Posted by Michael Haran on Feb 8, 2011
Scuppernong, Norton, Fredonia; not the usual wines you’d expect at a wine tasting but this was not your usual California wine tasting. This was the third year that the Atlantic Seaboard Wine Association (ASWA) was invited to pour some of the Association’s 2010 competition’s award winning East Coast wines at the 2011 Unified Wine and 
Grape Symposium in Sacramento. During their trip to the West Coast ASWA’s Carl Brandhorst and Dave Barber were asked by Anne Vercelli, a well know local food and wine educator, and Bo Simons, Librarian at Healdsburg’s Sonoma County ne Library to present an historical wine seminar. The event included the tasting of some of the 30 different East Coast wines shipped out for the events.
- Because of its industry dominance, many people associate the history of American wines with California. The fact is the first American wines were made in the late 1500s from species of Native American wine grapes. Native American grapes were so plentiful along the Eastern United States the name first given to North America by the Vikings was Vinland. In comparison, the first California winery was established in San Juan Capistrano in 1783 by the Franciscan missionaries.
Dave Barber, told the some 60 wine enthusiasts that attended the Healdsburg event, about America’s first introduction to wine production. The earliest wine made in what is now the United States was more than likely from the Scuppernong grapes by French Huguenot settlers at a settlement near Jacksonville, Florida between 1562 and 1564. In the early American Colonies of Virginia and the C
arolinas, wine making was an official goal laid out in their founding charters.
However, settlers would later discover that the wine made from the various native grapes had flavors which were unfamiliar and often referred to as “foxy” or earthy in taste unlike European wines which limited their popularity.
This led to repeated efforts to grow familiar Vitis vinifera varieties beginning with the Virginia Company exporting of French vinifera vines to Virginia in 1619. These early plantings were met with failure as native pests and vine disease brought on by hot, humid summers and the cold of winter ravaged the vineyards.
In 1683, William Penn planted a vineyard of French vinifera in Pennsylvania that may have interbred with a native Vitis labrusca vine to create the hybrid grape Alexander. One of the first commercial wineries in theUnited States was founded inIndiana in 1806 with production of wine made from the Alexander grape. Today French-American hybrid grapes still represent a significant sector of wine production on the U.S. East Coast.
The primary Native American East Coast grape species are Vitis labrusca, Vitis rotundifolia, Vitis aestivalis, and the best know Native American species Vitis riparia. Vitis labrusca’s Concord grape is used in jelly, juice and soft drinks and it was the Vitis labrusca’s root stock that saved the Phylloxera ravaged French vinifera grapes in the late 19th century. 
Some of the varietals that are made from the native vines include Scuppernong (it gets my vote for the best east coast wine name), Concord, Catawba and Niagara. From the start to the 1930’s the only wine made on the East Coat came from the native grapes. Because they could more resemble vinifera wines, in the 1930’s the French Hybrids took over from the native vines. The best know of these varietals include Norton, Chambourcin, Marechal Foch, Vidal Blanc, and Seyval Blanc. With the advances in viticulture by the 1950’s the vinifera varietals began to take hold.
Today, many fine vinifera wines are being made on the East Coast. As an example, the 2010 San Francisco Chronicle Wine Competition, the largest American wine competition in the world, awarded the up-state New York Finger Lakes Keuka Springs Vineyards 2008 Gewurztraminer the best white wine in the country.
And Now the Wines:
I really didn’t know what to expect. Being born and bred in California I only knew wines of the Vitis vinifera persuasion. Growing up I knew, as we all did, of the Concord grape (Vitis labrusca) because of Welch’s grape jelly, juice and soft drinks. The only other thing I knew was that wines made on America’s East Coast were considered inferior to those made on the West Coast.
