It began on Monday morning July 16, 2018 at 10am. The second largest state bank in Florida hastily called a press conference in Miami. Only a handful of local business reporters bothered to show up. This cadre of journalists assumed the presser would announce a management shakeup or perhaps even a merger. Boring news to bury deep in their news companies’ websites. But they quickly realized something was up when the bank CEO walked into the conference room and took to the podium. They had been expecting a lower ranking officer such as the bank Communications Director. Obviously, this would be an interesting announcement. And it was. Because as the press conference unfolded, these local business reporters were among the very first who recognized the enormity of what was now happening to Florida. And they wryly noted to each other that it was already too late to sell their own homes. Many in the Florida business community knew that someday, this particular day would come, but no one imagined it would arrive so soon. Certainly not in 2018.
Because on this day, the second largest state bank in Florida announced that it would stop writing 30 year mortgages on December 31st 2018. And from 2019 to 2025, this particular bank would only write 15 year mortgages for real estate purchases in select INLAND areas of northern Florida. And on January 1st, 2026, barely 7 years from this day, this state bank would no longer write real estate mortgages in the State of Florida. Ever Again. The reason? Global warming. Or more specifically, rising sea levels driven by global warming. And, the economic devastation this would soon bring.
The bank CEO explained that this decision was based on the undeniable fact that much of South Florida will be permanently flooded by rising seas by the 2050s at the earliest or the 2080s at the latest. And there was absolutely nothing the government could do to stop this from happening. In a nutshell, we missed our chance to stop global warming. So writing mortgages with repayment terms beyond 2048 would put those loans at great risk of not being fully repaid. And all of Florida will be impacted. Because as the bank CEO explained, the Florida economy depends on the tourism, construction, and retirement activity in the coastal zone. Once the coastal zone floods, key infrastructure (and assets) will be lost forever. Making any economic recovery unlikely. And furthermore, a MILLION buildings (and all their contents) in South Florida will be destroyed as the waters slowly rise, creating a shallow sea of trash and toxic waste across what is now South Florida. This combination of infrastructure destruction and environmental contamination will render most of the state uninhabitable. Even the higher counties of the Florida Panhandle will see their economies collapse as well, dragged down by the unprecedented economic and environmental disaster in South Florida. So the bank decided to completely withdraw from ALL Florida real estate investments. Phasing out all new loans so that their last outstanding mortgage loans are paid off by 2048.
According to the bank CEO, pulling out of real estate completely will dramatically shrink the size of the bank over time. But the management team concluded that this was the only reasonable strategy to keep the bank solvent. Because it is better to be a small solvent bank than a large insolvent bank holding billions of dollars in mortgages attached to worthless properties. And all those flooded properties will create a huge liability as the ocean moves in, displaces the owners, and transforms over a million buildings into a toxic stew of trash and debris. The bank CEO concluded his statements by saying governments of the world must take stronger actions to slow down global warming. Because Earth is heading towards Runaway Global Warming which will bring further irreversible damage to global real estate and the global economy. The CEO pleaded with world leaders to institute a global carbon tax as soon as possible to put the brakes on global warming and prevent Runaway Global Warming.
After the CEO concluded his remarks, shock and silence overtook the conference room. This was the biggest story these business reporters would ever break, and they were all at a loss for words. Partly because they were each calculating in their minds the personal financial devastation they were about to suffer from losing the value of their homes. There was a long awkward silence, until one of the reporters cleared his throat and asked, “What made you decide to make this announcement today and not sometime before and not sometime later?” The CEO replied that only recently had scientists discovered that both the West Antarctic Ice Sheet and Greenland’s undersea glaciers were collapsing. And the rate of their collapse was accelerating which means that South Florida will be permanently flooded sometime between the 2050s and 2080s. The reporter then followed up with, “Did the upcoming Congressional election have anything to do with the timing of your announcement?” And the CEO said, “No.”
