When the Charter Bubble Bursts

We know we are in the midst of an economic crisis, and real estate has been hit especially hard. And there's one group out there losing their homes at an alarming rate. In fact, one in seven of these people are now delinquent on their mortgages. You might guess that it's the middle class, or lower income individuals who were talked into sub-prime loans. But you'd be wrong.

It's the wealthy.

Yes, according to the New York Times, one in seven homeowners with a mortgage of over one million dollars is now seriously delinquent in their payments and in danger of immediate foreclosure. Don't cry them a river or demand a bailout, however; many of these people are simply choosing not to pay. Like so many others, the rich have seen the values of their homes decline and many properties are underwater (more is owed than the home is worth). Unlike many other people, the rich appear much more likely to just walk away from their mortgages and stick the taxpayers with the bill. Sam Khater of CoreLogic, a senior economist with a flair for understatement, was quoted as saying, "The rich are different. They are more ruthless."

Ruthless is right. Remember, most of these wealthy homeowners aren't in terrible financial straits--they just see their homes as a bad investement and walk away. Never mind what happens to the neighborhood. And who cares if the taxpayers are left holding the bag?

So I have to ask: What happens when the charter school boom goes bust? When the hedge funds finally eliminate charter caps and charters become ubiquitous, what will happen in the next finanacial downturn? Let's face it--it is the rich who own and operate charters. Will they walk away from their schools with as little care as they abandon their properties? Will they show concern for the neighborhoods they ruin?

Make no mistake: it can happen. Charters are the darlings of hedge funds right now because they are the reform de jour and politicians are looking to throw money at them. But that won't last forever. The very reason Bloomberg wants charters is that he can run them on the cheap by eliminating pesky unions that demand fair wages, pensions, and reasonable working conditions.

With a charter on every corner, they'll lose their special status. When the economic downturn happens, which it does in cycles, charters will be cut to the bone just like public schools are now. If there isn't enough profit, will the wealthy charter school operator keep the school going for the sake of the community, or will he just cut and run?

Let's put it this way: If the rich are walking away from their in-ground pools and marble staircases, why would they worry about a local school?