Good Fences Make Good neighbors -- The Obamas and the Rezkos

Looks like the McCain campaign has decided that they have been to high minded. Out of the gutter and into the sewer

Michael Sheer reports

Sen. John McCain and his Republican allies are readying a newly aggressive assault on Sen. Barack Obama's character, believing that to win in November they must shift the conversation back to questions about the Democrat's judgment, honesty and personal associations, several top Republicans said.

via Hilzoy

OK so lets take a trip down memory lane and ask about the Obamas and the Rezkos. This is all from memory so no specific links, but I get all my info on such matters from TPM muckraker.
For those who don't want to read boring crap from memory, my conclusion is that the episode suggests that the Obamas are extraordinarily honest.

Antoine Rezko is an actual Arab American (Syrian by birth), looks like a total crook, and, is a total crook (IIRC he has been convicted).

His wife owns the vacant lot next door to the Obama's house. Furthermore the Rezkos sold the Obamas a strip of land 10 feet wide right next to their house. Thus Obama has an actual transaction with the Rezkos (which he has called "boneheaded").

The dubious events, however, occurred earlier when the Obamas and the Rezkos simultaneously bought the house and the lot from the same previous owner. Mrs Rezko paid the asking price for the lot and the Obamas paid about $300,000 less than the asking price for the house. The owner wanted to sell the whole package.

Note Mrs Rezko bought the lot. It is in her name because Mr Rezko was near bankruptcy at the time. Now Mr Rezko is a builder who regularly buys empty lots to build on them. Still it is hard not to doubt that Mr Rezko felt he was doing a favor for the Obamas and hoped for something in exchange. The interesting question is whether Obama shared this view. I think it is obvious that he didn't, that he had no idea that Rezko had anything in mind except for building on the lot. That is I think the record shows that the Obamas behaved in a totally honest upright manner.

Huh ? It is easy to get to the claim that there is no proof that they knew that Rezko thought he was doing them a favor, but how can I positively claim that they didn't know ?

Well the key is the boneheaded purchase of the 10 foot wide strip. First this shows that Mrs Rezko was not letting the Obamas use her vacant property as a yard. In fact, the Obamas and Rezkos agreed to build a fence to keep, say, the Obama kids from the temptation to use something that their family didn't own or rent. There is a record of planning permission for the fence and a photograph which shows it uncomfortably close to the Obamas house (but note that since the house is historic they needed permission just to build a house. The reduces the value of the lot to the Rezkos, since it might be difficult to get permission to develop it. Still that's all about the deals from Rezkos point of view and not from the Obamas').

So the Obamas decide to buy a strip 10 feet wide from the Rezkos. This was one sixth of the Rezkos' empty lot. The couples had professional appraisers decide on a fair price. Uh Oh it was less than one sixth of the price ($ 600,000) that the Rezkos had paid. I think it was about half. So the appraisers said that the Rezkos overpaid by about $300,000 and oh my that was the difference between the asking price of the house and the amount the Obamas paid. Sure looks like it was a package deal in which, in effect Mrs Rezko gave the Obamas $300,000. I think this is proof that the Obamas are very very honest.

Why ?

Look if there was a wink wink nudge nudge deal that Mrs rezko overpaid and the Obamas underpaid then they would have kept it secret. If you are hiding a gift by claiming that something is worth more than its true value you don't have it appraised. The strong evidence that Mrs Rezko overpaid is proof that there wasn't a secret or even tacit understanding that she overpaid.

Then the Obamas insisted on paying more than the appraised price and bought the ten foot strip for IIRC $100,000 that is one sixth of the purchase price of the lot.

Now many things might be going on here. Maybe Rezko decided to buy a lot he couldn't develop (being short of cash and permission would not be trivial to get) to help Obama and had his wife pay extra for it all hoping that Obama would be grateful. The uh oh, Obama didn't get it. He insisted on a fence and then decided to buy some of the property and insisted on an appraisal. Only then, after the fact, could the Obamas guess that something funny was happening between Rezko and the third party while they were buying their house.

Another possibility is that the appraisers are dishonest and gave a low appraised value so the Rezkos attempted to give the Obamas about $50,000 and the Obamas refused. If the appraisal was invalid, it could have been designed to give the Obamas the false impression that they had already gotten a favor from the Rezkos without noticing to make them feel guilty and grateful.

Finally it is possible that the Rezkos and the appraisers have different impressions of the value of the land and everyone acted as they would have if Obama were just an average Joe (except for the Obamas ability to buy a 1.3 million dollar house).

The one hypothesis that makes no sense at all is that the Obamas chose to accept a favor from the Rezkos. There is no way that they would have called in appraisers if they were trying to hide a transfer by overstating the value of the lot.