The first wine tasted was the Sharrott Winery’s 2008 Crimson Sky a semi-sweet red wine made from the Fredonia grape. These grapes, which are a hybrid cousin of the Concord grape, were grown in the pine forests of Ne
w Jersey. Known for tastes of candied cherry and a floral fruity finish this wine won a Double Gold and Best-of-Class in the 2010 Indy International Wine Competition. This wine is priced at $14.00
The next wine was from the Vineyards on the Scuppernong Winery located in Columbia, North Carolina. Their 2009 Somerset is made from the Native American varietal Scuppernong (also known as Muscadine) cultivars Carlos (75%) and Niagara (25%). This dry white wine, which has the aroma of carefully selected Muscadine grapes and has a clean and crisp finish, was a Gold Medal winner and First in Category winner of the Atlantic Seaboard Wine Association 2010 competition. This wine is priced at $9.95
Next up was the 2008 Gewurztraminer from Dr. Konstantin Frank Wine Cellars. Located in the famed Finger Lakes region of upstate New York this Gewürztraminer has aromas of orange blossoms, citrus and banana. The wine has a nice acidic balance and light residual sugar gives a subtle honey taste. This wine is prices at $18.00
The fourth wine tasted was the Bordeleau Winery 2007 Chardonnay. Located in Eden Maryland, these Chardonnay grapes were barrel fermented giving tastes of vanilla, lemon/lime with a finish of apple and spice. This wine, which won a 2010 Atlantic Seaboard Wine Competition Gold Medal and Best of Category, is priced at $24.00.
New Jersey’s Heritage Vineyard 2007 Merlot was the next wine tasted. This vinifera grape, grown in the humid climate of the east coast, held up quite well. It was dark ruby in color and tasted of black cherry and tobacco. Its ripe tannins gave it a nice finish. The wine won a silver medal at the World Wine Championships and priced at $19.00.
The last wine tasted was a 2008 Norton from Cooper Vineyards. The Virginia hybrid Norton grape is believed to be across between aestivalis and vinifera. A small, deep blue-black grape, the Norton varietal gives intense color, body with strong herbaceous characteristics which includes spices, fruit, tobacco and chocolate. This wine was aged 16 months in Virginia oak barrels and retails for $22.00.
For the most part everyone at the event had a positive reaction to the East Coast wines. Some of the native varietals took a little getting used to but not in a “bad” way only a “different” way. I personally though the Merlot was a good as any California Boudreaux but there were a few wines in the lineup that seemed to lack a certain balance and maybe had some oxidation problems (“foxy?”). Virginia wines have come a long way from ten years ago.
As the quality of the East Coast wines has improved the future of the industry will be in their native/hybrid and the “cold weather” vinifera varietals such as Riesling and Gewürztraminer. Since this is the only place in the world that these American Native/French Hybrid wines are produced as they get known around the world the niche market for these wines can only grow.
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Posted by Michael Haran on Apr 20, 2010
Scuppernong; Norton; Seyval Blanc; Not the normal wines you’d expect at a wine tasting but this was not a normal California wine tasting. For the second year the Atlantic Seaboard Wine Association (ASWA) was invited to pour some of the Association’s 2009 competition award winning East Coast wines at the 2010 Unified Wine and Grape Symposium in Sacramento. During their trip to the West Coast the group was asked by Anne Vercelli, a local food and wine educator, and Bo Simons, head librarian of Healdsburg’s Sonoma County Wine library to present an historical wine seminar. The event included the tasting of some of the 22 different east coast wines shippe
d out for the events.
Because of its industry dominance, many people associate the history of American wines with California. The fact is the first American wines were made in the late 1500s from species of Native American wine grapes. Native American grapes were so plentiful along the Eastern United States that the name first given to North America by the Vikings was Vinland. In comparison, the first California winery was established in San Juan Capistrano in 1783 by the Franciscan missionaries.
Gordon Murchie, ASWA’s President Emeritus, told the some 60 wine enthusiasts that attended the Healdsburg event, about America’s first introduction to wine production. Being a retired U.S. State Department official, Mr. Murchie has a broad knowledge of U.S. history and his entertaining story telling made for a fun evening. For show and tell he even brought some very old wine bottles from the Jamestown Virginia Colony from the 17th century.
The earliest wine made in what is now the United States was more than likely from the Scuppernong grapes by French Huguenot settlers at a settlement near Jacksonville, Florida between 1562 and 1564. In the early American Colonies of Virginia and the Carolinas, wine making was an official goal laid out in their founding charters. However, settlers would later discover that the wine made from the various native grapes had flavors which were unfamiliar and often referred to as “foxy” or earthy in taste unlike European wines which limited their popularity.