Later that evening, local talk radio and Florida Fox News affiliates were SCREAMING that ‘political correctness’ was out of control. And they all blamed Al Gore for causing this bank to phase out mortgage loans in Florida. The very next day at 8am, Florida governor, Republican Rick Scott, held his own press conference. He was visibly furious and he blasted the bank’s decision. He called the bank’s management ignorant and incompetent. And he didn’t stop there. He also called a special session of the Florida legislature to meet within two weeks to begin an investigation into the possibility that a secret cell of ‘environmentalists’ had infiltrated the bank and corrupted it’s decision making process. “Because”, Governor Scott declared, “Global Warming is not happening.”
Towards the end of that week, the leadership of the Republican Congress upped the ante. Most congressional districts in Florida as well as most districts along the Atlantic and Gulf coasts are controlled by Republicans. And these coastal Republican congressmen proposed an investigation led by the F.B.I. to expose the “Cult of Global Warming” which had infiltrated key American institutions. Steadily undermining the American economy and American culture itself by persuading Americans that they are not the masters of their own destiny. Because, according to these coastal Republican Congressmen, it is common knowledge that “Global Warming is not happening.”
And for about three weeks, it appeared that Governor Scott, the Republican Congress, and conservative media were right. Nothing really happened. The bank’s announcement made all the major Florida newscasts. The announcement by Republican leaders in Congress calling for an investigation was briefly covered by the national media. And there were anecdotal reports of some Florida real estate buyers cancelling purchases, but the Florida public seemed to have brushed off the significance of this decision by just this one local bank. And the climate activists, who had seized upon the bank’s announcement as proof that it was finally time to tax fossil fuels, were perplexed by the strange quietude settling in over Florida.
But three weeks after the local bank’s announcement, reality hit. Because Citigroup called a press conference. And this presser was very well attended. The conference room was packed with local as well as national reporters. A sea of flashing camera lights nearly blinded the Citigroup V.P. as he announced that Citigroup would also stop writing 30 year mortgages in Florida on December 31, 2018. He also announced that Citigroup had begun a deep review of all coastal real estate nationwide and worldwide with the intention of phasing out real estate loans in other low lying areas as soon as possible. And this deep review would not only evaluate the threat from rising sea levels, but also the damage from future storm surges when determining if a neighborhood should be excluded from future mortgage loans. So it was conceivable that many low lying cities and towns miles from the shoreline could see their real estate financing dry up as well.
During the days following this second press conference, internet traffic on all Florida real estate websites skyrocketed. And both Zillow and Trulia crashed and were offline for a week. Realtors were FLOODED with cancellation notices from prospective buyers and pleas from sellers desperate to list their properties. And all those maps showing a future Florida disappearing beneath the blue ocean suddenly went viral all over the internet. And to most people, it didn’t matter if the map projected the disappearance of most of Florida 100 years from now, or just South Florida 30 years from now. Because the story was the same. Florida, as we know it, will disappear. Forever. And there is nothing we can do to stop it because we waited too long. Talk Radio blasted the real estate panic and accused homebuyers and homeowners of “drinking the Kool-Aid” served up by the “global warming cultists.” And the talking heads at Fox News scoffed at the specter of hypothetical floods some 30, 60, or 100 years from now. But the price signal from the “invisible hand of the market” was strong and clear.
The final Florida real estate bubble had burst. Never to inflate again. It was amazing how quickly prices fell. And not just home prices. Within weeks, the price of any asset tied to South Florida land plummeted: Condominium Towers, Shopping Malls, Strip Shopping Centers, Office Buildings, Factories, Refineries, Power Plants, Hospitals, and even Farmland. And the price of financial assets tied to South Florida land fell as well: Real Estate Investment Trusts, as well as local Florida Government bonds used to finance roads, bridges, and schools. And talk of a ‘decade of bankruptcies’ swept across Florida. Even though most banks had not announced that they would abandon Florida, buyers suddenly realized that Florida real estate was a fool’s bet. Because even if you qualified for a 15 year mortgage today, who would be able to buy your property in the future? No one.
