The Stench Of Freddie Mac Is Back – $18 Billion In Crony Capitalist Thievery
New York City, New York
November 11, 2015
Washington’s capacity to foster crony capitalist larceny and corruption never ceases to amaze. But according to the Bloomberg story below, Wall Street’s shameless thievery from US taxpayers is about to get a whole new definition.
To wit, Freddie Mac is handing three private equity billionaires $18 billion in deeply subsidized debt financing in order to undertake giant rental apartment deals. According to no less an authority than Morgan Stanley, the subsidy embedded in this cheap financing amounts to 150 basis points or about $250 million per year on the amounts in play.
Yet this largesse will serve no discernible public purpose whatsoever. Indeed, over the 20-year term of these loans the bonanza will amount to about $5 billion, but it will not generate a single new unit of housing. Nor will it provide a single dollar of incremental rent relief to any low or moderate income tenant.
That’s because the purpose of these giant loans is not to fund new construction of rental housing— for which there is currently an arguable shortage. And it’s not even to incentivize owners to convert existing apartment buildings to affordable housing.
Instead, its sole effect will be to put the taxpayers in the business of highly leveraged Wall Street deal making. That is, it will fund what amounts to apartment company LBOs being undertaken by the largest players in the private equity world including Barry Sternlicht’s Starwood Capital Group, Steve Schwarzman’s Blackstone Group and John Grayken’s Lone Star Fund.
Each of these cats are billionaires many times over and their remit most definitely does not include bolstering the social safety net. What they are doing is buying giant apartment companies in high priced takeover deals. These LBOs will shower sellers and speculators with windfall gains, and Wall Street dealers and themselves with prodigious fees now and the prospect of double, triple or quadruple their modest cash equity investments not too far down the road.
Jim Sinclair’s Commentary
Globally everything is improving. Good time to hike rates.
It’s Official: The Baltic Dry Index Has Crashed To Its Lowest November Level In History
Tyler Durden on 11/06/2015 14:41 -0500
2015 has been an ‘odd’ year. Typically this time of year sees demand picking up amid holiday inventory stacking and measures of global trade such as The Baltic Dry Index rise from mid-summer to Thanksgiving. This year, it has not.
In fact, it has plummeted as the world’s economic engines slow and reality under the covers of global stock markets suggests a massive deflationary wave (following a massive mal-investment boom). At a level of 631, this is the lowest cost for Baltic Dry Freight Index for this time of year in history.. and within a small drop of an all-time historical low.
Hard to ignore something that has never happened before as anything but a total disaster for world trade and economic growth.