With demands for a bank bailout, Silicon Valley shows its ‘small government’ mantra was just a pose
Michael Hiltzik, Los Angeles Times– March 13, 2023
For decades, the dominant mantra of Silicon Valley’s powerful has been that government is just a drag on their innovative spirit. Get regulators off our backs, they’ve argued, and we’ll improve people’s lives to an indescribable degree.
Not at the moment. The same investors and entrepreneurs who argued for less government and less regulation in the past successfully lobbied for a government bailout of Silicon Valley Bank, which failed Friday as a result of astoundingly imprudent business practices.
Driving their demands were the financing issues facing thousands of SVB corporate and individual customers who collectively had more than $150 billion of their cash on deposit at the bank under conditions that left it largely uninsured against the bank’s collapse.
This specific industry could exceed$30 billion by 2025 The Federal Deposit Insurance Corp. insures individual and business deposits up to $250,000 per depositor. Many of the bank’s depositors had cash balances at SVB of hundreds of millions of dollars each.
Dispensing with that limit, the Federal Reserve, Treasury Department and FDIC announced Sunday that all SVB depositors would have access to all their money on Monday. Previously, the FDIC said it would make only the insured balances available Monday, with the balances to be repaid later and possibly not entirely.
The three agencies said no taxpayer funds would be spent on the rescue. The repayments will come from the sale of SVB’s assets, which include treasury securities, with any shortfall covered by an FDIC assessment on its member banks. The agencies may have concluded that there were enough assets on the bank’s balance sheet to cover all deposits, once the assets are sold.
This isn’t a “bailout” by the government, since SVB’s shareholders may yet be the losers; they’re not covered by the regulators’ relief program.
As it happens, the government has turned out to be the savior of Silicon Valley’s small-government libertarians in this crisis. The FDIC is one of many programs launched during Franklin Roosevelt’s New Deal that preserve Americans’ livelihoods and way of life during a crisis, and that conservatives have been trying to undermine since the 1930s.
As we reported last week, the sudden collapse of SVB resembled almost all bank runs of the past — the accumulation of huge sums of deposits that could be withdrawn on demand, backed by long-term investments that could retain their value only if held to maturity.
On Thursday, the bank announced that it needed to raise more than $2 billion in new capital, largely because long-term securities it had put up for sale had lost billions in value as interest rates rose over the last year or more.
The announcement spooked venture investor Peter Thiel and venture firms, which advised their portfolio companies to pull their cash out of the bank.
The result was an incredible $42 billion in withdrawals initiated that day, a torrent that rendered the bank almost instantly insolvent.
California regulators and the FDIC shuttered the bank Friday morning. When that happened, the shaky foundations of the bank’s business model were exposed to daylight, and the cries for a government bailout of its customers swiftly followed.
The context of these events was a fundamental change in the economics of the high-tech and biotech companies the bank served. As interest rates moved higher, its clients had more difficulty raising funds from private investors and therefore relied more on their cash balances at the bank. Their markets shrank, intensifying the rate at which they were burning cash.
It’s not unusual for a crisis to turn people’s most cherished beliefs on their head. The old joke says a conservative is a liberal who’s been mugged, and a liberal is a conservative who’s been sent to jail. An old military saw has it that “there are no atheists in foxholes,” an insight that investment commentator Barry Ritholtz expands to read, “there are also no Libertarians during a financial crisis.”
One other immutable principle of American capitalism is at play: The goal in business to privatize profits and socialize losses. In other words, when things are good, companies will keep their profits for distribution to shareholders. When things turn sour, the cry is heard for government to step in with bailouts and subsidies.
What’s overlooked in this case is that Silicon Valley Bank’s problems were in part the consequence of a Trump-era deregulation movement in banking that was fully backed by the banking industry and the management of — yes — Silicon Valley Bank itself. More on that in a moment. But first, let’s call the roll of small-government advocates who got their wish for a big-government bailout.
Start with billionaire hedge-fund operator Bill Ackman, who has advocated for self-regulation by the crypto-currency sector and has pushed back against efforts by the Securities and Exchange Commission to regulate one of his investment funds. Ackman went all-in for Donald Trump after Trump’s election in 2016, gushing that the U.S. has been “undermanaged for a very long period of time. We now have a businessman as president.”
In a lengthy tweet Saturday, Ackman flayed banking regulators for “allowing [SVB] to fail without protecting all depositors,” which he called “a-soon-to-be-irreversible mistake.”
He added, “Already thousands of the fastest growing, most innovative venture-backed companies in the U.S. will begin to fail to make payroll next week. Had the gov’t stepped in on Friday to guarantee SVB’s deposits … this could have been avoided and SVB’s 40-year franchise value could have been preserved.”
Then there’s David Sacks, an intimate of Thiel and Elon Musk, who were his partners in establishing and growing PayPal. Sacks and his friends have promoted a worldview that opposes progressive laws and regulations, including those aimed at reining in economic inequality.
Appearing on Megyn Kelly’s Sirius XM satellite show June 7, the day of the successful recall vote against San Francisco’s progressive district attorney, Chesa Boudin — a recall movement Sacks helped to finance — he called Democrats “useful idiots for the Chinese Communist Party.
“By this weekend Sacks was squealing: “Where is Powell? Where is Yellen? Stop this crisis NOW. Announce that all depositors will be safe.” (His references are to Federal Reserve Chair Jerome H. Powell and Treasury Secretary Janet L. Yellen.)
Venture investor Brad Gerstner called in a tweet for the Federal Reserve to “act now to make sure depositors are 100% protected.” In a second tweet, he asserted that the savings of thousands of small investors are at risk “just [because] the system failed.”
That drew a horselaugh from veteran investor Jim Chanos, whose experience as a short-seller has given him a uniquely percipient feel for Wall Street foibles. “The chutzpah here beggars belief,” Chanos replied on Twitter.
Chanos observed, accurately, that it was venture investment firms that actually launched the run on SVB on Thursday, when they suddenly urged their companies to pull their deposits from the bank, triggering the $42-billion outflow. “And they now want the Taxpayer to bailout their investments…?! Capitalism, Silicon Valley-style.”
It’s not only the entrepreneurial brotherhood demonstrating that, to quote what has become known as Miles’ Law, “Where you stand depends on where you sit.”
Consider former Treasury Secretary Lawrence H. Summers, who last year was heard disdaining President Biden’s student loan relief as inflationary. His argument was that the $10,000 to $20,000 in proposed relief “consumes resources” better used to help those who don’t attend college, and invites colleges to raise tuitions.
By Friday, however, Summers was saying that it’s “absolutely imperative” that “all depositors be paid back and paid back in full.” Interestingly, the same cadres who argue that student loan borrowers should have known what they were getting into when they took out their loans were able to overlook that Silicon Valley Bank depositors should have known that deposits beyond $250,000 are uninsured and therefore not guaranteed to be paid back.
(Miles’ law was coined by then-federal budget official Rufus E. Miles Jr. in the 1940s, after he noticed that after his most hard-nosed budget examiner took a job at one of the agencies he had criticized, the examiner became that agency’s most devoted defender against the unwarranted critiques from the budget office.)
Libertarian-minded Silicon Valley types have been trying to blame the bank’s collapse on the Fed. Cryptocurrency promoter Balaji Srinivasan, for example, complained that “Powell said that he wouldn’t raise rates in April, June, July, and Oct 2021 … People trusted him … And that’s how the Fed caused the crisis.”
That’s absurd, of course. The Fed began its sequence of interest rate increases in March 2022 and brought them higher by 4.75 percentage points from then through January this year. At every step the central bank made its intentions crystal clear. By early 2022, people “trusted” that the Fed was on a long-term rate tightening campaign. Absolutely no one had a right to be surprised.
Two key factors in the SVB disaster can’t be overlooked: The incompetence of the bank’s management and the improvidence of its customers.
The value destruction taking place in the bank’s holdings of long-term securities was written in bright red on its ledger books. With the prospect of interest rate increases continuing through 2022 and into this year, its management had no excuse for failing to unwind its holdings well before now instead of waiting.
Under regulations implemented in accordance with the Dodd-Frank banking reform law of 2010 safety-and-soundness standards were tightened for banks with more than $50 billion in assets.
Those larger banks were required to submit annual disclosures to the Fed, meet stricter liquidity and risk management requirements, and undergo “stress testing” that would reveal how they would fare under extreme financial scenarios.
Mid-sized banks launched a vigorous lobbying campaign to raise that threshold. In testimony submitted to the Senate Banking Committee in 2015, Greg Becker, the chief executive of Silicon Valley Bank, called for raising the threshold as high as $250 billion.
Becker’s statement bristled with the buzzwords and catchphrases beloved of Silicon Valley entrepreneurs. He asserted that without the change, the regulations would be so burdensome that “SVB will likely need to divert significant resources from providing financing to job-creating companies in the innovation economy.”
