Wall Street Prepares To Scam Future Homeowners
Here’s yet another form of hidden bailout the federal government doles out to our big banks, without the public having much of a clue.
This is from the WSJ this morning:
Some of the biggest names on Wall Street are lining up to become landlords to cash-strapped Americans by bidding on pools of foreclosed properties being sold by Fannie Mae…
While the current approach of selling homes one-by-one has its own high costs and is sometimes inefficient, selling properties in bulk to large investors could require Fannie Mae to sell at a big discount, leading to larger initial costs.
In con artistry parlance, they call this the “reload.” That’s when you hit the same mark twice – typically with a second scam designed to “fix” the damage caused by the first scam. Someone robs your house, then comes by the next day and sells you a fancy alarm system, that’s the reload.
In this case, banks pumped up the real estate market by creating huge volumes of subprime loans, then dumped a lot of them on, among others, Fannie and Freddie, the ever-ready enthusiastic state customer. Now the loans have crashed in value, yet the GSEs (Government Sponsored Enterprises) are still out there feeding the banks money through two continuous bailouts.
One, they continue to buy mortgages from the big banks (until recently, even from Bank of America, whom the GSEs were already suing for sales of toxic MBS), giving the banks a permanent market for home loans.
And secondly, they conduct these quiet bulk sales of mortgages, in which huge packets of home loans are sold to banks at a “big discount”.
It gets better:
Warren Buffett, considered a sage investor and chief executive of Berkshire Hathaway Inc., said in an interview with CNBC-TV last month that he would buy up “a couple hundred thousand” single-family homes if he could do so easily, given the high yields on rental investments.
So congratulations, America, your quasi-governmental housing entity is about to subcontract out mass-landlording/slumlording jobs to the likes of John Paulson and Warren Buffett, so that they can add to their bottom lines collecting rent payments in the middle of a nationwide housing slump.
As one hedge fund analyst put it to me this morning: “Help inflate the bubble, create a foreclosure crisis, buy homes in bulk, and rent them out to the same average homeowner.”
Is this what we had in mind when we created the “ownership society” – helping billionaires collect your rent?
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