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US Taxpayer Set To Bank-Roll Biggest Billionaire Builders
Just days after the potential for more capital injections for Fannie Mae and Freddie Mac (GSEs) are admitted to, we discover another 'scheme' to enrich the 'have-yachts' on the backs of the 'have-nots'.
At the behest of the government, apparently to provide 'affordable' housing for the least creditworthy individuals - just as they did in the not-so-distant past to such cataclysmic ends, GSE's "commitment to providing critical financing for multi-family housing in all markets," has, as Bloomberg reports, enabled billionaires such as Starwood's Barry Sternlicht and Blackstone's Stephen Schwarzmann to cheaply finance two transactions totaling more than $10 billion, implicitly subsidized by the US taxpayer. Even more ironic is that the provision of this 'cheap debt' is helping sustain just the unaffordable surges in rents and prices that are forcing Milennials to live with their parents for longer.
Who do billionaires turn to when they want to buy apartment complexes? The U.S. taxpayer. Bloomberg explains...
Barry Sternlicht’s Starwood Capital Group and Stephen Schwarzman’s Blackstone Group LP are in talks with Freddie Mac to finance two transactions totaling more than $10 billion, according to people with knowledge of the negotiations. Those discussions come after the government-owned mortgage giant already agreed to back Lone Star Funds’ $7.6 billion deal to buy Home Properties Inc. and Brookfield Asset Management Inc.’s $2.5 billion takeover of Associated Estates Realty Corp.
The mortgage guarantor -- which along with its larger counterpart Fannie Mae was rescued in a $187.5 billion taxpayer bailout in 2008 -- is boosting its multifamily lending as their regulator eases restrictions on that part of their business. Cheap debt from the U.S.-backed companies is helping sustain a five-year surge in values for apartment buildings and fueling some of the biggest real estate deals since the financial crisis.
“They wield a very big stick,” said John Levy, a principal at a real estate investment banking firm in Richmond, Virginia, that bears his name. “It takes more time and it’s going to be more expensive” to get transactions done without the two companies, which can lend at rock-bottom rates because their deals have implicit government backing.
And so there we have it - the GSEs are providing 'cheap' loans to the extremely wealthy (with the US taxpayer's shoulders bearingthe weight of the gap between the underlying risk of the loan and the free money being offered).
Freddie Mac’s deals are getting bigger as its regulator expands the definition of affordable housing, enabling the company to make more loans. Properties that are deemed affordable by the Federal Housing Finance Agency are exempt from a $30 billion cap that limits how much the government-sponsored entities can lend to apartment landlords each year.
“We’re helping to push more capital into this part of multifamily,” said David Brickman, head of multifamily operations at McLean, Virginia-based Freddie Mac. “A very small percentage of what we’re doing is luxury.”
Freddie Mac provided $34.1 billion for multifamily acquisitions and refinancings this year through September, more than double the $14.1 billion for the same period in 2014.
So if you wondered why you could not afford to rent (let alone buy) a home, it's not just the Chinese hot money flows, it's an implicit subsidy by the US government (using US taxpayer funds)
Other than the government-sponsored companies, there aren’t many lenders that have the capacity to fund a purchase as large as Blackstone’s, according to Sam Chandan, president of Chandan Economics, a provider of real estate data and analysis.
“You could argue convincingly that the deal wouldn’t get done in its current form without agency financing in the market,” he said.
Will they never learn?
U.S. multifamily-building prices are 33 percent higher than they were at the prior peak in 2007, according to Moody’s Investors Service and Real Capital Analytics Inc., a jump stoked partly by the abundant financing from Fannie Mae and Freddie Mac.
That’s raised concerns that a bubble is forming that might pop when interest rates rise, according to Levy, the investment banker.
Taxpayers could be on the hook for losses incurred by the mortgage companies if apartment values were to fall sharply.
Detractors argue that providing subsidized loans to deep-pocketed real estate investors isn’t in line with the mandate of the government-sponsored entities.
"If the purpose of the GSEs is to provide liquidity to the secondary mortgage market, in an effort to promote homeownership, a focus on funding multifamily rental properties seems inappropriate,” Josh Rosner, an analyst at research firm Graham Fisher & Co., said in an e-mail. “This approach only serves to deliver a public subsidy to private players.”
Brickman said Freddie Mac doesn’t view its business through the prism of the institutions it lends to.
“Our focus in on supporting middle-income and workforce housing,” he said. “Who owns it is somewhat irrelevant.”
Yeah it's irrelevant who gains from the US taxpayer subsidy, as long as the number of home units is rising...
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It's called crony capitalism.
Its a small club and you ain't a member.
Yet.
Always felt that this was the logical completion of Carlin's quote.
Look guys, if we're going to let in a hundred million immigrants we need to house them somewhere.
Exactly - how do we get in on the action?
nothing capitalist about it, crony yes, socialism or facism.... take pick for the suffix.
It's for the children.
( tax serf children sold into Fed Reserve slavery, and their children forever afterwords).