Becker referred to “SVB’s deep understanding of the markets it serves, our strong risk management practices, and the fundamental strength of the innovation economy.”
As it happens, SVB plainly didn’t understand how the markets it serves were vulnerable to lock-step flight from its deposit accounts, had weak or paltry risk-management practices, and failed to recognize that the innovation economy has its ups and downs.
The industry’s lobbying yielded fruit. President Trump raised the Dodd-Frank threshold in 2018. At the signing ceremony, Trump labeled the regulations “crushing.” He said, “Those rules just don’t work.”
Actually, they would have worked well for Silicon Valley Bank, which exceeded the $50-billion asset threshold in 2017 and never reached the $250-billion level, having topped out last year at $211.7 billion in assets. Had the old rules remained in place, it would have become subject to stricter oversight no later than 2018. Regulators might have noticed its rapid growth and the shortcomings of its risk profile. But they never had the chance.
Finally, the customers. SVB evidently required some of its Silicon Valley borrowers to do all their banking through the bank as a condition of their loans. According to its annual disclosures, the bank paid an average of 2.2% on savings and checking accounts last year; that’s higher than most commercial banks, but not high enough to compensate for the risk of uninsured cash deposits.
Some companies have reported uninsured balances of hundreds of millions of dollars sitting at SVB. It’s not unusual for businesses to have sizable balances in bank accounts exceeding the insurance cap. But prudent companies spread their deposits around, so they’re not mortally exposed to the failure of any one depository institution.
Multiple options exist for parking cash, such as investing in short-term government securities, money market instruments and corporate commercial paper. None of these is government-insured, but they offer diversification and a cushion against a single bank’s implosion.
With the debacle apparently resolved, the bank’s clients and their employees can enjoy the peace of mind that comes with a well-regulated banking system. Even at the businesses whose leaders lobbied to make banking less safe for everyone.
Michael Hiltzik is a columnist for the Los Angeles Times.
Opinion: Beyond saving Silicon Valley Bank’s depositors, here’s what needs to happen next
Simon Johnson – March 13, 2023
Before Thursday, Silicon Valley Bank was regarded as being in “sound financial condition.” But on that day it experienced attempted withdrawals of $42 billion, about a third of its U.S. deposits. By close of business, the run on the bank made it incapable of paying its obligations as they came due. On Friday, the California Commissioner of Financial Protection and Innovation took possession of the bank’s property and business.
The Federal Deposit Insurance Corp., which insures deposits up to a limit of $250,000 per individual account or for a corporation at a single bank, was immediately appointed as the receiver. In some ways, SVB was unusual. Around 97% of its deposits (by value) were uninsured. This is because the bank catered primarily to the tech community, with many of these companies and nonprofits (perhaps up to 37,000 of them) parking their operating cash there.
Its collapse raised critical questions: What protection should be provided to depositors at SVB with uninsured amounts? Will there be problems for similarly situated banks? And what official action would be appropriate to head-off any potential cascade of bank failures?
Some preliminary answers were provided Sunday night by Treasury Secretary Janet L. Yellen, Federal Reserve Chair Jerome H. Powell and FDIC Chairman Martin J. Gruenberg: All bank depositors with SVB and with Signature Bank, which was closed by New York authorities on Sunday, will be fully protected. The Federal Reserve will also make available additional funding to ensure banks have enough liquidity to meet the needs of all depositors trying to make withdrawals.
The hope is that this rapid response will stop any further panic that could drive more bank runs. It appeared to be working on Monday, when all depositors’ funds in SVB became available. The stocks of midsized regional banks, however, plummeted as equity investors worried about the sudden collapses of SVB and Signature Bank.
Going forward, the FDIC will also manage SVB’s remaining assets, which are of high quality, including government securities and mortgage-backed securities guaranteed by government sponsored enterprises. The recovery value of these assets will be high, and they can be sold immediately.
Preventing bank runs is the immediate fire to put out, but the underlying problem that weakened Silicon Valley Bank — and may also leave other banks susceptible — has yet to be addressed.
In this case, a significant factor was how SVB was affected by the Federal Reserve and its macroeconomic priority to bring down inflation. Somehow this message did not filter down to corporate leaders at the bank.
SVB was brought down because it and its Fed supervisors did not pay attention to what Powell said would happen — that the Fed would raise interest rates if inflation stayed stubbornly high, as it has. Instead, SVB’s assumption that interest rates would remain low appeared to drive its investment strategies.
For many years, SVB was well regarded, apparently successful and had the best possible connections to banking regulators. The chief executive, Greg Becker, has been on the board of the San Francisco Fed since 2019 (he was removed from that board on Friday). Mary Miller, former undersecretary for domestic finance at the U.S. Treasury Department, was on the board of SVB.
For a while, nothing seemed amiss. And when startups received a flood of funding during the pandemic and immediately after, deposits at SVB rose by about $100 billion, more than doubling its balance sheet. SVB leadership used these funds to buy long-term U.S. government-backed bonds that are free of credit risk (they never default).
Unfortunately, as the bank’s management and its Fed supervisors should have known, such assets are not free of interest rate risk — meaning that as the Fed raised interest rates over the last nine months, the market value of SVB’s portfolio declined. Eventually, the value of its assets fell so much that concern about solvency arose, and SVB was unable to find enough cash to match the attempted $42-billion withdrawal on Thursday.
The bank’s miscalculation of risks, based on over-optimism of future interest rates, was a central problem, creating a vulnerability that helped trigger the bank run. But Fed supervisors also apparently failed to see the interest rate risk inherent in SVB’s big bond buying spree or to do anything about it (e.g., to require the bank to hedge that risk).
As a result, the Federal Reserve and other officials feel pressed to provide additional support to the banking system. There has been widespread concern since Friday about a run on other midsized banks, leading to other insolvencies — hence the move to guarantee all deposits at SVB and Signature.
In 2008, the regulation and supervision of big Wall Street traders broke down, resulting in a major financial panic, millions of jobs lost and the Fed loosening monetary policy as much as possible to prevent even worse outcomes.
In 2023, it is the supervision of regular commercial banks that has broken down. The failure of a $200-billion bank should not bring down the financial system. But a breakdown in supervision is another matter.
Fearing a major financial panic, the Fed and other authorities seem willing to provide a de facto blanket guarantee for all bank deposits. (Total bank deposits in the U.S. are around $18 trillion, of which about $10 trillion are FDIC insured.)
To be fully effective, this extension of deposit insurance has to be permanent, and all such insurance should be paid for through appropriate contributions from banks.
Going forward, federal authorities and the taxpayer will ultimately be responsible for more of the downside risk associated with poor risk management at banks. Consequently, regulation and supervision will need to be strengthened in an appropriate manner. Many people said this after 2008, but not enough was done.
A well-regulated system is still the right goal. This time around, the Federal Reserve needs to overhaul and improve its bank supervision — and to make that consistent with its macroeconomic policy for interest rates.
Simon Johnson is co-chair of the CFA Institute Systemic Risk Council, former chief economist of the International Monetary Fund and a professor at MIT Sloan.
Fifteen Years After 2008, Why Do Banks Keep Failing?
Peter Coy – March 13, 2023
Credit…Illustration by The New York Times; images by CSA Images/Getty Images
The weekend rescue of uninsured depositors in Silicon Valley Bank and Signature Bank was absolutely essential and absolutely frustrating. We have to stop getting ourselves into these messes, people.
If the federal government hadn’t given a blanket of protection to all deposits, companies that had deposits in either of the banks above $250,000, the maximum that’s insured by the Federal Deposit Insurance Corp., would not have been able to pay their workers. Start-ups that bank with Silicon Valley Bank would have been imperiled. “It could have destroyed early-stage biomedical research in this country for a decade,” said Karen Petrou, the managing partner of the consulting firm Federal Financial Analytics, who sits on the board of a biomedical research foundation.
The damage could have been far greater. Depositors at other banks were beginning to panic, worrying that their banks would be next to fail and looking for safer places to stash their cash. We were looking at the early stages of a generalized bank run that would have done serious damage to the U.S. economy. Even a healthy bank can be destroyed overnight if all its depositors demand all their money at once. The only way to arrest the panic was for the government to assure all depositors that there was no need to yank from the bank.
Even after the emergency intervention, markets remained unsettled on Monday. Bank stocks were down. Economists at Capital Economics reported “worrying signs of incipient strains in core money markets.” Interest rates fell as investors speculated that the Federal Reserve might curb its rate-raising campaign to relieve pressure on banks (a concern I wrote about on Friday). A scare such as this one has lasting consequences.
True, the government didn’t bail out everyone involved. Shareholders in the banks are wiped out and members of senior management were fired. That’s fair — and contrasts with what happened during the 2008 global financial crisis, when the government propped up shaky banks while leaving management and shareholders in place.