This led to repeated efforts to grow familiar Vitis vinifera varieties beginning with the Virginia Company exporting of French vinifera vines to Virginia in 1619. These early plantings were met with failure as native pests, vine disease brought on by hot, humid summers and the cold of winter that ravaged the vineyards.
In 1683, William Penn planted a vineyard of French vinifera in Pennsylvania that may have interbred with a native Vitis labrusca vine to create the hybrid grape Alexander. One of the first commercial wineries in the United States was founded in Indiana in 1806 with production of wine made from the Alexander grape. Today French-American hybrid grapes still represent a significant sector of wine production on the U.S. East Coast.
The primary Native American east coast grape species are Vitis labrusca, Vitis rotundifolia, Vitis aestivalis, and the best know Native American species Vitis riparia. Vitis labrusca’s Concord grape is used in jelly, juice a
nd soft drinks and it was the Vitis labrusca’s root stock that saved the Phylloxera ravaged French vinifera grapes in the late 19th century.
Some of the varietals that are made from the native vines include Scuppernong (it gets my vote for the best east coast wine name), Concord, Catawba and Niagara. From the start to the 1930’s the only wine made on the East Coat came from the native grapes. Because they could more resemble vinifera wines, in the 1930’s the French Hybrids took over from the native vines. The best know of these varietals include Norton, Chambourcin, Marechal Foch, Vidal Blanc, and Seyval Blanc. With the advances in viticulture by the 1950’s the vinifera varietals began to take hold.
Today, many fine vinifera wines are being made on the East Coast. As an example, the largest American wine competition, The San Francisco Chronicle Wine Competition, the largest American wine competition in the world, awarded the up-state New York Finger Lakes Keuka Springs Vineyards 2008 Gewurztraminer the best white wine in the country.
And now the wines.
I really didn’t know what to expect. Being born and bread in California I only knew wines of the Vitis vinifera persuasion. Growing up I knew, as we all did, of the Concord grape (Vitis labrusca) because of Welsh’s grape jelly, juice and soft drinks. The only other thing I knew was that wines made on America’s east coast were considered inferior to those made on the west coast.
The first wine poured was the Native American varietal Scuppernong from Duplin Wines Cellars in North Carolina. It has historically has been grown in the southeastern U.S. Also know as Muscadinia or Muscadine, this Scuppernong was crystal clear, sweet and with strong floral aromas.
The next wine was a fortified vinifera Madeira from the island of the same name near Portugal. Since it’s not an east coast wine I won’t go into it but as an aside Madeira was used by our founding fathers to toast our Declaration of Independence in 1776
Next up was the Virginia hybrid Norton which is believed to be across between aestivalis and vinifera. A small, deep blue-black grape, the Norton varietal gives intense color, body with strong herbaceous characteristics which includes spice, fruitiness, aroma of plumb and tart cherries, black pepper, tobacco and chocolate.
The Chambourcin grape is one of the more successful French Hybrids which ripens late in the season. The varietal, which can produce rose and Beaujolais style wines, is known for a distinct aroma of herbaceous flavors including raspberry, clove, cherry, plum and tobacco.
The second white poured was the Virginia, 2008 Lake Anne Winery Seyval Blanc which is one of the more commercially successful east coast French Hybrids. This wine is reminiscent of the Vinifera Sauvignon Blanc in that it boasts of aromas of grass, hay, green apples and juicy pears with a nice clean finish.
The last wine tasted was a wine called Octagon which is a classic Bordeaux Vinifera Blend of Cabernet Sauvignon, Merlot, Cabernet Franc and Petit Verdot. All of the grapes of this 2005 blend were grown in the Barboursville vineyards, Virginia. A bit tannic the winery advises that this vintage should be put down for five years to reach a flavor peak around 2012. This wine boasts of an intense aroma of plum, cassis, coffee and berries.
For the most part everyone at the event had a positive reaction to the east coast wines. Some of the native varietals took a little getting used to but not in a “bad” way only a “different” way. I personally though the Bordeaux blend was a good as any California blend but there were a few wines in the lineup that seemed to lack a certain balance and maybe had some oxidation problems. Virginia wines have come a long way from ten years ago.
As the quality of the east coast wines has improved the future of the industry will be in their native/hybrid and the “cold weather” vinifera varietals such as Riesling and Gewürztraminer. Since this is the only place in the world that these American Native/French Hybrid wines are produced as they get known around the world the niche market for these wines can only grow.