Mmm, sounds like Crony Socialism to me, in fact that is what it really is and thus it shall be refered.
Believe me, I'm a superintendent in Texas involved primarily in multi-family new construction, whether they're 5 building garden-style apartments or 24 story high rises, and let me tell you I've been calling this for a long time.
This bubble, at least in Texas, is freaking incredible. These things are shooting up left and right. Meanwhile, for sale signs in everyone's yards.
*edit* By the way, in the years I've been doing this, lately I've noticed a trend... all of these projects are pushing harder than ever to complete early or stage immediate TCO. Didn't take long and I realized I bet these banks are pushing real hard to have these GC'S turnover these projects as fast as possible. These banks know this is a huge risk, as any day now you may be caught with your pants down amidst 50 incomplete projects that may never get done come SHTF.
Yes it is TRUE. Occupancy before projects are even finished. I see it to in Atlanta. Who gets stuck when music stops.
Exactly. I'm on a job right now with 2 phases, building 1 and then 2. I just built a bridge that connects the two. Well, there's a lot of work left on this bridge still, all of which is overhead work. They STILL got a TCO on Bldg 1 despite the overhead work going on.
Unheard of. We made them sign a waiver releasing our liability. They happily signed, they didn't even care. Go go go go. Build and gtfo asap.
Part of the rise in construction costs by the way, as the article mentions , are related to "skilled" Mexican labor forcing contractors to, oddly enough, raise their bids to compensate for all of the overhead that stems from fixing fuck ups these guys are doing.
Trust me on that one.
+100
But it's not just the "unskilled Mexicans" it's also the unskilled high school & associate degreed that can swing a hammer just like they think they can swing their dick.
I've seen this right after 2008 and it didn't end pretty. A LOT of shoddy construction going on to save a buck. In a slow time we responded to a contractor that wanted tile set in a home...like in 3 days...COMPLETED. He said he didn't care what it looked like in a year+1 day..just get the work done. We refused.
I want no part in it.
That sounds suspiciously similar to offshoring code development to India.
In SE VA, there is a huge multi story apartment complex maybe 10-15 deep that have gone up over the summer next to a high school. I was working on a job and had to drive past it for 7 weeks looking at all the lumber placed outside (uncovered) while the workmen were building. Over a few weeks with the rain, humidity and sun I noticed there were many buildings that appeared grey and moldy because they had not covered the roof or side with Typar or tar paper. Sure enough one day I drove by and NO work was being done but I saw them talking with what I suspect was the city...who denied their building until they correct the mold.. I saw mulitple roofs being replaced by new wood after that. But the walls still look moldy. I would hate to rent in that place..EVER.
The fucking GC on the job should be castrated then fired. In that order.
Brother I can give you another example. I'm on yet another job where a 7 floor garage was "completed" with only 50% of the post-tension cables installed. It delayed the job a good 6 months, you've never seen so many stilts propping up a massive structure in your life, and from what I understand cost the GC'S all their profits, and this before the building was even halfway up.
Believe me, these Mexicans aren't doing the work white people won't do, they're literally fucking up everything they touch. Oh, by the way, their superintendent was Mexican.
Guess it helps speaking 2 languages. Doh.
Well everyone, I call bullshit on you and your sorry as crying about Mexicans! I've worked in construction and construction management my whole fucking life.......Disney World, how many of you slugs worked in Orlando...probably none! If you're a cheap fucking scab building shitty residental crap for thieving contractors what do you expect. The construction industry has as many thieves in it as the banks do. For thirty years assholes, I went a travelled all over the western hemisphere and built all manner of interesting, challanging and demanding projects and managed hundreds of people, including lots of common Mexicans and they do more work for longer hours, less money with no problems if they are properly directed. I've run them 16 hours a day in the hot fucking sun and they are right back on the line the next morning ready for another 16 or 20 hours, with a fucking smile on their faces, so fuck you you racist pansies. I'd take 1 Mexican over 2 white boys or 3 blacks. You don't know what you're talking about fucking jerkoff!
Structural Concrete High-rise, metal stud building core, bathrooms and stairways with open floor to Tenant improvement, you probably don't know what that even is.....Historical restoration and waterproofing high-rise buildings, another thing you probably don't have any fucking idea about, you're probably a wood butcher anyway. I built a 18,000 sf US Post Office in the Middle of the NOWHERE in Puerto Rico....Puerto Ricans don't know concrete like Mexicans! so just fuck off asshole! I happen to like Mexican and all Latins, especially their women, they are HOT!
It is simplier than that. It is time to bring back Hammurabi's building codes. If your building gets somebody sick or injured, you are killed.
set to? 9/11, silverstein insurance claim.
aig bailout. taxpayer, debtor and creditor
of last federal reserve resort.
nothing new?
PRIVATIZE THE GAINS-SOCIALIZE THE LOSSES. No brainer
this so rhymes with desolate and vacant
Chinese urban development, man. does
investment capital prefer communism,
socialism, cannibalism, pragmatism, fascism,
disenfranchised territorial ism, boot on the
neck fetishism, or that other unsubscribed
ism, unacknowledged.