Whether taxpayers helped pay for the rescue is a matter of semantics. On Monday, President Biden told reporters, “No losses, and this is an important point, no losses will be borne by the taxpayers.” Still, the government — and by extension, taxpayers — is providing a valuable guarantee to the banking system. The fact that any government expenditures will eventually be recouped through higher insurance premiums doesn’t take away from that. Also, the Federal Reserve is promising to support troubled banks by buying bonds from them at face value rather than their current depressed market price. Not a bailout, exactly, but certainly a good deal.
The real question is why this keeps happening. After the global financial crisis, Congress passed and President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Federal Reserve raised safety standards for banks, especially ones that are deemed “systemically important.” There’s a Financial Stability Oversight Council that’s supposed to take a broad view of risks in the system.
It clearly wasn’t enough. It didn’t help matters that bank lobbyists got Congress and regulators to roll back some measures that they regarded as onerous. For example, a 2018 law signed by President Trump — which was passed by Congress with bipartisan support — spared banks with $100 billion to $250 billion in assets from the highest level of scrutiny. Hard to say, but Silicon Valley Bank — which lobbied for the law — might still be with us if it weren’t for that law.
There are lots of things that could be done to improve banking supervision, require thicker capital cushions and so on, but for now I’d like to focus on the question of the day, which is what to do about uninsured deposits.
The theory in banking is that big depositors have the financial sophistication and the incentive to make sure that the banks where they keep their money are safe. Keeping deposits uninsured above a certain threshold is thus supposed to be a kind of market discipline, supplementing the supervision by state and federal regulators. But that was never a realistic expectation for most depositors, who have other things on their minds. Plus, because big depositors know that they’ll be protected when push comes to shove, they have no incentive to seek out safe banks.
This is hardly a new problem. In 1991, Jerome Powell, now the chair of the Federal Reserve, was a senior official in the Treasury Department who was assigned to deal with the collapse of the Bank of New England Corp. As he recounted in a 2013 speech: “We came to understand that either the F.D.I.C. would protect all of the bank’s depositors, without regard to deposit insurance limits, or there would likely be a run on all the money center banks the next morning — the first such run since 1933. We chose the first option, without dissent.”
Under the Federal Deposit Insurance Corporation Improvement Act of 1991, the F.D.I.C. is required to resolve bank failures in the way that incurs the least cost to the deposit insurance fund, even if that means wiping out uninsured depositors. But in practice, uninsured depositors almost never get wiped out because the F.D.I.C. arranges for a stronger bank to acquire the failed one, assuming all of its deposits. The Dodd-Frank Act of 2010 made an explicit exception to the least-cost test for cases of “systemic risk” — that is, if complying with the least-cost test “would have serious adverse effects on economic conditions or financial stability.” That’s the exception that the government invoked for Silicon Valley Bank and Signature Bank.
If market discipline works in theory but not in practice, one alternative is to bow to reality and explicitly insure all bank deposits. It would certainly lessen the number of panics such as the one that killed Silicon Valley Bank and Signature Bank, without giving banks carte blanche to behave irresponsibly. One person who favors that solution is Robert Hockett, a professor at Cornell Law School, who has written twopieces about the idea for Forbes recently. The F.D.I.C. premiums are higher for riskier banks, which makes sense. Given that the F.D.I.C. already takes risk into account, Hockett told me, the $250,000 limit is “vestigial, like the human tailbone.”
Insuring all bank deposits would make banks look more like public utilities, Petrou told me. She said she’d prefer relying more on market discipline, as originally intended. But that ship may already have sailed.
Elizabeth Warren: Silicon Valley Bank Is Gone. We Know Who Is Responsible.
By Elizabeth Warren– March 13, 2023
Credit…Justin Sullivan/Getty Images
Senator Warren is a Democrat from Massachusetts.Sign up for the Opinion Today newsletter Get expert analysis of the news and a guide to the big ideas shaping the world every weekday morning. Get it sent to your inbox.
No one should be mistaken about what unfolded over the past few days in the U.S. banking system: These recent bank failures are the direct result of leaders in Washington weakening the financial rules.
In the aftermath of the 2008 financial crisis, Congress passed the Dodd-Frank Act to protect consumers and ensure that big banks could never again take down the economy and destroy millions of lives. Wall Street chief executives and their armies of lawyers and lobbyists hated this law. They spent millions trying to defeat it, and, when they lost, spent millions more trying to weaken it.
Greg Becker, the chief executive of Silicon Valley Bank, was one of the many high-powered executives who lobbied Congress to weaken the law. In 2018, the big banks won. With support from both parties, President Donald Trump signed a law to roll back critical parts of Dodd-Frank. Regulators, including the Federal Reserve chair Jerome Powell, then made a bad situation worse, letting financial institutions load up on risk.
Banks like S.V.B. — which had become the 16th largest bank in the country before regulators shut it down on Friday — got relief from stringent requirements, basing their claim on the laughable assertion that banks like them weren’t actually “big” and therefore didn’t need strong oversight.
I fought against these changes. On the eve of the Senate vote in 2018, I warned, “Washington is about to make it easier for the banks to run up risk, make it easier to put our constituents at risk, make it easier to put American families in danger, just so the C.E.O.s of these banks can get a new corporate jet and add another floor to their new corporate headquarters.”
I wish I’d been wrong. But on Friday, S.V.B. executives were busy paying out congratulatory bonuses hours before the Federal Deposit Insurance Corporation rushed in to take over their failing institution — leaving countless businesses and non-profits with accounts at the bank alarmed that they wouldn’t be able to pay their bills and employees.
S.V.B. suffered from a toxic mix of risky management and weak supervision. For one, the bank relied on a concentrated group of tech companies with big deposits, driving an abnormally large ratio of uninsured deposits. This meant that weakness in a single sector of the economy could threaten the bank’s stability.
Instead of managing that risk, S.V.B. funneled these deposits into long-term bonds, making it hard for the bank to respond to a drawdown. S.V.B. apparently failed to hedge against the obvious risk of rising interest rates. This business model was great for S.V.B.’s short-term profits, which shot up by nearly 40 percent over the last three years — but now we know its cost.
S.V.B.’s collapse set off looming contagion that regulators felt forced to stanch, leading to their decision to dissolve Signature Bank. Signature had touted its F.D.I.C. insurance as it whipped up a customer base tilted toward risky crypto-currency firms.
Had Congress and the Federal Reserve not rolled back the stricter oversight, S.V.B. and Signature would have been subject to stronger liquidity and capital requirements to withstand financial shocks. They would have been required to conduct regular stress tests to expose their vulnerabilities and shore up their businesses. But because those requirements were repealed, when an old-fashioned bank run hit S.V.B., the bank couldn’t withstand the pressure — and Signature’s collapse was close behind.
On Sunday night, regulators announced they would ensure that all deposits at S.V.B. and Signature would be repaid 100 cents on the dollar. Not just small businesses and nonprofits, but also billion-dollar companies, crypto investors and the very venture capital firms that triggered the bank run on S.V.B. in the first place — all in the name of preventing further contagion.
Regulators have said that banks, rather than taxpayers, will bear the cost of the federal backstop required to protect deposits. We’ll see if that’s true. But it’s no wonder the American people are skeptical of a system that holds millions of struggling student loan borrowers in limbo but steps in overnight to ensure that billion-dollar crypto firms won’t lose a dime in deposits.
These threats never should have been allowed to materialize. We must act to prevent them from occurring again.
First, Congress, the White House and banking regulators should reverse the dangerous bank deregulation of the Trump era. Repealing the 2018 legislation that weakened the rules for banks like S.V.B. must be an immediate priority for Congress. Similarly, Mr. Powell’s disastrous “tailoring” of these rules has put our economy at risk, and it needs to end — now.
Bank regulators must also take a careful look under the hood at our financial institutions to see where other dangers may be lurking. Elected officials, including the Senate Republicans who, just days before S.V.B.’s collapse, pressed Mr. Powell to stave off higher capital standards, must now demand stronger — not weaker — oversight.
Second, regulators should reform deposit insurance so that both during this crisis and in the future, businesses that are trying to make payroll and otherwise conduct ordinary financial transactions are fully covered — while ensuring the cost of protecting outsized depositors is borne by those financial institutions that pose the greatest risk. Never again should large companies with billions in unsecured deposits expect, or receive, free support from the government.
Finally, if we are to deter this kind of risky behavior from happening again, it’s critical that those responsible not be rewarded. S.V.B. and Signature shareholders will be wiped out, but their executives must also be held accountable. Mr. Becker of S.V.B. took home $9.9 million in compensation last year, including a $1.5 million bonus for boosting bank profitability — and its riskiness. Joseph DePaolo of Signature got $8.6 million. We should claw all of that back, along with bonuses for other executives at these banks. Where needed, Congress should empower regulators to recover pay and bonuses. Prosecutors and regulators should investigate whether any executives engaged in insider trading or broke other civil or criminal laws.
These bank failures were entirely avoidable if Congress and the Fed had done their jobs and kept strong banking regulations in place since 2018. S.V.B. and Signature are gone, and now Washington must act quickly to prevent the next crisis.