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Posted by Michael Haran on Sep 15, 2009
HEALDSBURG’S FIRST WINERIES
Published in the Healdsburg Museum’s Russian River Recorder
Autumn 2009
by Michael Haran
Montepulciano Winery
It seems fitting that during our annual grape harvest, we take a look at the early history of the industry that wines, dines and supports our town. Not only does Sonoma’s wine industry account for about 40% ($20 billion) of our county’s annual gross income but it has also fostered other businesses such as the one billion dollar per year tourism industry. All of this has transformed Healdsburg (like it or not) into an up scale market including designer shops, restaurants and hotels with full service spas. One wonders what George Miller would think of all this.
Prior to George Miller Sr. establishing Healdsburg’s first commercial winery, wine was made by many small home producers for their personal use and as part of the barter system which was prevalent in NorthernSonomaCounty before the establishment of banks and the beginning of our modern economy. In a letter from Lindsay Carson (brother of famed explorer Kit Carson) to his great-grandfather in 1857, he wrote “money is scarcer than I have ever known.”
It seems that one of the first things any European settler did here was to plant grapes. The Russian’s at FortRoss are credited with the establishment of the first vineyards. The Franciscans at the Sonoma Mission first planted grape vine in 1823 about five years after the Russians planted their first vineyard. Most of the early vineyards featured Mission grapes. In 1860, Davenport Cousins was listed as the first wine producer in the DryCreekValley. His ranch, which is now the site of the Ferrari-Carano Winery (8761 Dry Creek Road) featured a post office, saloon and grocery store. The site was known as Cozzens Corner and was operated by Cozzens and his son for some thirty years.
In 1864, A.J. Galloway was credited with establishing DryCreekValley’s first vineyard. Gene Cuneo, felt that Galloway’s vineyard, which is now the Cuneo Ranch (2470 Dry Creek Road, was primarily planted in Zinfandel. To give some idea of the grape varietals being grown in the area in 1883: 395 acres were planted to Zinfandel; 240 acres to Mission; 64 acres to Malvoise; 50 acres to Golden Chasselas; 18 acres to White Reisling; and 40 acres to other varietals.
As an aside, it is interesting to note how land values, today by far the most costly element of any vineyard, of the period were little more than an incidental. The following is an actual cost accounting reported by Agoston Haraszthy (founder of Buena Vista Winery) when he planted 100 acres in January 1858:
Six men with nine horses for deep tillage
and six horses for shovel plow $231.60
Horse hire and feed 255.00
Blacksmith 30.00
18 men to layout, stake,
Dig holes and plant vines 892.68
Cost of land 170.00
Miscellaneous 55.36
Total $1,634.64
It is believed that Healdsburg’s first commercial winery was established in 1862, during the Civil War, by George Miller Sr. A native Swiss, Miller came to SonomaCounty in 1853. He was first a partner in his uncle Felta Miller’s (along with Samuel and Thomas Heald) saw and grist mill located on Mill Creek off of Westside Road.
Of interest, it was local lore that Catherine “Katie” Miller, Felta’s wife, was a problem. This story is one of Sonoma Counties most told legends and tales. It seems Katie liked her hooch. Felta would often hide the “jug” from Katie who was known to appear at the back door of some of Healdsburg’s early saloons. Felta and some friends were leaving for a Fourth of July celebration in 1854, and he was concerned as to how to conceal a keg of whiskey that was in the house. Felta got an idea. He had one of his friends climb a tree and, unseen by Katie, tied it securely out of reach. After a diligent search she spotted the “treasure” high in the tree. After diligent thought she came up with a brilliant solution. She carried out a large washtub and placed it directly beneath the keg. Procuring her husband’s rifle she peppered the keg with several bullet holes. Katie was found by the returning party in close proximity to her favorite tipple, having had as much “independence” as was good for her.
