Nevada had unrealistic growth expectations before the nation’s financial meltdown battered the state’s tourism industry and erased billions of dollars in real estate equity, an economist told a federal commission examining the causes of the Great Recession.
“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,” Jeremy Aguero, an economist for Applied Analysis, told representatives of the 10-member Financial Crisis Inquiry Commission on Wednesday.
The group planned to question banking executives, analysts and public officials during a daylong hearing at the University of Nevada, Las Vegas.
Vice Chairman Bill Thomas, a Republican former congressman from California, said the commission 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.
The expert panels included U.S. Attorney Daniel Bogden as well as local economists, banking executives and others with expertise in the Silver State, where foreclosures, bankruptcy and joblessness pace ahead of every other state in the country.
Aguero said Nevadans have lost billions in real estate equity, with home prices down to roughly the same levels as they were in 2000. He said there are 40,000 to 60,000 excess homes on the market today with no demand to buy.
“I think that signs existed, and certainly I missed it,” Aguero said. “There is little doubt whatsoever that this community got out in front of its skis.”
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 was on a panel of business leaders who spoke about diversifying the industries in the state, which Thomas repeatedly referred to as “maturing” Nevada’s economy.
Steve Hill, founder of Silver State Materials Corp., said Nevada needs three or four more industries to provide future growth for the state.
But William Martin, chief executive of Service 1st Bank of Nevada, said people have tried to diversify Nevada’s economy for decades but the number of jobs created in other industries have paled in comparison with casino openings.
In one exchange with a commissioner, 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 that half of Nevada’s children don’t graduate high school.
“It’s a tragedy,” Martin said.
The commission was also expected to hear from the public at the meeting.
The group was created by Congress and has a formal report due to lawmakers and President Barack Obama by Dec. 15.