Wisconsin Real Estate Program

Wisconsin Real Estate and Economic Outlook Conference Explores "New Partnerships: Government and Real Estate"

July, 2011, Center News

Over 150 real estate, financial services, government and non-profit professionals gathered on June 9 at the Fluno Center for the Wisconsin Real Estate and Economic Outlook Conference. The day offered an action-packed agenda covering a variety of topics and perspectives from some of the most influential leaders in government and industry.

Alluding to the many differing views on the ideal level of government regulation in business, Graaskamp Center Academic Director Stephen Malpezzi opened the conference by reminding attendees of the statement engraved on Bascom Hall at the heart of campus and its call for the university to seek truth through constant "sifting and winnowing." To do so, Malpezzi said, individuals needed to put aside their biases and ideologies and listen to each other. (Read opening remarks here.)

You can read summaries of the conference sessions below. The Powerpoint presentations and videos of the sessions can be found on the Wisconsin Real Estate and Economic Outlook Conference website.

Session 1: "The New Regulatory Realities: What Can You Expect?"

Participants on "The New Regulatory Realities: What Can You Expect?" panel tackled the current regulatory environment from a variety of perspectives, but seemed to agree that the basic drive behind current regulations was to make it easier for consumers to borrow and lenders to lend.

Peter Bildsten, Secretary of the State of Wisconsin Department of Financial Institutions, noted that not only did regulators want lenders to lend, but shareholders demanded it, and Patricia McCoy, Assistant Director for Mortgage and Home Equity Markets at the Consumer Financial Protection Bureau, discussed an ambitious project out of the Consumer Financial Protection Bureau to merge required disclosure forms for home loans and make them more consumer-friendly. This project, called "Know Before you Owe," is designed to help educate consumers as well as make industry compliance easier and less expensive.

Rose Oswald Poels, President of the Wisconsin Bankers Association, expressed concern on the part of bankers for the sheer amount of regulations placed on the banking industry, while other non-bank lenders did not come under the same level of scrutiny. In addition, regulations can be difficult to interpret or inconsistently interpreted. Dan Hurth, Vice President of Compliance Services for Marshall & Ilsley Corporation, added that the complex regulatory environment is additionally harder on small community banks, which may have less access to specialized legal services. He urged regulators to think on a macro level when creating new rules for the banking industry and lending in general.

Policy Keynote by Governor Scott Walker: "The Current Political Landscape and its Impact on the Economy"

Following the first panel came the conference's policy keynote speaker, Wisconsin Governor Scott Walker, who addressed "The Current Political Landscape and its Impact on the Economy." Governor Walker noted Wisconsin's economic outlook is improving, including the addition of 25,000 jobs in the first four months of 2011, but that the state has a ways to go. He compared Wisconsin's performance to Illinois, which raised taxes on individuals and corporations in an effort to balance the state's budget but is still facing an $8 billion deficit.

"We're moving forward, they're headed backwards," Walker said.

Walker openly addressed one of his more controversial decisions, to remove many collective bargaining elements from public employees, by describing the decision as one that would give local units of government more tools to make up for cuts in state aid. He noted that the potential savings of reducing collective bargaining would more than offset the reduction in state funding in the upcoming budget.

While horns honked and the dull sound of protesters buzzed from outside, the governor also addressed the polarization of the state, saying it was time for a pragmatic approach to politics rather than a partisan one. He described his approach as middle ground, neither raising taxes nor gutting services, and said that by staying the course, the state could reach long-term sustainability.

Afternoon Keynote by Michael Knetter, President and CEO of the University of Wisconsin Foundation and former dean of the Wisconsin School of Business: "The Economic Outlook of the State and UW-Madison"

In his keynote entitled "The Economic Outlook of the State and UW-Madison," Michael Knetter, President and CEO of the University of Wisconsin Foundation, looked at the ripple effects of the economy on institutions of higher education such as the UW.

Knetter set the stage by reviewing the state of the economy and the unique circumstances that have prohibited a similar rebound as was seen in after the recession of the early 1980s - including unusual weather patterns, supply disruptions in the Middle East due to civil unrest, policy uncertainty and labor mismatches as individuals have lost manufacturing jobs and lacked training to be competitive for jobs in the expanding fields of IT and health care.

Some have suggested the problem is too much debt, but Knetter reminded attendees that "one person's debt is another person's asset" and one could easily argue that debt both increases risk and opportunity in the system. He also discussed correlated mistakes in the valuation of things, such as internet stocks or housing, and a herd mentality that pours too much capital into an opportunity with too little return.

Knetter said he believed the U.S. would remain one of the most successful developed economies, but how that would play out in higher education had yet to be fully realized, as universities were not run under the same expectations as businesses. He hopes the University will begin to find ways to take advantage of its highly recognizable global brand and find the proper incentives to continue to bring the best and brightest to both learn and teach here.

Session 3: "The Budget and Financial Reforms: What's on the Horizon?"

Incoming Graaskamp Academic Director Morris Davis began his session by asking the panel what it would propose for federal agencies that had dropped the ball, like HUD, FHFA and the SEC. Panelists recognized that there was a certain inevitability to having the government involved in the mortgage and financial markets.

"The government has a vested interest in housing and will come to the rescue," noted Julia Coronado, Chief Economist of North America for BNP Paribas.

Yet all agreed that a certain degree of oversight and transparency was also necessary, especially to ensure that certain programs, such as section 8 vouchers, continued to help people find affordable housing. Richard Green, Professor and Director of the University of Southern California (USC) Lusk Center for Real Estate, described regulatory oversight as prudentially driven or consumer driven, and that there was a place for both in the overall big picture that would capture metrics as well as provide affirmative consumer protections.

The panel also addressed entitlement programs, most specifically in health care, as the baby boomers continue to retire at a rate of 10,000 a day. While Congressman Paul Ryan spoke at length about a proposed premium support program similar to Medicare Part D, Green and Coronado suggested a need to reconceptualize retirement benefits overall, noting that programs like Medicare and Social Security were created at a time when life expectancies were much lower and the rate of people entering the work force exceeded those leaving it. With neither of those factors relevant today, a new approach may be necessary to encourage greater personal accountability to retirement savings and health care costs.

Green reminded attendees that many of our decisions end up as social judgment and would not necessarily survive a cost-benefit analysis. "Look at the rule banning leaded gasoline," he suggested. "That didn't save anyone any money. But looking back, I think we're all glad we did it."

Session 4: Financial Reforms and Affordable Housing: What Works

Moderator Stephen Malpezzi opened the discussion by pointing out that the problem of housing affordability never truly goes away because it is a necessity rather than a luxury item, but also a large expense out of one's monthly budget.

Panelists expressed concerned that however well-intentioned regulations may be, they were making affordable housing more difficult, not less. As family try to keep their homes out of foreclosure and landlords attempt to comply with laws while keeping rents reasonable, some regulation seems to work against those in the lowest income levels from any kind of housing, whether it is owning or renting.

This wasn't to say that no government programs were effective, and all three saw great benefit to Section 8 vouchers and the Section 42 voucher. Michael Collins, Assistant Professor of Consumer Science and Director at the UW-Madison Center for Financial Security, also included non-housing programs in his analysis, as government benefits such as food and health care assistance free up funds for low-income families to afford better housing. "We need to think about how this programs impact the overall balance sheet," he noted.

The Wisconsin Real Estate and Economic Outlook Conference is sponsored by the Graaskamp Center, the Wisconsin Housing and Economic Development Authority (WHEDA), the Wisconsin Department of Commerce, the Wisconsin Realtors Association and the Wisconsin Bankers Association.