.
freedom, truth and liberty in the seat
of consciousness and conversation. it is
better than corporate entertainment entrancement
:
this so rhymes with desolate and vacant
Chinese urban development, man..
Did anyone even need to click the article to know it would be a couple of "Chozen" doing this?
Strange but they seem to have jewboy names too
Looting America until it collapses, then move on to another host.
If they're counting on the Law of Return to get them asylum in Israel once the American empire collapses, trust me, Israel will have tightened its admission requirements by then.
Having a Jewish grandfather, or just making one up, won't be enough to get you an Israeli passport much longer. They'll want people whose loyalty to the Jewish people and Jewish state can be relied on. People like these clowns are only loyal to their bank accounts. Good luck getting them to put on a uniform and shoot Arabs.
Under Obama, just like Bush, taxpayers' money is Other Peoples' Money (OPM). If Fannie Mae guarantees loans to giant corporations that end up driving up rental costs, no matter. After all, the FDIC provided insurance to back up Bank of Americas' 23 trillion dollars of derivatives. The GSE bosses have no fear of signing on the dotted line, it is OPM they are giving away.
fkkking zios
I used to hear the word "corporate socialism" few years ago. Is this it too?
Mussolini called it fascism. whatever, it is
the "church and state" constitutionalism attempts
to separate, but fails.
why?
As long as the sheeple keep bending over and taking a high hard one, who's going to stop it. Burn DC to the ground with all of them in it
another instance of FUCKING GOVERNMENT OUT OF CONTROL. THE GOVERNMENT DOESN'T HAVE ANY MONEY, IT NEVER DID, IT IS THE PEOPLES MONEY, AKA THE TAXPAYERS WHO PROVIDE. WTF! sorry, didn't mean to hurt your ears...............
Blackrock and Blackstone getting together again??
Laurence “Larry” Fink has achieved much during his long career on Wall Street, including creating almost from scratch what is the largest and arguably the most successful money management firm in the world of finance, BlackRock.
But people who know him say that for all that he has accomplished, Fink believes his career is incomplete unless he achieves the one goal that has eluded him for years -- a presidential appointment to become U.S. Treasury Secretary.
People close to Fink, one of Wall Street’s most prominent Democrats, say that he’s now hoping his next chance to become Treasury Secretary is if Democratic front-runner Hillary Clinton wins the presidency in 2016.
One major sign that he’s angling for the job, they say, is his October 2013 appointment of Democratic political operative and Hillary Clinton confidant Cheryl Mills to the BlackRock (BLK) board of directors.
Imagine if you knew that an ice-age of indeterminate duration was coming due to a solar minimum such as the Maunder minimum.
Suppose you massively overbuilt cheap housing of the type you wished to force on the population in the temperate, sub-tropical and tropical zones of your human tax farm with 0% FED funds regardless of current needs.
Suppose through your mocking bird MSM and captured science institutions you created a fake, socially engineered fear of impending hot climate, so called "man made climate change" as a distraction and to suppress the same sort of build out activity in equatorial competitors and emerging economies.
Suppose tens of millions of people in your country alone are forced to relocate as climate refugees of the opposite type and in the opposite direction to that which many have expected?
What would happen to the price of said property when the great lakes no longer melt ....at all? When Food production collapses world wide.
Hmmmm?
I smell something.
They always set the sheep up on the wrong side of the trade
Open-pit strip-mining of the middle-class.
Correct stant.
As for the down voter.
Down votes require counter arguments.
Unless you are a fuckstain "believer" in British eugenics like "climate change". Then logical counter argument is probably not your thing.
Did the best part of you run down your idiot mothers leg?
It seems so, since you provide no counter argument you brave phantom down voter you.
You mean the burger-builders.
His name was Hank Paulson. His name was Hank Paulson. His name was Hank Paulson.
GSE = Hood Lessons Episode 4: Niggas Don't Pay They Bills Like ...
you mean to enrich the 'have-yachts' on the backs of the 'have-nachts'.
I so love the english langwidj
There's your helicopter money.
Pallets of Franklins for already rich people to squander on real estate deals that nobody in his right mind would invest his own money in.
You, poor soul, will have to keep working for small change, and will be expected your job hasn't been outsourced---yet.
Every year more jobs are being outsourced to places like Pune India.
Wall Street and the CEOs love it. Means larger bonuses for them.
Why would any young person want to risk their life acting as a pawn in their get-richer game?
*will be expected to be grateful your job hasn't been outsourced
The purpose of the FED has gone from the entity that removes the punch bowl while the party is in bloom to being the entity that promotes WS Banks to becoming gambling casinos, by being the largest Bad Bank in the world.
Watch for the student loan bailout.
It's what you do when you have the Federal Reserve buying up all your treasuriy debt and burying it off the books.
Private suckin' on the public teat? It's an Amerikan tradition! It's why we're exceptional! And indespensible!
I thought government subsidized housing was only for black people in poor areas???