Elizabeth Warren is a United States senator for Massachusetts.
Giant blob of seaweed twice the width of US taking aim at Florida, scientists say
Bradford Betz – March 12, 2023
Giant blob of seaweed twice the width of US taking aim at Florida, scientists say
A giant seaweed bloom – so large it can be seen from outer space – may be headed towards Florida’s Gulf Coast.
The sargassum bloom, at around 5,000 miles wide, is twice the width of the United States and is believed to be the largest in history.
Drifting between the Atlantic coast of Africa and the Gulf of Mexico, the thick mat of algae can provide a habitat for marine life and absorb carbon dioxide.
However, the giant bloom can have disastrous consequences as it gets closer to the shore. Coral, for instance, can be deprived of sunlight. As the seaweed decomposes it can release hydrogen sulfide, negatively impact the air and water and causing respiratory problems for people in the surrounding area.
Rafts of brown seaweed, Sargassum sp., pile up on the shore of Miami Beach, Florida, USA.
“What we’re seeing in the satellite imagery does not bode well for a clean beach year,” Brian LaPointe, a research professor at Florida Atlantic University’s Harbor Branch Oceanographic Institute told NBC News.
Brian Barnes, an assistant research professor at the University of South Florida’s College of Marine Science, told the outlet that the sargassum can still threaten critical infrastructure if it remains in coast waters.
“[I]t can block intake valves for things like power plants or desalination plants. Marinas can get completely inundated and boats can’t navigate through,” Barnes said.
The impending seaweed comes as Floridians along the state’s southwest coast have complained about burning eyes and breathing problems. Dead fish have washed up on beaches. A beachside festival has been canceled, even though it wasn’t scheduled for another month.
Florida’s southwest coast experienced a flare-up of the toxic red tide algae this week, setting off concerns that it could continue to stick around for a while. The current bloom started in October.
Red tide, a toxic algae bloom that occurs naturally in the Gulf of Mexico, is worsened by the presence of nutrients such as nitrogen in the water. The Florida Fish and Wildlife Conservation Commission warns people to not swim in or around red tide waters over the possibility of skin irritation, rashes and burning and sore eyes. People with asthma or lung disease should avoid beaches affected by the toxic algae.
Red tide brings 3.5 tons of dead fish to Bradenton beaches. What to expect this weekend
Ryan Ballogg – March 10, 2023
Red tide’s presence remains strong this week on the Southwest Florida coast, including around Anna Maria Island and Manatee County.
On Tuesday, dead fish littered the waterline at Bradenton Beach, and frequent coughs could be heard from visitors who braved the sands.
The harmful algae bloom has persisted in area waters since fall, but it intensified in recent weeks with increased reports of respiratory irritation and dead fish from Pinellas County south to Monroe County.
Karenia brevis, the organism that causes red tide, was detected in 123 water samples along Florida’s west coast over the past week, the Florida Fish and Wildlife Conservation Commission said in a mid-week update.
Eight of those samples were collected in Manatee County waters, where red tide levels ranged from low to high.
Medium levels of K. brevis were detected at five points on and around Anna Maria Island on Monday. At levels of medium and above, red tide is more likely to cause fish kills and breathing irritation.
Dead fish by the ton
County staff who clean beaches and waterways for red tide debris have seen a major increase in dead fish washing ashore over the past two weeks, according to Manatee County Parks operations manager Carmine DeMilio.
“It started getting intense,” said DeMilio, who leads the county’s red tide cleanup efforts.
The county began responding to the red tide bloom in November; between that time and mid-February, about a ton of dead fish were collected from area beaches.
Over the past two weeks alone, around 3.5 tons were collected, DeMilio estimates.
The county cleans beaches daily with beach rake tractors, and skimmer boats collect dead fish from the water.
“We start at 5 in the morning and go til around 11:30,” DeMilio said. “By that time, the beachgoers are on the beach and it’s hard to maneuver.”
DeMilio said a strong west wind began pushing more dead marine life ashore last weekend. The fallout has mostly been bait fish, he said, but some larger species like grouper and snook were mixed in.
“That was our battle — trying to keep the accumulation of fish coming to shore under control,” DeMilio said. “So when our visitors show up to our beaches, it’s clean and safe for them. That’s our goal daily.”
So far, DeMilio said this year’s bloom is mild compared to the extreme red tide that hit Southwest Florida in 2018. During the peak of that event, crews worked for 64 straight days to remove over 200 tons of dead fish.
“If we can handle that and we were successful with that, handling a smaller version is much easier,” DeMilio said. “It’s just like any maintenance that you do at your house. If you stay on it, it’s not going to accumulate.”
County staff said that conditions were beginning to improve on Wednesday as winds shifted.
Local red tide conditions
Tampa Bay area: Red tide conditions remained intense along Pinellas County’s shoreline this week, where medium and high concentrations were detected at multiple beaches from Honeymoon Island south to Mullet Key. Dead fish and respiratory irritation were reported along the coast.
Manatee County and Anna Maria Island: Medium levels of K. brevis were detected around Anna Maria Island in state water samples collected on Monday — an increase from last week. Dead fish and respiratory irritation were reported at all major public beaches.
Sarasota County: Along Sarasota County’s coast, red tide levels ranged from low to high this week, with the strongest concentrations around Longboat Key and Lido Key. Dead fish and respiratory irritation were reported at public beaches.
Southwest Florida: Red tide algae was also found at high levels offshore of Charlotte, Lee and Collier counties this week, as well as medium levels off of Monroe County.
Red tide forecast
University of South Florida’s short-term red tide forecast predicts that red tide’s presence on the coast will continue over the weekend. Very low to high levels are predicted for the entire coast line, including areas of intensity in Pinellas, Manatee, Sarasota, Charlotte, Lee and Collier counties.
NOAA warns of a moderate to high risk of respiratory irritation over the next 36 hours in Pinellas, Manatee, Sarasota, Charlotte, Lee and Collier. Chances increase when wind is blowing on or along the shore.
A map shows a short-term red tide forecast for Southwest Florida from the University of South Florida College of Marine Science’s Ocean Circulation Lab.
Red tide safety tips
The Florida Department of Health offers the following safety tips for when red tide is present:
Look for informational signage posted at most beaches.
Stay away from the water.
Do not swim in waters with dead fish.
Those with chronic respiratory problems should be especially cautious and stay away from these locations as red tide can affect your breathing.
Do not harvest or eat mollusk and shellfish or distressed or dead fish from these locations. If caught live and healthy, finfish are safe to eat as long as they are filleted and the guts are discarded. Rinse fillets with tap or bottled water.
Wash your skin and clothing with soap and fresh water if you have had recent contact with red tide.
Keep pets and livestock away and out of the water, sea foam and dead sea life. If your pet swims in waters with red tide, wash your pet as soon as possible.
Residents living in beach areas are advised to close windows and run the air conditioner, making sure that the A/C filter is maintained according to manufacturer’s specifications.
If outdoors near an affected location, residents may choose to wear masks, especially if onshore winds are blowing.
One of Anna Maria Island’s last trailer parks is for sale in Florida. ‘It’s a family.’
James A. Jones Jr. – March 12, 2023
Along with the bright colors, quirky personal touches and flowering plants at the Pines Trailer Park, there is sadness and uncertainty among residents.
Dating back to 1935, the park was first used by members of a traveling circus, some say, and baseball great Babe Ruth once owned a home at 402 Church Ave., that later burned down, the Bradenton Herald reported in 1990.
It’s a tight-knit group of residents, some full-time, but many seasonal. The park bumps up against Sarasota Bay. Bridge Street and Bay Drive both run through it. Visitors often walk through, taking in the local color of one of Anna Maria Island’s last two trailer parks.
It’s a throwback to the Florida of yore.
Bradenton Beach City Hall sits a few blocks to the west.
“It’s sad. We are extremely hopeful residents will be able to work out a deal with the property owner,” Mayor John Chappie said. “The Pines is really a community within a community.”
Trailer park residents respond
Pines Trailer Park and Sandpiper Mobile Resort, 2601 Gulf Drive N., also in Bradenton Beach, are the last remaining trailer parks on Anna Maria Island.
For some of the residents of Pines Trailer Park, it is the only home they have, said Linda Maerker, president of the tenant’s association.
She worries for them.
“You know the price of real estate. It’s sad,” she said.
Maerker and her husband have wintered in Pines Trailer Park for 15 years.
“This place is so important to so many people,” she said. “It’s a family. We have become very close.”
Maerker calls the park her healing place after some tragedies in her life.
Ranae Ratajczak has lived in the park for 13 years, spending six months a year there.
“It’s our happy place, our piece of paradise,” Ratajczak said.
The owners of Pines Trailer Park in Bradenton Beach want to sell the property and have offered residents the option to purchase the park for $16 million.
