Wall Street's Continuing Syndication Of Its Own "Secured" Debt Via Equity Markets

Tyler Durden's picture

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Anonymous's picture

unreal consumer ocnf tanks and cnbc has a flash with an optimistic forecast by fed economicst..unreal

Hondo's picture

This is and has been a scam but,  I have to say...any investor and especially an intuitional investor that is buying this crap or hired a so called REIT manager who is buying this crap deserves to lose it all........sorry, no whining.  The government has been looking for lemmings in the private sector to share their pain (TALF, PPIP) and now they found them in the CRE REIT market.  Stupid does stupid is.



deadhead's picture


Anonymous's picture

There is a sucker born every day so these suckers are buying such debt knowing how conflicted the underwriters are. I will bet there will be a lot of lawsuits next year by shareholders when everything goes underwater by early next year as reality hits. Wonder if new bank shareholders will sue the Fed for "misleading stress tests."

Anonymous's picture

The Fed *is* a private corporation. I can't see why they couldn't be sued.

agrotera's picture

NOW we're talking! 

23Trillion dollars ( in less than a year bankheist bonanza) later, but better late than never, and while we're at it, let's get the Federal Reserve Act repealed so the owners are out of their 96 year old and long, money train.

Their X-Enron lobbyist is in full bloom sending Bernake on a road show, and getting ready for something like this coming soon.

Anonymous's picture

Exactly who is hurt by this? YSI shareholders avoid BK, the buyers of the follow-on offering get an immediate 10% gain and the lenders get paid. Except for the shorts, everybody wins. No harm, no foul.

Anonymous's picture

>Exactly who is hurt by this?

There is fundamental lack of disclosure and transparency. Is this a good thing?

>YSI shareholders avoid BK

But get massively diluted in the process

>the buyers of the follow-on offering get an immediate 10% gain

To get the "immediate gain," they need to be part of the REIT mafia. Folks like CGM, Cohen Steers. Conflicted insiders profit, vast majority of public has no access to this gain. Great...

Your reasoning is weak.

H Baskerville's picture

I don't understand how REITs and their crazy cousin variants manage to still exist.  It's a business structure that in theory should work but in the real world it's being applied wrong.  All the REITs I ever looked into were in growth mode.  Can't finance growth internally when you're required to pay out 90% of your profits in dividends so they continuously sell mucho stock, take on more large debt.  But they paid such great dividends!  Just a great big complicated Ponzi scheme. 

lizzy36's picture

Maybe at some point the regulators will stop smiling at this practice and actually demand that there is a real separation of various underwriting activities for companies.....

Regulators have been smiling at each and every practice aimed at allowing the TBTF banks to earn there way out of the mess that they earned their way into.

The extent to which the rule of law has been denigrated, over the course of this crisis, while only be truly understood in hindsight.

Anonymous's picture

I'm sure there is a "Chinese Wall" between the various segments of the banks. We know how "straight up" all the players are.

Anonymous's picture

Can you say TYING?

This practice of winning investment banking business (such as a follow on offering) by "tying" it to a traditional commercial banking practice (of lending) is supposed to be ILLEGAL.

Yet another commonplace practice of the big "universal banks" that goes unenforced by the regulators and unpunished by the big banks.

The major media ignores this scandal. You can't blame them to some extent, it's hard to conclusively prove (plus they're conflicted, as their antiquated business model depends on large banks to advertise their mortgage and CD rates, especially about to fail banks chasing deposits with above market CD rates (see Wachovia, summer 2008)).

Keep fighting the good fight Tyler

agrotera's picture

William K. Black, in the interview posted last week here, said basically, there aren't enough FBI agents to deal with all the crime...we live in Gotham City! And unlike "Gotham City" all of our politicians(except for a few, Ron Paul, Alan Grayson, Darryl Issa, and maybe a few others) are friends of the gangsters (banksters).

Anonymous's picture

As I understand it, the borrower needs to refinance an unsecured facility. Nobody wants to refinance the borrower on an unsecured basis, so the borrower has to raise new equity. The new equity provides potential secured lenders enough of a cushion they are comfortable lending on secured basis. The secured lenders now have collateral pledged from the borrower and a big cushion of equity support, so they have a vastly improved credit. The use of proceeds and the fact WFC and BAC stand to get taken out of their unsecured lending positions is disclosed. So what if they stand to make underwriting fees in the new secured deal and the equity offering? Someone has to arrange the deals, why not WFC and/or BAC?

I don't get the conflict.

Anonymous's picture

Never mind. I just saw 36691's response. I get it now.

fedusw's picture
fedusw (not verified) Aug 14, 2009 2:18 PM

Power junkies want to go off it slowly but cold turkey is the only way to do it. Time for them to take authoritative action and watch everyone just blink and stare at them coldly.

good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions

deadhead's picture

Tyler...this is an outstanding piece.  some time ago, i would say that this deserves to be in the main stream media.  right now i would say that zh is becoming the main stream financial media.

excellent job sir.


Anonymous's picture

ain't gonna happen