It should definitely be the case that the government shouldn’t be buying the risky creations of other businesses. Government backed versions should be helping to support the smallest fraction of disadvantaged people that wouldn’t otherwise be serviced in the market. (compare with government supporting the last mile of rural postal customers that don’t have access to UPS/FedEx/etc.)
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Keenan, though, had a bigger point: All the structural disincentives that had built Americans’ irrational response to the climate risk were now reaching their logical endpoint. A pandemic-induced economic collapse will only heighten the vulnerabilities and speed the transition, reducing to nothing whatever thin margin of financial protection has kept people in place. Until now, the market mechanisms had essentially socialized the consequences of high-risk development. But as the costs rise — and the insurers quit, and the bankers divest, and the farm subsidies prove too wasteful, and so on — the full weight of responsibility will fall on individual people. 1
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links: privatizing profits and socializing losses economics capitalism
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We need better ways of making valuations and assessing risk so that these sorts of dangerous debt can’t be passed along.
These sorts of sales should have long term baggage clauses built into them to prevent government “suckers”. If they fail within x number of years, the original owners and their investors are held liable for them.
How can we mathematically prevent these sorts of deals? Is regulation the only way forward? #openquestion
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Under the radar, a new class of dangerous debt — climate-distressed mortgage loans — might already be threatening the financial system. Lending data analyzed by Keenan and his co-author, Jacob Bradt, for a study published in the journal Climatic Change in June shows that small banks are liberally making loans on environmentally threatened homes, but then quickly passing them along to federal mortgage backers. At the same time, they have all but stopped lending money for the higher-end properties worth too much for the government to accept, suggesting that the banks are knowingly passing climate liabilities along to taxpayers as stranded assets. 1
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links: privatizing profits and socializing losses climate crisis economics government regulation
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bluelining—a neologism I’ve not seen before, but it’s roughly what one would expect.
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Keenan calls the practice of drawing arbitrary lending boundaries around areas of perceived environmental risk “bluelining,” and indeed many of the neighborhoods that banks are bluelining are the same as the ones that were hit by the racist redlining practice in days past. This summer, climate-data analysts at the First Street Foundation released maps showing that 70% more buildings in the United States were vulnerable to flood risk than previously thought; most of the underestimated risk was in low-income neighborhoods. 1
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links: racist ideasracist policies climate crisis
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- related terms (RT): redlining
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MOC: [[Words MOC]]
Why can’t we project additional places like this and begin investing in infrastructure and growth in those places?
This might be better than rebuilding in poor places.
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Jesse Keenan, an urban-planning and climate-change specialist then at Harvard’s Graduate School of Design, who advises the federal Commodity Futures Trading Commission on market hazards from climate change. Keenan, who is now an associate professor of real estate at Tulane University’s School of Architecture, had been in the news last year for projecting where people might move to — suggesting that Duluth, Minnesota, for instance, should brace for a coming real estate boom as climate migrants move north. 1
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links: migration climate crisis real estate demography anthropology policy
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This is an interesting and telling example.
Is part of the issue local maxima/minima versus universal? Is Florida (or other states) doomed to continue making mistakes because they can’t be Illinois (for example?) ie: they’re stuck with what they’ve got an have to make the best of things without the next level up forcing them to make different decisions. Perhaps this is a place that the Federal Government needs to force states to do better.
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That’s what happened in Florida. Hurricane Andrew reduced parts of cities to landfill and cost insurers nearly $16 billion in payouts. Many insurance companies, recognizing the likelihood that it would happen again, declined to renew policies and left the state. So the Florida Legislature created a state-run company to insure properties itself, preventing both an exodus and an economic collapse by essentially pretending that the climate vulnerabilities didn’t exist. 1
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links: climate crisis capitalism hurricanes government regulation policy
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Another place where markets are failing us. We need better regulation for this sort of behavior.
Where is the unbundling of the capitalism and the governmental regulation failing us? #openquestion
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Part of the problem is that most policies look only 12 months into the future, ignoring long-term trends even as insurance availability influences development and drives people’s long-term decision-making. 1
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links: climate crisis markets capitalism government regulation decision making policy
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