“Our hope is to become owners of the park. There is a lot of history here. We want to keep it as it is, as a mobile home park,” she said.
History of Pines Trailer Park
This is not the first time that park owners have offered to sell the park to residents.
In 2002, the owners also offered residents a chance to buy the park, according to records filed with the Manatee County Clerk of Court’s Office.
George and Grace Bagley started Pines Mobile Home Park — named after the Australian pine trees in the area — in 1935 and the park has had many owners over the years, according to Jonathan Torkos, historical resources librarian for the clerk’s office.
At its opening in 1935, the Bradenton Herald reported that it was a “new and strictly modern tourist camp” with a community hall, dance hall, restaurant and laundry. Budweiser was offered on draft, according to a newspaper advertisement.
In 1936, thieves entered the washroom of the park and stole all the plumbing, the Bradenton Herald reported.
In 1948, Mr. and Mrs. Harry Hively sold the park to Mr. and Mrs. James Ashby for $25,400.
This aerial depicts the southern-most portion of Bradenton Beach. To the right of the image is the Anna Maria Sound and to the left of the image is the Gulf of Mexico in this historic postcard from 1945.
One of the subsequent owners, Mr. and Mrs. Glen Fifer, sold the park in 1956 for $55,000 to Mr. and Mrs. Charles Bisbee.
In 1962, Bradenton Beach’s then-mayor Victor Reinel sold the park to Mildred Henri and Forrest J. and Elizabeth Lincoln for $150,000, the Bradenton Herald reported.
Jackson Partnership has been the owner of the trailer park since 1976.
Challenging housing market
The housing market has never been so challenging in the Bradenton area, with rental prices becoming some of the least affordable in the United States and the price paid to buy a house at record levels.
In the early 1970s, Bradenton Beach had very affordable housing that service workers on the island could afford, Chappie said this week.
That is a concern not only for Pines Trailer Park residents who want to remain in their homes but for many who are looking to rent or buy elsewhere in the Bradenton area.
The owners of Pines Trailer Park in Bradenton Beach want to sell the property and have offered residents the option to purchase the park for $16 million.
The availability of affordable housing and workforce housing has become a major concern not only for consumers but for business interests and public service providers.
The owners of Pines Trailer Park in Bradenton Beach want to sell the property and have offered residents the option to purchase the park for $16 million.The owners of Pines Trailer Park in Bradenton Beach want to sell the property and have offered residents the option to purchase the park for $16 million.The owners of Pines Trailer Park in Bradenton Beach want to sell the property and have offered residents the option to purchase the park for $16 million.The owners of Pines Trailer Park in Bradenton Beach want to sell the property and have offered residents the option to purchase the park for $16 million.
They bought their dream homes from the ‘King of Coconut Grove.’ They still can’t move in
Linda Robertson – March 12, 2023
Twelve new townhouses line a block of Coconut Avenue. Lushly landscaped, outfitted with high-end appliances and spacious closets, they’re in move-in condition. Yet the Coconut City Villas are empty, as empty as their backyard swimming pools and unsullied trash bins sitting in unoccupied driveways.
Instead of “For Sale” signs, house hunters see “No Trespassing” notices posted along the street and “Do Not Enter” decals stuck to the front doors, a curious contrast in Coconut Grove, one of the most hotly desired neighborhoods in the country, where housing prices have nearly doubled over the past three years.
The lack of residents can’t be explained by lack of demand. The 4,000-square-foot townhouses, originally priced from $1.2 million to $1.8 million, are under contract to buyers who put down as much as $500,000 starting as far back as 2018. They were told by developer Doug Cox their homes would be ready in 45 to 90 days, or at the latest six months.
They’ve been waiting ever since. Their plans have been perpetually postponed by Cox, owner of Drive Development, who has not closed a house sale in four years despite a booming market. His completion dates teased buyers as the houses beckoned. But their dreams of a dream home have gone bust.
They have been locked out and led into a dead end darkened by threats, lawsuits, non-disclosure agreements and unsavory lenders, buyers say.
The delays have turned buyers and their families into nomads — moving from one expensive rental to another, cramming in with relatives while living out of suitcases — draining their finances and testing their marriages. When they go past their houses they are tantalized by memories not made — cooking in the kitchen, playing in the pool, celebrating birthdays, hosting block parties.
“We’ve spent three Christmases in limbo,” said Alan Lombardi, who signed a contract three years ago with the assurance that he, his husband and their newborn twin daughters would move in by summer 2020. The twins are now age 3. “The developer has kept us hanging on his hook, ruining people’s lives by deceiving us with false promises, just like Bernie Madoff.”
Lombardi has asked the FBI to investigate Cox for running a Ponzi scheme.
The buyers can’t move in because Cox has failed to complete inspections and get certificates of occupancy from city of Miami building department officials, whose lack of oversight enabled Cox to ignore expired permits and a Stop Work order and avoid applying finishing touches on houses for years. The city, which has ceased responding to buyers’ calls and emails, says it can’t intervene in a private dispute.
The buyers got caught in the fallout from Miami’s COVID-driven housing gold rush. Some are transplants from New York, Chicago and California who were eager to sign purchase agreements for new homes that looked — outside and inside — like they were ready to sleep in, missing only a mirror, some paint, a fence. They want their plight to serve as a warning: Don’t make one-sided deals with developers.
A Coconut Avenue townhouse built by Drive Development. Buyers who have paid hundreds of thousands in deposits for these houses have been waiting to move in for two, three and more than four years. They’ve been stymied by the Coconut developer, Doug Cox, who has continually stalled the closings on the properties.
Cox is deliberately stalling to frustrate them into canceling their contracts so he can flip each house for an additional $1 million or more, buyers allege. They feel trapped: As time passed, the market skyrocketed, and in 2023 they will never find comparable homes in the neighborhood for the price they planned to pay and the mortgage rate they had secured.
On Wednesday, Drive Realty listed 2986 Coconut Ave. for $2.495 million. Original sales price in July 2020 was $1.385 million, a difference of $1.11 million. One catch: It doesn’t have a certificate of occupancy so anyone who buys it can’t move in.
“Seems like a shell game,” said Andy Parrish, a longtime Miami developer who lives in Coconut Grove. “He’s put these people through hell by stonewalling them with excuses.”
One weary buyer confided in Parrish, cried on his shoulder.
“She said, ‘I can’t believe people lie to other people like this,’ ” Parrish said. “I told her, ‘Welcome to Miami! A sunny place for shady people.’ ”
Cox, 52, initially agreed to an interview with the Miami Herald, then changed his mind and asked for emailed questions. He didn’t respond to questions sent twice or attempts to talk to him over the past two weeks.
Nicole Pearl, 37, who is Cox’s business partner and mother of their three children, declined to talk to the Herald. Her law firm, Pearl & Associates, is the registered agent of companies connected to the properties, Florida corporate records show. She is a licensed real estate agent who lists homes for Drive Realty.
The Herald spoke to 16 buyers — many did not want their names published, fearing retaliation by Cox — and examined lawsuits, mortgages, purchase agreements, property records and Miami building department reports, which substantiated buyers’ chorus of complaints.
Several of the 12 townhouses in the 2900 block of Coconut Avenue in Coconut Grove on Wednesday, Feb. 15, 2023. Buyers who have put down deposits as much as $500,000 dating back to 2018 say they haven’t been able to move into the homes due to perpetual delays by their developer, Doug Cox of Drive Development.
No sales closed since 2019
Cox calls himself the “King of Coconut Grove.” His clients call him less flattering nicknames. What his gambit is no one can say for certain because he has not sold a home since August 2019 when he and Pearl closed on a Bridgeport Avenue townhouse for $1.15 million. Closing on the new homes should be a mutual goal but there are no signs of progress. He offers clients refunds of their deposits and says he’s got a line of backup buyers.
“It’s a strange way to run a real estate development company,” Lombardi said. “It’s really an anti-development company. Why doesn’t he want to deliver? How can he afford to operate?”
Cox has told buyers he wants to get them into their special houses, but he’s been delayed by factors beyond his control: the pandemic, supply-chain problems, manpower shortages, rising construction costs, subcontractor snafus and now bureaucratic red tape in the building department tangling his efforts to finish inspections.
A padlock and chain link fence greet passersby at 3159 Virginia St. in Coconut Grove on Thursday, Feb. 9, 2023. The property is owned by Send Enterprises LLC, one of the limited liability companies connected to Doug Cox and Nicole Pearl.
Double contracts on homes
Is Cox playing musical chairs? At least three of the townhouses have double contracts on them. The legal descriptions correspond to 2955, 2960 and 2990 Coconut Ave.
Some buyers discovered through Miami-Dade Clerk of Court records that near the end of 2022 Cox signed a “memorandum of contract” on their houses with Chris Paciello, the former South Beach nightclub impresario, and his business partner, Mio Danilovic. Before he became famous for hosting parties at Liquid and dating Madonna, Sofia Vergara and Jennifer Lopez, Paciello was a Mafia henchman and thief in New York City.