George Miller
When Miller sold his interest back to his uncle, he and his wife Ursula bought about 12 acres that is bordered today by College, University, Grant and Powell Streets from the estate of Colonel Rod Matheson who was killed in an 1862 Civil War battle. After clearing, he planted eight acres in Mission and Hamburg grapes (6.5 to Mission and 1.5 to Hamburg) with the remaining four acres (the southeast corner of the property) reserved for the construction of the distillery and family home. The name of the winery was the Healdsburg Fruit Distillery, which produced “Quality wines and brandies distilled from grapes, apples and peaches.” Both Ursula and his daughter Celia (who was Healdsburg’s May Queen in 1869) worked the winery with Miller.
Some time before 1867 Miller moved the winery to the southeast corner of West (now Healdsburg Ave.) and Grant Street. He may have also taken in a partner during this time. A man named Mr. Fried was said to have worked with Miller at the winery, but no further record of him can be found.
The coming of the railroad in 1871 brought Healdsburg a boom in prosperity. With the trip from San Francisco now taking only four hours, the tourist trade took a sharp up turn, as did the sale of agricultural products to the now easily accessible Bay Area markets. In 1872 George Bosch and Alex Colson opened the first Dry Creek winery and produced quality wines from their 14 acres (around 1500 Dry Creek Road) of Mission and Zinfandel grapes. The Zinfandel grape had arrived from the East Coast during the Gold Rush and was first used as a table grape in San Francisco.
In 1873, a Frenchman named John Chambaud built a stone winery along the north side of Hudson Street, a little west of Front Street (one wall of the original building is still standing as part of the office building that currently occupies the site). It can be argued that Chambaud’s winery was the first in Healdsburg since this winery was actually within the city limits, whereas Miller’s first location was not. Chambaud grew none of his own grapes. His winery’s 20,000 gallon capacity was welcomed by the local grape growers. Vineyards were growing rapidly in the area and not all the grapes could be sold in the San Francisco market. Chambaud bought and crushed (using mostly Chinese labor) 200 tons of grapes for his first vintage.
Chambaud Winery circa 1909
In the first half of the 1870’s several factors led to the first boom in Sonoma County’s wine industry (a cycle that’s been repeated ever since). First, the coming of the Transcontinental Railroad in 1869 opened up the Eastern U.S. markets; second, the French Phylloxera epidemic opened the European market to California wines for the first time. This caused a boom in both grape growing and wine making. In 1873 California wine production jumped 40% to 2,636,000 gallons. In the same year, Healdsburg’s wine was selling for 30 cents per gallon and brandy was selling for $1.50 per gallon. By 1876 the price of wine dropped to 10 cents per gallon.
In 1877, Miller sold his winery to Mr. A.E.S. DeWiederhold (a winemaker from British Columbia), but kept his home and the 12 acres of grapes. Miller then opened a butcher shop in downtown Healdsburg. He gradually transplanted his old Mission vines and had a vineyard of desirable dry red varieties by the early 1890s. DeWiederhold changed the name to the Fairview Winery.
The depression of 1876 forced John Chambaud to sell his winery to a cooperative group of vineyards organized as “The United Vineyard Proprietors Company” for $4,000. Chambaud stayed on as foreman until he moved to Cloverdale in 1880. The cooperative changed the name of the winery from Chambaud Winery to the Healdsburg Winery.
The depression of the mid 1870s set the stage for a dramatic rebound in the early 1880s. In 1877, Chambaud produced about 20,000 gallons of wine; Miller produced about 5,000 gallons; and Bloch & Colson produced about 5,000 gallons. In 1882, the Healdsburg region wine produced was 382,000 gallons. The Simi and the Gobbi brothers timing was perfect.
Pietro and Giuseppe Simi bought the Healdsburg (Chambaud) Winery in 1881 just in time for the next boom in the SonomaCounty wine industry. Giuseppe Simi arrived in California from his native Tuscany in 1859 and work for a time as a miner and later a produce farmer renting 2,800 acres of land in SacramentoCounty, 1,840 acres in KernCounty and 1,600 near Pescadero. Pietro sold the produce and made wine in their building at 429 Green Street in San Francisco.
Pietro and Giuseppe Simi
In 1868, Giuseppe moved to Healdsburg to buy grapes for the brother’s San Francisco winery. After they bought the Healdsburg Winery and, catching the wine boom, soon out grew the Hudson Street location. In 1883, Giuseppe bought 126 acres just north of Healdsburg. They cleared the land and planted 116 acres of mostly Zinfandel. They built a stone winery on the site and named it Montepulciano in honor of the Tuscan winegrowing town where they were born. The annual out put was 70,000 gallons of wine through the 1890s. Giuseppe was always in charge of the winery, while Pietro ran the business in San Francisco. The Simi Winery is the longest continuing running winery in the Healdsburg area.
