banking companies with federal oversight. American Express followed later in the year. The Age of Froth was truly over as the cowboy operations that thrived on 30-to-1 (and higher) leverage became history.

The mother of all bailouts came as wintry storms arrived with an Old Testament vengeance in the autumn of 2008. With rancorous and reluctant Congressional approval, Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke on October 1 ushered through a sketchy $700 billion bailout package called the Troubled Asset Relief Program (TARP), which would pump money into banks, possibly buy bad mortgages, and prop up the financial system for a short time.

This massive cash transfusion was designed to prevent credit markets from shutting down and avert a global depression. Meanwhile, the Fed was lending some $2 trillion to banks, attempting to break a credit freeze that threatened to shut down all institutional lending. Paulson later backtracked on his earlier proposal to buy mortgages, triggering even more concerns that his master plan was ill conceived and ineptly managed. Sensing that the real purpose of all of the bailout measures was to stem the foreclosure crisis, the Federal Deposit Insurance Corporation announced its own mortgage bailout plan on the heels of the Paulson announcement. Several large banks said they would do voluntary loan modifications to reduce the cost of adjustable-rate loans, although they were under no legal obligation to do so.

After more dithering over how TARP funds would be allocated, Secretary Paulson and Fed Chairman Bernanke moved to prop up Citigroup, one of the largest global lenders, with a $20 billion cash infusion and guarantee of more than $300 billion of its loans. Within days, responding to criticism that banks were the exclusive benefactors of the government's bailout, the Fed moved to guarantee certain mortgage, credit-card, and student-loan securities.

Homes Still Cost Too Much

You would think with home prices still dropping like hailstones in most areas, that homes would be bargains.

The present buyer's market obscures a key fact about the housing crisis though: millions sought the refuge of cheap credit, subprime and adjustable loans during the boom because they were the easiest routes to homeownership in a time when house prices far outpaced income growth.

The sad fact is that the Great American Dream is still out of reach for far too many and it was the declining affordability of decent houses that was one of the triggers of the housing bust.

It's not that home prices haven't plummeted as banks unload foreclosed homes at fire-sale prices. The national median home price fell to $169,000 in the first quarter, according to the National Association of Realtors. Bank-owned properties are selling at 20 percent to 50 percent discounts.

"Contrary to popular belief," says Jeffrey Lubell, executive director of the Center for Housing Policy, "the recent decline in home prices has not resolved the nation's housing affordability problem."

Homes cost too much even before the bubble, so home buyers were willing to do anything to get into the domicile of their dreams. After all, homeownership is an American birthright, or at least that promise was sold to Americans starting in 1946. "Buy as much house as you can afford!" That's what the bankers and real estate agents were telling us for generations because of generous tax breaks and easy, often government-guaranteed financing.

Unfortunately the cost of land, homebuilding, taxes and homeownership far exceed what millions of households are able to cover with nearly stagnant personal income growth in this century. Inflation simply ate away at wages that just weren't enough to pay ever-rising bills for property taxes, maintenance, health care, education and energy.

Even at the height of the boom, Harvard researchers at their Joint Center for Housing Studies found that almost 18 million households were paying more than half of their incomes for housing (about one-third is considered reasonable). They were also hit hard by rising energy costs, which rose twice as fast as total spending from 2004-2006.

That wasn't always the best advice. The Harvard group last year found that "nowhere in America does a full-time minimum wage job cover the cost of a modest two-bedroom rental at 30 percent of income." Those stranded in the low-wage service economy, left behind by the technological revolution of the 1990s, could barely afford to rent a decent place in most cities, much less buy.

Those families who are paying more than half of their budget for housing have little to nothing left over for healthcare, food, clothing and education. That hurts more than 14 million children living in low-income households, whose families had less than $600 per month on average for other essential expenses.

So was anyone surprised when brokers and subprime lenders targeted minority and low-to middle-income neighborhoods then walked away when they sold trillions of these mortgages to Wall Street and the largest banks? They were selling the American Dream!

From sparkling new suburbs in the Sun Belt to inner cities, cheap money and neutron-bomb adjustable loans meant nobody had to be house poor -- at least for a year or two. Then the explosion hit and we're still feeling the aftershocks.

Further exacerbating the affordability crisis was the tendency for municipalities to favor upscale, sprawling home developments over middle- and low-income housing. Since home values are directly fueling property tax income in most places, nearly every community can get more money for schools and public services. When you base property tax revenue on home valuations, bigger price tags translate into better-equipped schools, fire stations and libraries.

Yet building McMansion subdivisions only inflated the housing bubble and reduced the stock of affordable homes. From 2002-2005, home prices soared 45 percent in areas restricted to upscale building, versus 24 percent in unrestricted areas. Moreover, by creating these "spurbs," sprawling urban areas unconnected to transportation and city centers except by endless highways, homeowners' costs rose to catch up with needed infrastructure, schools and other public services.

The housing crisis has given us a rare opportunity to re-evaluate and re-invent the American Dream. As I note in my new book The Cul-de-Sac Syndrome, if we're to increase the homeownership rate, government will have to create incentives to build more affordable housing.

We'll also have to find a way to de-link property taxes from funding local services to reduce the number of overpriced homes in a handful of areas. Perhaps even eliminating tax breaks for mortgage interest would keep prices at realistic levels because you wouldn't be subsidizing ever-larger mortgages.

Ultimately, though, the American home and community will have to be re-invented. Houses will need to be ultra-energy efficient to reduce long-term ownership costs and even produce their own energy. This can be done with factory-built, green homes.

Then we'll have to build -- or re-build -- high density, walkable communities that are close to jobs and retail outlets. This is already happening throughout the U.S., although building and zoning codes need to change to allow this to happen on a large scale. Even more federal incentives are needed for green building.

We've just experienced a great teaching moment in history. The American Dream as we know it was not sustainable. Now we have the chance to make it affordable, ecologically sound and socially beneficial. It's a rare opportunity.

©2009 John F. Wasik, author of Cul-de-Sac Syndrome: Turning Around the Unsustainable American Dream

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