Once Paciello’s past caught up with him in 2000, he became an FBI informant, pleaded guilty to racketeering and served six years in prison for robbing $300,000 from a New York bank and driving the getaway car in a home invasion during which a Staten Island housewife was shot in the face and killed.
Paciello, the owner of four Anatomy Fitness deluxe gyms in South Florida, has ventured into real estate investment since the pandemic and flipped houses for $9 million and $14 million in Miami Beach. It’s unclear how much of a deposit Paciello and Danilovic put down in their backup contract deal with Cox. Backup contracts are not illegal.
When contacted by the Herald, Paciello, 51, declined to comment.
Ingrid Casares and Chris Paciello at Liquid, the South Beach nightclub, on Nov. 16, 1995. Casares and Madonna were lovers; Casares and Paciello were partners in Liquid. Paciello and his business partner have backup contracts on three of the Coconut Avenue townhouses.
In another complication that has alarmed buyers, Cox took out a $350,000 loan in December from DC Fund based in Sunny Isles Beach, whose associates include men who were sued for racketeering in an alleged loansharking scheme that disguised “criminally usurious loans” as cash advances that had to be repaid with 430 percent interest, according to a lawsuit filed in Brooklyn. Cox put up eight properties as collateral. If he defaults on the loan, he could lose them.
Buyers have observed Cox showing their houses to prospective buyers on multiple occasions. He says he is merely displaying his handiwork, and not offering those particular houses for sale. But contract holders have heard from acquaintances whose names are on a list of backup buyers Cox has compiled. One is upset he’s only No. 3 on the list.
A finished kitchen in one of the Coconut Avenue townhouses built by Doug Cox of Drive Development.
If Cox is flipping the townhouses, for how much? Miami real estate agent Randi Connell, who identifies herself as a Drive Development sales associate, recently texted a prospective buyer about two off-market Coconut Avenue houses available for $2.7 million and $3 million, which is $1.5 million and $1.2 million more than the original sales prices.
Homebuyers who signed purchase agreements and put down deposits on townhouses along Coconut Avenue in Coconut Grove have been waiting for several years to move into their dream home. The developer, Doug Cox of Drive Development, keeps stalling, the buyers allege. Photo was taken in 2021 by a buyer.
Pearl listed 2986 Coconut Ave. for sale for $2.495 million on Wednesday morning. The house first went under contract for $1.385 million on July 8, 2020, to Jonathan Schonfeld and Aviva Auslander, with a completion date of Sept. 1, 2020, or at the latest, March 1, 2021. They waited two years. Disgusted, they gave up.
If Cox and Pearl land a buyer for 2986, they could collect at least a $500,000 deposit and “utilize” it as they please, according to two Send Enterprises contracts the Herald reviewed. Contrary to realty ethics rules, Pearl did not disclose in the listing that the house doesn’t have a certificate of occupancy, and its building permit expired Feb. 15.
“If the delays are indeed outside their control, how can they list a property if they don’t know when or if they can close?” Lombardi asked.
South Florida real estate lawyer Dennis Eisinger said home buyers can get “boxed in” by contracts that typically favor the developer and waive buyers’ rights.
“It appears this developer is bullying the buyers to get the financial advantage,” he said. “We saw this situation before the recession in 2003-2006 when defiant and unscrupulous developers tried to get buyers to rescind contracts so they could resell at higher prices.”
Lawsuits, ‘worst decision of my life’
At least three buyers, including Schonfeld and Auslander, sued Send Enterprises, alleging fraud and breach of contract. The cases were assigned to mediation, as required in the contracts; buyers cannot seek a jury trial. They had to sign non-disclosure agreements. At least four others have taken Cox up on his offer to refund their deposits and walk away; they also signed NDAs.
Catherine and Andrew Prescott of Miami Beach signed a $1.82 million purchase agreement on May 25, 2021, and paid a $455,000 deposit for 2960 Coconut Ave. The contract stipulated a completion date of Aug. 1, 2021, and an “outside” closing date within six months.
The Prescotts sued Send Enterprises in January 2022 for its alleged failure to achieve specific performance of its obligations, fraudulent inducement, unfair trade practices, negligent misrepresentation and unjust enrichment.
In their lawsuit, which also named Cox, Schonfeld and Auslander asserted that Cox “repeatedly lied” about “fabricated dates.” The Prescotts said the developer made promises “without any intention of performing, or with the positive intention to not perform” to entice them to sign and pay a deposit. The cases went to mediation and everyone signed NDAs.
Three months after the Prescotts sued, a real estate agent who works with Cox offered the house for $2.4 million, about $600,000 more than the original sales price.
Other buyers are determined to stick it out. They can’t afford to hire a lawyer. They’re not ready to abandon the houses they’ve invested in, emotionally and financially. And they don’t want to let Cox win.
“If I could rewind time — this was the worst decision of my life,” said Kevin Ware, who owns an insurance brokerage firm. He moved his family from Chicago in March of 2021, walked through a Coconut Avenue townhouse that was weeks from completion and fell in love with it. They’ve lived in three rentals since. “We cannot let Doug keep scamming more people. We don’t want anyone else to get caught in this predicament. Buyer beware.”
Strung along by Cox, buyers acquired mortgages with 2 percent rates that have since tripled.
“It must be exhausting to be Doug Cox. He lives in 15-minute increments. Think of all the lies he has to keep track of,” Ware said. “We have paid a high price for dealing with him. From the sheer expense of living in short-term housing to the financial damage of losing our mortgage rate locks to the strain on our relationships and mental health, Doug has constantly and cruelly put his greed above our well-being.”
Kevin Ware moved his family from Chicago in March of 2021, walked through a Coconut Avenue townhouse that was weeks from completion and fell in love with it. They’ve lived in three rentals since, unable to move into their home.
‘Cautionary tale for other home buyers’
For Lombardi and his family, it’s been a three-year ordeal, first sharing his mother’s small Hollywood condo with his partner and infant twins, now in a $5,000-per-month Midtown apartment.
“We thought it would be a three-month wait because the house was 80 percent done, so we sold our Brickell condo, put everything, including baby equipment, in a sealed storage pod, packed four suitcases and moved in with my mom — for two years,” said Lombardi, a real estate agent.
The twins never had the nursery Lombardi envisioned.
One buyer described himself and his wife as “40-year-old couch surfers.” They’ve lived in seven different places.
New York transplants Michael Coyne and his wife, Oksana, have 1-year-old twin daughters and a 3-year-old son, and expected to share 2978 Coconut Ave. with her parents, who fled Ukraine after Russia attacked. Among the six places they have lived since their closing date evaporated was a one-bedroom apartment.
Coyne said they moved to a rental in Rhode Island to wait it out because they couldn’t afford “insane” rents in Miami. Fueled by inflation that’s made housing unaffordable for many and the influx of remote workers and newcomers moving to a no-income tax state, Miami has become the most competitive rental market in the country with prices 76 percent higher than the national median, a Zillow study showed.
Coyne, an investment banker, wanted to open an office with two of his business associates in Miami but he’s told them not to come. Oksana, a registered nurse, was scheduled to do her clinical work to become a nurse practitioner; she’s postponed her career plans. The chaos has been difficult for the children and Oksana’s Ukrainian parents, who speak limited English.
“Doug and Nicole either lie to you or ignore you,” Coyne said. “You work really hard for your family to buy the most important asset of your life and you get caught in a calculated, malicious, exploitative scheme by a flimflam developer.
“I’m not letting him get away with it. Let this be a cautionary tale for other homebuyers.”
New York transplants Michael Coyne and his wife, Oksana, have 1-year-old twin daughters and a 3-year-old son, and expected to share 2978 Coconut Ave. with her parents, who fled Ukraine after Russia attacked.
One family has suffered the longest. They chose a four-bedroom model four and a half years ago so their 12-year-old daughter would have her own room and so her grandmother, recovering from cancer, could live with them. Now, the daughter is a high school senior heading to college in the fall. The grandmother never got to move in with her family.
City of Miami should be ‘embarrassed’
Cox brags about his chummy connections to the city’s building department and Miami Mayor Francis Suarez.
Cox’s customers recount the exact same comments he’s made to all of them — that he can remove any obstacle by “having a cafecito” with officials. Drive Development contributed $50,000 to Suarez’s re-election campaign in 2020 and $100,000 to Suarez’s 2018 initiative to create a strong mayor position (voters rejected it), campaign finance records show.
Buyers who have sought relief from the city have gotten nowhere: Emails, phone calls and meetings have prompted no corrective action.
Buyers acknowledge they signed contracts that gave lots of leeway to the developer but decided to sign because they were shown nearly completed houses by a persuasive seller who had previously built fine houses. What could go wrong?
The Herald asked to speak to three City of Miami building department officials about inspection delays and an audit of Drive Development plans. The city’s reply: “The Building Department takes this matter seriously and is tasked with enforcement of the building code and other technical standards, as well as City ordinances. The Building Department has no authority over the pace of construction, nor any contractual matters between the buyers and the developer.”
