OSKAR GARCIALAS VEGAS (AP) â¿¿ From mortgage problems to education and budget issues, Nevada leaders on Wednesday delivered a sobering assessment of the state's future as a result of the Great Recession during seven hours of testimony before a federal panel investigating the country's financial meltdown. And while the bipartisan Federal Crisis Inquiry Commission isn't expected to deliver its formal report to Congress and President Barack Obama until Dec. 15, commissioners told state leaders they need to be bold in fixing widespread problems. "It is a very bleak picture that you paint," said Commissioner John Thompson, board chairman of Symantec Corp. "While it's hard to say that you'd ever want to invoke an income tax or invoke things that have been heretofore considered taboo, arguably in a time of crisis that's when you have the best opportunity to capture the hearts and minds of the citizens." Nevada, which leads the nation in unemployment, foreclosure and bankruptcy rates, had unrealistic growth expectations before the nation's financial meltdown battered its tourism industry and erased billions of dollars in real estate equity, an economist told representatives of the 10-member commission. "The state was overbuilt and some 100,000 jobs were predicated on a level of growth and consumer spending that seemed to evaporate almost overnight," testified Jeremy Aguero of the Nevada research firm Applied Analysis. The commission questioned bank executives, analysts and public officials during the daylong hearing at the University of Nevada, Las Vegas. Vice Chairman Bill Thomas, a Republican former congressman from California, said the commission created by Congress was seeking testimony to deliver to Wall Street bankers and others "who have no real on-the-ground knowledge of the suffering that goes on in a number of areas." "Laying the record is very important," Thomas said. Commissioners Heather Murren and Byron Georgiou, who led Wednesday's hearing because they live in Las Vegas, said the panel is still debating causes for several aspects of the meltdown and is using testimony from Sin City, Bakersfield, Calif., Sacramento, Calif., and Miami to connect the causes with their effects.
The hearing included sworn testimony from Nevada's U.S. attorney, Daniel Bogden, and others with expertise in the Silver State.When asked by commissioners why prosecuting mortgage fraud wasn't a bigger priority in Nevada, Bogden's answer echoed the sentiments of others who testified and many who have struggled during the recession. "We've tried to do the best we can with the resources we've got," he said. Phil Satre, chairman of both slot machine maker International Game Technology and utility NV Energy Inc., said he thinks Nevada is at the "bottom of the food chain" in terms of financial recovery, depending on other states like California to drive tourism spending in Las Vegas and other destinations. "I'm not very sanguine about the prospects of recovery in the near term," Satre said. "In my view, we have a giant umbilical cord to California." Satre and other business leaders spoke about diversifying the state's industries, which Thomas repeatedly referred to as "maturing" Nevada's economy. But William Martin, chief executive of Service 1st Bank of Nevada, said people have tried to diversify Nevada's economy for decades and the number of jobs created in other industries has paled in comparison with casino openings. In one exchange, Martin said Nevada has problems with its work force because of education issues. "When a third of our graduates go to college and take remedial English, you've got a problem," he said. "That's quite a handicap for your state, I would assume," Commissioner Brooksley Born replied, noting only half of Nevada's children graduate high school. "It's a tragedy," Martin said. Sometimes confrontational, the commission was toughest on a former regional sales manager for Fremont Investment & Loan, one of the top originators of subprime mortgages. Its parent, Fremont General Corp., was a $7 billion financial services company before it filed for bankruptcy protection in 2008. It emerged from bankruptcy in June.
Jay Jeffries, who said he oversaw account executives in Arizona, California, Nevada and New Mexico, told the panel his salespeople each made $175,000 to $200,000 per year at the peak of the subprime lending market in 2004 and 2005.But he said that while he knew lending guidelines, a separate audit department was responsible for determining whether loan terms were OK for borrowers. "You were placing, hundreds, thousands of loans to homeowners, and you never thought about whether they could pay them off?" Born asked. "That was not my job. My job was sales," Jeffries testified. "I did not underwrite loans. It's not my job to comment on whether the underwriting guidelines are too stringent or too soft." Born said, "It's like you were selling Chinese toys with lead-based paint and you never thought, 'Were these good for children.'" The commission also heard suggestions from the public, including opening a nuclear power plant at the Nevada National Security Site, a 1,450-square-mile site established in January 1951 for the testing of nuclear devices.