Meanwhile, DeWiederhold sold the Fairview Winery to Peter and B. Gobbi in 1882. Gobbi renamed it the Sotoyome Winery and moved it to the 300 block of West Street (Healdsburg Ave.). In 1884, a cousin, Julius Gobbi bought out B. Gobbi. They made about 60,000 gallons of wine annually and their wines had a “fine reputation, which commands ready sale in San Francisco as soon as prepared for the market. They also manufacture grape brandies, and the product of their distillery never has to wait for a market.”
Both cousins were from an Italian town named Dongo which is near the northern end of LakeComo. Both men’s fathers were vineyardists and wine producers. In 1869, Julius’ family moved to Ukiah where his father planted a vineyard. This is where Julius learned the business of vine growing and the rudiments of wine-making. Peter came to California in 1873 and worked in the dairy business in Petaluma and Bloomfield until he moved to Healdsburg and bought the Fairview Winery.
In the 1880’s Peter and Julius built a commercial building at 312 Center Street which still bears their name. Peter retired in 1895, but Julius ran the operation for some years to come. Both men had a fine reputation and were active in the Healdsburg community.
DeWiederhold kept his vineyard and built a small private winery that was maintained by his widow, Alice, until 1892, when it burned down. This was one of the numerous temperance movement winery fires around this date and was presumed the work of the fanatic “Drys.”
Today there are over 350 bonded wineries in SonomaCounty with eleven distinct and two shared American Viticulture Areas including the RussianRiverValley, AlexanderValley, and DryCreekValley, the last of which is known for the production of high-quality Zinfandels.
In 2007 the SonomaCounty grape harvest amounted to over 198,000 tons, exceeding NapaCounty’s harvest by just under 30 percent. About 80% of non-pasture agricultural land in the county is for growing wine grapes—63,825 acres of vineyards with over 1800 growers. The most common varieties planted are Chardonnay, Cabernet Sauvignon, Pinot Noir, Merlot and Zinfandel. The overall 2007 average price per ton was $2,081 up 5% from 2006.
Photos courtesy of Healdsburg Museum
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Posted by Michael Haran on Mar 9, 2009
Forget nationalizing the banks. Forget nationalizing the auto industry. If the government is serious about stopping the deflation that is ravaging our economy they should take over every “underwater” home in the country.
The Treasury’s $75 million Homeowner Affordability and Stability Plan is supposed to provide up to 4 to 5 million homeowners with new access to refinancing and enact a comprehensive stability initiative to offer reduced monthly payments for up to 3 to 4 million at-risk homeowners. The two main features of the program will allow homeowners who own up to 5% more of their home’s current value to be able to refinance and homeowner’s that owe up to 50% more than their home’s value would be eligible for a loan modification.
The problem with this program is that it is estimated that it will only help about 20% of the at-risk homeowners. That means that 80% troubled homeowners could lose their homes to foreclosure. The program does nothing to stop the current slide in the value of U.S. homes which is the root cause of the credit freeze.
The program states that, “This plan will also help stabilize home prices for homeowners in neighborhoods hardest hit by foreclosures. Based on estimates concerning the relationship between foreclosures and home prices, the average house in the U.S. valued around $200,000, the average homeowner could see his or her home value stabilized against declines in price by as much as $6,000 relative to what it would otherwise be absent the Homeowner Stability Initiative.”
This is like spitting on a forest fire. The ink wasn’t even dry on the plan when new number emerged showing the median value of a U.S. home fell to $170,000 down from $199,000 in January 2008, a 12-year low. How does a 3% “price stabilization” compare to national home prices which, according to the Standard and Poor’s/Case-Shiller price index, fell 18% in the fourth quarter of 2008. Offer this plan to homeowners in Phoenix (down 23%); Las Vegas (down 33%); Miami (down 29%); Los Angeles (down 26%) and they’d think you were crazy.