And ironically, those most devastated were the very rich. Because in Florida, the most valuable properties and infrastructure (homes, office buildings, hotels, roads, bridges, schools) are right next to the ocean. And these properties were suddenly nearly worthless. Now, they were not completely worthless because people will be living in and using these properties for the next 30 years. So they had some value from the rents they could generate. And this ‘rental value’ was enough to prevent a total price collapse, but resale values had fallen at least 60% in most locations. And prices would continue to fall each year as the seas crept upward; inch by irreversible inch.
The Florida real estate collapse also had echoes of the 2008 Lehman Brothers collapse which triggered the Great Recession. When Lehman Brothers collapsed, investors suddenly realized that that the investment bank had been parking their money in very risky assets without disclosing this to investors. And now in Florida, the banks were suddenly admitting that Florida real estate was the equivalent of a junk investment. And like Lehman Brothers, the losers were the property owners (like Lehman shareholders) who now owned property (like Lehman shares) that no one wanted to buy. The banks would recover most of their money as mortgages were paid off. And of course the bank management teams would still receive their generous annual compensation and bonuses. And when viewed from this perspective, the decision by the banks to stop lending in coastal areas was mostly an attempt to keep the banks solvent and keep the management teams employed for foreseeable future.
A month after Citigroup’s announcement, other banks began to announce that they too would abandon Florida. As a result, the New York Stock Exchange fell 30% due to fear that the Florida real estate collapse would drag America into a deep recession. And all along the Gulf and Atlantic coasts outside of Florida, property values were falling fast though not as deeply as in Florida. But everywhere, fear had replaced optimism. No one wanted to live near the beach anymore. America had finally begun to accept that yes, global warming is real, it is happening right now, and it is doing great damage to the American economy and America’s people. The question was no longer, “Should we fight global warming with carbon taxes and new government regulations?” The public’s answer to that was simply, “YES.” The new question for most people was, “Will America even survive this thing?”
But as usual, the politicians were 10 years behind the people. The election of 2018 was an off year Congressional election and should have strongly favored the Republican majority in Congress because Democrat Hillary Clinton had been narrowly elected President in 2016. But Republicans stuck to their ‘Global Warming Is Not Happening’ talking points. And the Democrats finally hammered the Republican Party (deservedly so) for allowing this catastrophe to happen. It was easy for Democrats to blame Republicans because the Republicans had been so adamant for so long that global warming was “a hoax.” There were literally TERABYTES of video of Republican politicians everywhere saying something ignorant about global warming at some point in the past. From Presidents (Bush I, Bush II), to Senators, to Congressmen, to Governors (Jeb Bush – FL, Chris Christie – NJ), to State Legislators, to County Supervisors, to City Council Members. All of them, echoing the same idiotic talking points from Fox News.
The Democrats campaigned very hard in Florida and along the Gulf and Atlantic coasts. And they made “Stop Runaway Global Warming, Vote Democrat” their one and only message. When the votes were finally tallied in Florida, Republicans had lost nearly every seat in the state except for a few local seats in the far northern Florida Panhandle. These Republican losses in Florida combined with other Republican Congressional losses along the Gulf and Atlantic coasts gave the Democrats a narrow majority in the House of Representatives for the first time since 2010.
But amazingly, after the election, the new Republican minority in the Senate continued to filibuster every Democrat effort to Stop Runaway Global Warming. Carbon Taxes, Climate Changes Treaties, Global Reforestation Funding; all of it blocked by the Republican minority. Voters should not have been surprised by the loyalty the fossil fuel industry was able to purchase among Republican Senators. But the voters were furious. And by the 2020 election, voter rage was palpable. Once again Democrats ran hard against the Republicans on Global Warming. But this time, Democrats warned southern voters about the 140F+ degree heat waves their grandchildren would face if Global Warming accelerated into Runaway Global Warming. And on election night 2020, a Big Blue Wave swept across the American South. Sweeping the Republican Party out of power and into political extinction. And the long difficult struggle to contain the climate crisis and “Stop Runaway Global Warming” had finally, belatedly, begun.