The city does have authority over permitting and inspections, but wouldn’t explain why it has taken years for Cox to receive city approvals and certificates of occupancy. Nor would officials answer questions about penalties for permit violations or prolonging the inspection process.
“The city should be embarrassed,” Lombardi said.
A walk-in closet at one of the 12 luxury townhouses on Coconut Avenue in Coconut Grove that developer Doug Cox of Drive Development built. The photo was taken in 2021 by a buyer.
When the Coynes asked Pearl for an update three weeks ago, she told them inspectors can’t work during an audit. The city said that’s not true; inspectors are allowed to carry on.
Developers like Cox can hire “private providers” to conduct inspections and submit the results to the city. Cox hired MEP Consulting Engineers of Coral Gables. He’s told buyers he blames MEP for bungling reports. MEP blames Cox for not giving inspectors the information they need to finish the job.
MEP President Katrina Meneses said that the city’s audit is done and in the hands of Cox.
“What we’re waiting on is paperwork from the owner, our client,” she said. “We love to finish projects so we can move on to the next one. Anything that takes over a year, it’s difficult to continue and slows us down. Yes, if I was a customer, I’d feel upset.”
The city is notorious for its lack of transparency and accountability, said Parrish, the Miami developer who lives in the Grove.
“We’re in a pro-development city, county and state where everything is driven by developers and their money. Florida is a creation of developers,” he said. “Developers control elections, elections control politicians and politicians control building and zoning. The city of Miami is one of the worst examples of how the gravy train works. It’s an absolute mess.”
Buyers have asked for help from the city, ex-Miami commissioner Ken Russell, Mayor Suarez, the Miami-Dade State Attorney’s Office, the state’s Department of Business and Professional Regulation and the FBI. The response: If Cox isn’t doing anything illegal, we can’t get involved.
Ware’s experiences illustrate the relationship between Cox and the city.
Cox was allowed to work through a Stop Work order for more than a year. The city issued the order because Cox failed to submit plans for the five three-story townhouses he was building on Coconut Avenue; he only submitted plans for the two-story units. His reason: Plans were proprietary and he didn’t want his design stolen.
Ware discovered there was a Stop Work order and expired permit on his house when he checked the city website iBuild in summer 2021.
Kevin Ware moved his family from Chicago in 2021 and has been waiting to move into their Coconut Avenue home in Coconut Grove.
According to Ware, Cox told him not to worry, the order wasn’t being enforced and he’d have a cafecito with officials to smooth things over. Five months later, after repeated requests for an update, Cox told Ware he had submitted a substantial number of reports to the city after giving MEP engineers a $50,000 bonus each to expedite inspections, and promised Ware “we’re almost there.”
A month later, Ware met with city inspector Perla Mutter. She told him Cox had submitted nothing, and that because of the expired permit, nothing could be submitted until Cox and his contractor Eric Myers met with the building department.
A month after that, on April 26, 2022, Ware went to the meeting at city offices expecting to talk to Cox, Myers and Miami building department assistant director Luis Torres. But Cox met with Torres privately first. And there was no sign of Myers.
“Doug comes out of the office and admits he met with Torres early so that, ‘Everything would be taken care of,’ ” Ware said. ”The following week Doug paid a $100 fine and reopened his permit.
“The city can try to cleanse its hands but it is enabling this developer to abuse the system,’’ Ware said.
The permits for 2984 and 2986 Coconut Ave. expired last month. Cox must sign onto iBuild and pay $100 to re-activate the permits for six months. It’s part of a years-long pattern: His permits expire, he reactivates them months later, then doesn’t enter documentation in time for the city to complete reviews before they expire again, records show.
Permits for the other townhouses on Coconut Avenue are scheduled to expire March 12, April 30 and July 4. Buyers check iBuild and see a vicious cycle: Submit, Pending, Review, Deny, repeat.
To fix the slow and complicated permitting process that has stranded buyers, they advocate new laws with strict 120-day deadlines for the review and approval of applications and harsh penalties for breaking them.
There’s a cost to the city as well. Cox has been paying property taxes of $10,000 per lot, or $60,000 per year on the Coconut Avenue townhouses. Homeowners would pay about $20,000 per unit, or a total of $240,000 per year.
‘House of Rumors’
Then there’s the seven-year saga of 4010 Park Ave.
The two-story South Grove house still has plywood for a front door and a Porta Potty in the front yard.
On realtor.com, it’s listed as a 5-bedroom, 6-bathroom home “active with contract” for $2.95 million.
In 2019, Steven Salm bought the home for $2.55 million. He sued Send Enterprises in November 2020; the lawsuit went to mediation and NDAs were signed. The house was re-listed in February 2021 for $2.95 million.
Marcos Junges has lived next door for 27 years. He said the building of 4010 Park began back in 2016.
“Goes in fits and starts, with long hiatus periods,” he said.
A home under construction at 4010 Park Ave. in Coconut Grove on Feb 15, 2023. A neighbor who lives next door said the home has been under construction since 2016. Neighbors call it the ‘House of Rumors.’ The property is owned by Send Enterprises LLC.
He and his neighbors — who paused to chat during one of their evening walks — call it the “House of Rumors.” They’ve heard it’s been under contract for five years with a succession of buyers. Junges said Cox bought the modest house that used to be there from his elderly neighbor’s family when she died.
At 2050 Secoffee St., majestic oak trees shade a vacant lot. Secoffee is a quintessential Grove street in the rapidly transforming North Grove, where developers capitalize on the neighborhood’s expansive lots by tearing down old houses and the jungle that surrounds them and building new ones with much larger footprints. Price-per-square-foot in the Grove’s 33133 ZIP code rose to a record $874 last year.
Drive Development’s website shows a gorgeous rendering of a 5,302-square-foot house with atrium, listed for $4.85 million in July 2021, then removed in January 2022. A description currently on movoto.com includes three different wishful details: Under construction! Expected completion Q3 2022 and Year built 2021.
No ground has been broken.
The image on the real estate website movoto.com shows a rendering of a house at 2050 Secoffee St. in Coconut Grove, on Feb. 25, 2023. The description includes three different wishful details: Under construction! expected completion Q3 2022 and Year built 2021.Drive Development advertises a luxury designer home along a fence in front of a lot at 2050 Secoffee St. in Coconut Grove. The lot is vacant.
Cox tells buyers he’s finishing his own dream townhouse at 3167 Shipping Ave. in central Coconut Grove. The adjacent one is under contract with a buyer from New York City who is growing more impatient. Both look ready for move in. Around the corner on Gifford Lane, a buyer from southern California awaits a townhouse that was supposed to be done in November. Other than grass growing, nothing’s happening on the lot.
Newly constructed homes along the 3100 block of Shipping Avenue in Coconut Grove on Wednesday, Feb. 15, 2023. Cox tells buyers he’s finishing his own dream townhouse at 3167 Shipping Ave. in central Coconut Grove. The adjacent one is under contract with a buyer from New York City who is getting impatient.
The loans
Cox’s companies have taken out at least $59 million in loans, for which he put up 20 properties as collateral, according to public records.
But it’s his most recent loan that has buyers concerned about the fate of their houses. Cox borrowed $350,000 from DC Fund on Dec. 30, 2022, soon after three buyers decided to cancel and get their deposits back. Around the same time, Pearl signed the double contracts with Paciello and Danilovic. And now Cox and Pearl have listed a house for which they could pocket $500,000 or more in deposit money.
Cox put up eight properties as collateral on the DC Fund loan. If he defaults, lenders get first dibs.
DC Fund’s registered agent is Ariel Peretz, principal of Diverse Capital, a lender that advertises “we say yes when others say no” and urges customers to get in touch “if you’re in search of desperately-needed money.”
Peretz and DC Fund members run firms in the merchant cash advance business, mostly based in Brooklyn, which attempt to skirt state usury laws by saying they are not lending quick money at exorbitant rates but are buying the future earnings of their borrowers.
Peretz and DC Fund associates Yoel Getter and Jonathan Allayev and their companies were sued in 2021 by a Texas businessman who accused them of collaborating in a “criminal enterprise that profits by making and collecting on illegal loans.”
The businessman took out a $150,000 loan for which he agreed to repay $224,850 at 215 percent interest via $3,748 daily debits from his bank account. Two weeks later, the businessman borrowed $350,000 — in part to repay the first one — at 430 percent interest, for which he owed $524,650 via $17,488 daily debits.
The businessman dropped the case.
Peretz didn’t return messages left by the Herald.
“We are very worried,” Coyne said. “If Doug gets in trouble with these high-risk loans and debts, we may be left with nothing.”
Cox boasts to buyers that he and Pearl are independently wealthy with $70 million in savings, but if his cash flow has dried up, they fear he can’t pay off mortgages, can’t obtain the clean title necessary to close and could declare bankruptcy.