This plan looks like the Treasury is trying to buy time until the economy turns around and is not really intended to bottom out this deflationary cycle. It seems they are treating this decline like any other housing cycle. Well this isn’t just any other housing cycle. When the CIA starts to track the economic melt-down you know the crisis is real.
The way it works now is when a bank forecloses they try to sell the home for whatever they can get knowing full well that the taxpayers will cover their losses. The banks have no interest in maintaining the foreclosed home which causes whole neighborhoods to deteriorate. If the government allows mortgage reductions it will encourage paying home owner to walk away from their homes knowing that it will be many years before they see any equity in their homes as speculators and first-time buyers buy up their neighbors homes at discount prices.
The government should treat the housing crisis as a national emergency. The number one priority should be to stop the nation’s declining in home valves that are wreaking havoc through out the economy. The way to do this is for the government to take-over every underwater foreclosure in the nation. It would be like what Paul Volker did in 1982 to stop run-away inflation. This would stop this recession dead in its tracts.
The mortgages on these homes should be kept in place and not written off. The people who were foreclosed upon could rent the home back from the government which would also achieve one of the Homeowner Affordability and Stability Plan’s objectives which is to stabilize the rental market.
The feds would then own the homes until the market value of home once again reached the value of the defaulted mortgage. This could take 2-5-10-years but who cares, the government isn’t going anywhere and it’s an investment in our country’s future. The home would then be sold (possibly back to the defaulting family) and the mortgage’s principle would be paid off. The system to deal with foreclosures is already in place through FHA, VA Fannie Mae and Freddie Mac.
This proposal would not cost the taxpayers any money and it would create hundreds of thousands of jobs through property management and home maintenance, the cost of which would be mostly paid for through rental income. It would also give the government time to work through the mortgage derivatives mess.
The devastation to our economy was caused by an artificial over supply of home building. We can’t wait for normal population growth to correct the market. We need to fight artificial with artificial and get every underwater foreclosure off the market. NOW!
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Posted by Michael Haran on Mar 9, 2009
For the life of me I don’t know why everyone in Washington is surprised about the fact the banks aren’t making more loans. Like banks making loans will turn the economy around. Get this straight – banks don’t lead they follow. A core banker (not the mathematicians known as financial engineers that turned the financial sector into a big Ponzi scheme) makes money off other people’s money.
It was kind of funny watching all of these financial “experts” in Washington give the banks $165 billion dollars and wonder why they have used the money to buy other banks, shore up their balance sheets and not make loans. It was also funny watching Congress bash the bankers and wonder why they weren’t making more loans. But it wasn’t so funny listening to Timothy Geithner, the new Treasury Secretary, saying that he doesn’t have the slightest idea how to fix the problem.
The reason the banks haven’t made more loans is because there is currently very little to lend money on in this economy. We are still in a deflationary cycle and banks won’t lend now because businesses and people need the loans. They won’t lend on real estate because home prices haven’t yet stabilized; they won’t lend to consumers because they could still lose their jobs; they won’t lend on cars because of the instant devaluation. As the old adage goes banks will lend money to you only if you don’t need it.
To shore up the nation’s insolvent financial system numbers as high as $1 trillion are being thrown around. The banks want the money to attract private investors so they can make more loans. No investor is going to invest in an industry that is so stupid they pay out billions of dollars of taxpayer money in management bonuses, buy golden toilet paper fixtures and not expect a public backlash. No one’s going to invest, that is, without a government guarantee.
I got a better idea. Let’s focus on the best ways to put the money into the economy from the ground up (not the top down) to jump start the economy. Cash will be flowing again and the banks can get back in the ball game making money off the productivity of others. The thing to remember it doesn’t start with the banks.
As far as Mr. Geithner goes it’s hard for him to see the forest through the trees. As a Wall Street insider he argued against reining in the financial manager’s excessive pay (I guess someone has to support the upper-end real estate market). But that’s small potatoes considering what’s facing this nation. I know Obama wants transparency in his administration and I’d rather have a few gaffs like this as opposed to the clandestine nature of the last administration. However, I think sometimes a little political “speak” would do better than a remark like “I really don’t know how we are going to do this,” which freaked everyone out.
The problem is Mr. Gaither is still trying to find a way for the financial sector to be a leader in getting us to the bottom of this cycle. Well it isn’t going to happen. You could give the banks all the money the treasury could print and it’s still just going to sit in their vaults. They’ll continue to cry that they can’t value their losses (lets take a bundle of mortgages or credit card debt; apply an algorithm to inflate the value by $50 trillion; let investors buy in at different values; and gee, what went wrong?). They’ll want the taxpayer to give them more money so they can attract private investment so they can be in a position to not make more loans.
No, this is not going to work. What should happen is that the government should give the banks just enough money so they can stay solvent and tread water until the economy bottoms out. The feds could hold the remaining bank bailout money as a reserve for the stimulus package. Money should be available to the Small Business Administration because even in good times, banks won’t make a small business loan unless the government guarantees it. The proposed Consumer and Business Lending Initiative, which is intended to foster consumer and small business lending, would be a good thing. More tax incentives should also go to venture capitalists for it is they, not the banks, which fund innovation.
Other than job creation all the stimulus and bail-out funds should go toward housing. It’s obvious that congress really doesn’t get this since the last thing they eliminated from the stimulus bill was the $15,000 tax credit for buying a home. This credit was supposed to be temporary and used to help bottom out the housing sector which should be the feds top priority.
The Legacy Asset Partnership Bank (LAPB), which would be a government agency designed to acquire bank’s toxic assets, could be another good thing. If the feds took all of the banks liabilities such as non-performing loans and REO (bank owned real estate which to a bank is a liability and not an asset) at cost, the government could hold them until the economy turns around and then sell into a healthy market at no loss or even a profit. It worked in Sweden and it could work here.
Let’s say the LAPB bought every one of the 8 million foreclosures that are expected this year. Loan modifications will forestall about 20% of these foreclosures but there will still be many people that will lose their homes. The treasury should take every foreclosure and hold the properties until the market justifies a sale for the amount of the defaulted loan.
A U.S. housing cycle usual encompasses about five years. The housing market normally goes along; the population grows; lack of supply causes prices to rise; builders build to meet this demand and overbuild; the market weakens; prices stabilize; and the housing market goes along. This cycle will be longer because of the artificial over supply of homes but it doesn’t matter since the government isn’t going anywhere.
This way, not only will we be quicker to bottom out the major cause of the devaluation that’s paralyzing our economy but we also might also make some money in the bargain. After all, I wouldn’t mind owning a one 300 millionth share of some 8 million homes. Of course the money would go to pay off our budget deficit but wouldn’t that be a nice gift to our children.
The LAPB could also take all of the so called derivatives, pull them apart and sell the parts that are performing and either hold the non-performing loans or write them off if the borrower has gone through bankruptcy. This way I think the government could attract the investors that the banks are courting with our tax dollars. Who wouldn’t want a bottom line partner like the U.S. Government? Once the banks are healthy again and the economy has turned around these investors could once again invest in the private financial sector.
Geithner said that “governments are terrible managers of bad assets – there is no good history of governments doing that well.” Well, I got news for Mr. Geithner all you “brightest and best” better learn pretty quick because it’s the government that’s going to re-regulate the financial system and it’s the government that’s going to manage the jump-start of the economy. And there is a history of the U.S. government doing this well as in the Great Depression, WWII, and the S&L scandal in the late 1980s. And the government has an extensive history of managing foreclosures through the FHA, VA, Fannie Mae and Freddie Mac. Like it or not it’s the government time to pick up the bat and step up to the plate.
This is exactly why we believe in our system of government and this is exactly why we support it with our tax dollars. Once the economy is running properly again and the financial system has been re-regulated, the feds can slowly turn the economy back to the private sector and the banks can once again do what they do best.
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Grape Symposium in Sacramento. During their trip to the West Coast ASWA’s Carl Brandhorst and Dave Barber were asked by Anne Vercelli, a well know local food and wine educator, and Bo Simons, Librarian at Healdsburg’s Sonoma County ne Library to present an historical wine seminar. The event included the tasting of some of the 30 different East Coast wines shipped out for the events.
arolinas, wine making was an official goal laid out in their founding charters.
w Jersey. Known for tastes of candied cherry and a floral fruity finish this wine won a Double Gold and Best-of-Class in the 2010 Indy International Wine Competition. This wine is priced at $14.00