“He may have thought, ‘I sold these too cheap and I can make more money if I resell,’ but that makes less sense every day because the market is cooling,” Parrish said. “Maybe he got in too deep and has problems paying lenders. He can’t close so he’s kicking the can down the road.”
The two sides of Doug Cox
Cox can be a charming salesman.
Or a belligerent bully.
Michael Coyne has seen both sides. But as a U.S. Army combat veteran, he is not intimidated.
“The last time I saw him he ran up to my car, leans in and says he’s hired a former CIA operative to tail me because my wife made disparaging comments on social media,” Coyne said. “Another time he told me, ‘Bring it!’ I deal with plenty of nasty lawyers on Wall Street and none of them have ever challenged me to a street fight.”
Lombardi has felt Cox’s wrath. Cox terminated Lombardi’s 3-year-old contract last month, accusing him of trespassing at his house at 2984 Coconut Ave. and making derogatory comments. Cox prohibits buyers from going on their properties and has installed surveillance cameras. But he allowed Lombardi to go inside last May with his family.
Eight months later, when Cox heard Lombardi called the FBI, Lombardi said, Cox canceled his contract. They are in mediation. Lombardi wants his deposit back, and believes Cox wants him out so he can list 2984 at a higher price and collect another $500,000 deposit.
Buyers are also wary of Cox because they’ve read a graphic police report from Sept. 6, 2020, when Cox and Pearl got into an argument.
Pearl, who describes Cox in the report as her “live-in boyfriend,” told police Cox began texting her with insulting names from the master bedroom where he was with their daughter as she put their 3-year-old son to bed in his room. Cox stormed in and hit her, choked her, pulled her hair and spit on her as their son watched, “terrified and screaming.” She wrote this description for police:
“He has a pattern of domestic violence and extreme childhood abuse and trauma which has left him with deep unresolved issues and anger problems. This has culminated into a cycle of violence with me since 2014. … He has repeatedly threatened that if I report it, it will destroy his life and in turn he will destroy mine and that of my family.”
Pearl also checked boxes asserting he has “threatened to conceal, kidnap or harm” their children and “intentionally injured or killed a family pet.”
Cox was charged with battery and domestic violence by strangulation and spent the night in jail, Miami-Dade Corrections records show. He was given a restraining order. Pearl dropped the charges.
Booking mug when Doug Cox was arrested and charged with battery and domestic violence by strangulation in 2020.
Cox has perfected the art of evasion.
“I call it the Doug Cox two-step,” Coyne said.
When buyers are able to chase him down on the phone — he avoids putting anything in writing — he swears he’s pushing against the forces obstructing him. He wants them living in their dream homes as ardently as they do.
A vacant lot on Woodridge, a sweet little street in the South Grove next to Merrie Christmas Park and its towering banyan trees, has been overtaken by vegetation. As people in Miami clamor for more housing, this spot where a cottage once stood has grown wild. Vines climb the trees instead of children. The scraping racket of a bulldozer echoes down the block.
On this patch, owned by the King of Coconut Grove, all is still. The ripe land, taking revenge, has reclaimed itself.
A ‘Do Not Enter’ sign is affixed to the front door of one of the 12 luxury townhouses on Coconut Avenue in Coconut Grove that have been built by Doug Cox of Drive Development. Buyers of the homes have been waiting years to move in.
Miami Herald Director of Research Monika Leal contributed to this report.
Florida prepares for influx of manatees suffering from red tide
Andrew Wulfeck – March 8, 2023
Video:Dozen manatees returned to the wild in Florida https://s.yimg.com/rx/martini/builds/54607967/executor.html
TAMPA – A massive bloom of harmful algae that has been intensifying off the west coast of Florida is now believed to be impacting the manatee population at a crucial time when biologists were cautiously optimistic that the species was on the path of rounding the corner from record die-offs.
The red tide was initially observed in the days after Hurricane Ian impacted areas around Fort Myers and has grown throughout the winter.
The Florida Fish and Wild Conservation Commission reports that levels of the organism, Karenia brevis, have reached concentrations of over 100,000 cells per liter – an amount that is ten times higher than the minimum level needed to impact wildlife and humans significantly.
Florida red tide count 3/8/2023
The U.S. Fish and Wildlife Service said it knows at least three recent cases of manatees being transported to SeaWorld’s recovery center in Orlando from West Florida.
“Those are fairly easy to care for once they are rescued. However, they do take up a bit of the rehab capacity because even though we can get the neurotoxin out of their system fairly quickly in just a matter of a few days, they may take up an entire pool while that’s happening,” said Terri Calleson, the Florida manatee recovery lead for the USFWS.
Several rescue centers around the state were already operating with the potential to quickly increase capacity due to an ongoing Unusual Mortality Event along the state’s east coast due to an increase in malnourished sea cows needing treatment over the past two years.
Over the last several months, additive-containing pools have mainly gone unused due to the apparent tailing of amounts of ill animals, but biologists stand at the ready in case figures start to rise again.
“We can’t put them back to the wild until the red tide cell counts subside for an extended period of time. So that’s going to strap us a little bit on rehab capacity, and we’re going to make some moves to try to address it,” said Calleson.
So far this year, the FWC reports 140 manatees have died – a figure below the pace of the last two record years.
The agency estimates there are only around 7,500 manatees left in Sunshine State, and if boaters see an animal in distress, they should inform the agency about the sighting by calling 888-404-3922.
Burning eyes, dead fish; red tide flares up on Florida coast
March 11, 2023
Red tide is observed near Pinellas County beaches off Redington Beach, Fla., during a flight with SouthWings volunteers on Friday, March 10, 2023. Florida’s southwest coast experienced a flare-up of the toxic red tide algae this week, setting off concerns that it could continue to stick around for a while. The current bloom started in October. (Douglas R. Clifford/Tampa Bay Times via AP)A health alert sign warns visitors to Sand Key Park of the presence of Red Tide in the surrounding water on Thursday, March 9, 2023, in Pinellas County, Fla. Florida’s southwest coast experienced a flare-up of the toxic red tide algae this week, setting off concerns that it could continue to stick around for a while. The current bloom started in October. (Douglas R. Clifford/Tampa Bay Times via AP)Red tide is observed at Clearwater Beach, Fla., during a flight with SouthWings volunteers on Friday, March 10, 2023. Florida’s southwest coast experienced a flare-up of the toxic red tide algae this week, setting off concerns that it could continue to stick around for a while. The current bloom started in October. (Douglas R. Clifford/Tampa Bay Times via AP)Dead fish lay at the high tide line on Clearwater Beach on Thursday, March 9, 2023, in Pinellas County, Fla. Florida’s southwest coast experienced a flare-up of the toxic red tide algae this week, setting off concerns that it could continue to stick around for a while. The current bloom started in October. (Douglas R. Clifford/Tampa Bay Times via AP)Red tide is observed at Clearwater Beach, Fla., during a flight with SouthWings volunteers on Friday, March 10, 2023. Florida’s southwest coast experienced a flare-up of the toxic red tide algae this week, setting off concerns that it could continue to stick around for a while. The current bloom started in October. (Douglas R. Clifford/Tampa Bay Times via AP)
SARASOTA, Fla. (AP) — Residents are complaining about burning eyes and breathing problems. Dead fish have washed up on beaches. A beachside festival has been canceled, even though it wasn’t scheduled for another month.
Florida’s southwest coast experienced a flare-up of the toxic red tide algae this week, setting off concerns that it could continue to stick around for a while. The current bloom started in October.
The annual BeachFest in Indian Rocks Beach, Florida, sponsored by a homeowners’ association, was canceled after it determined, with help from the city and the Pinellas County Health Department, that red tide likely would continue through the middle of next month when the festival was scheduled.
“Red Tide is currently present on the beach and is forecasted to remain in the area in the weeks to come,” the Indian Rocks Beach Homeowners Association said in a letter to the public. “It is unfortunate that it had to be canceled but it is the best decision in the interest of public health.”
Nearly two tons of debris, mainly dead fish, were cleared from Pinellas County beaches and brought to the landfill, county spokesperson Tony Fabrizio told the Tampa Bay Times. About 1,000 pounds (454 kilograms) of fish have been cleared from beaches in St. Pete Beach since the start of the month, Mandy Edmunds, a parks supervisor with the city, told the newspaper.
Red tide, a toxic algae bloom that occurs naturally in the Gulf of Mexico, is worsened by the presence of nutrients such as nitrogen in the water. The Florida Fish and Wildlife Conservation Commission warns people to not swim in or around red tide waters over the possibility of skin irritation, rashes and burning and sore eyes. People with asthma or lung disease should avoid beaches affected by the toxic algae.
The Florida Fish and Wildlife Conservation Commission on Friday reported that it had found red tide in 157 samples along Florida’s Gulf Coast, with the strongest concentrations along Pinellas and Sarasota counties.
