How Hillary is Already Complicit with the Next Subprime Real Estate Bubble
I turned on the news to watch Bernie Sanders give a one-on-one with some idiot anchor this morning. She tried to put Bernie Sanders on the spot for something the Blackstone CEO said at Davos to a Wall Street Journal reporter, framing it as “middle-class families are scared!” Bernie smiled.
Why? Because it’s bullshit. He sees right through this bullshit.
Blackstone is to 2016 what Goldman Sachs was to 2007. Besides investing in SeaWorld, which we all know is fucking evil now, Blackstone is also setting America up for another real estate bubble.
Laura Gottesdiener reported in 2014:
Over the last two years, private equity firms and hedge funds have amassed an unprecedented real estate empire, snapping up Spanish revivals in Phoenix, adobes in Los Angeles, Queen Anne Victorians in Atlanta, and brick-faced bungalows in Chicago. In total, Wall Street investors have bought more than 200,000 cheap, mostly foreclosed houses in some of the cities hardest hit by the economic meltdown. But they’re not simply flipping these houses. Instead, they’ve started bundling some of them into a new kind of financial product that could blow up the housing market all over again.
No company has bought more houses than the Blackstone Group, one of the world’s largest private equity firms. (Its many investments include Hilton Hotels, the Weather Channel, and SeaWorld. Among its institutional investors are Goldman Sachs, Morgan Stanley, Citigroup, Bank of America, Deutsche Bank, and JPMorgan Chase.) Through its subsidiary, Invitation Homes, Blackstone has picked up houses through local brokers, at foreclosure auctions, and in bulk purchases. Last April, it bought 1,400 houses in Atlanta in a single day. In Phoenix, some neighborhoods have a Blackstone-owned home on just about every block. As of November, Blackstone had acquired 40,000 houses, most of them foreclosures, worth $7.5 billion. Today, it is the largest owner of single-family rental homes in the nation.
But buying houses cheap and then waiting for them to appreciate isn’t the only way Blackstone is making money on these deals. It wants your rent check, too. In November, after many months of hype, the firm released the first-ever rated bondbacked by securitized rental payments. Joining forces with Credit Suisse, Deutsche Bank, and JPMorgan (which recently paid a record $13 billion fine to settle accusations of ripping off mortgage investors), Blackstone has bundled the rental payments from more than 3,200 single-family houses, offering investors its mortgages on the underlying properties as collateral. After investors tripped over themselves to buy into the $479 million bond, Blackstone’s competitors announcedthat they, too, would develop similar securities.
Asked why the public should expect rental-backed securities to be safe, the hedge fund investor responds, “Trust me.”
“It’s just like a residential mortgage-backed security,” says one hedge fund investor whose company does business with Blackstone. Yet some analysts and observers are uneasy about the idea of a new market for securitized mortgage debt backed by rent checks. Dean Baker, an economist and codirector of the Center for Economic and Policy Research, is concerned that Wall Street firms are overlooking the risks of these untested investments. “You kind of just hope they know what they’re doing,” he says. In documents sent to investors, Blackstone has stated that it expects that 95 percent of its homes will be occupied at all times, with an average monthly rent of around $1,300. Real estate professionals say that those assumptions may be overly ambitious for single-family rentals.
Does this sound familiar? That’s because it is. Here’s Matt Taibbi explaining how Goldman Sachs built the first housing bubble:
None of that would have been possible without investment bankers like Goldman, who created vehicles to package those shitty mortgages and sell them en masse to unsuspecting insurance companies and pension funds. This created a mass market for toxic debt that would never have existed before; in the old days, no bank would have wanted to keep some addict ex-con’s mortgage on its books, knowing how likely it was to fail. You can’t write these mortgages, in other words, unless you can sell them to someone who doesn’t know what they are.
Goldman used two methods to hide the mess they were selling. First, they bundled hundreds of different mortgages into instruments called Collateralized Debt Obligations. Then they sold investors on the idea that, because a bunch of those mortgages would turn out to be OK, there was no reason to worry so much about the shitty ones.
Sounds pretty fucking similar, doesn’t it?
So that’s what Blackstone literally, overtly admits to be doing: bundling bad rental properties in exactly the same way banks bundled bad mortgages to sell them as bonds. I don’t have to explain how this ends for you. You can put on your coat and go see The Big Short. It’ll do a better job of explaining it than I can.
So yeah, Blackstone is in the business of wildly speculative finance. And it has the audacity to blame Bernie Sanders for people’s distrust of Wall Street?
Clearly, Blackstone is afraid of Bernie Sanders. Bernie Sanders won’t take their money! He won’t play the game they’re playing.
Along with Elizabeth Warren, Bernie Sanders is one of the only dissenting voices to this kind of bullshit. Why? Because he doesn’t take their campaign money. Here’s what Bernie quite literally said on the Senate floor about the bailout back in 2008:
If a bailout is needed, if taxpayer money must be placed at risk, if we are going to bail out Wall Street, it should be those people who have caused the problem, those people who have benefited from President Bush’s tax breaks for millionaires and billionaires, those people who have taken advantage of deregulation who should pick up the tab, not ordinary working people.
This bill does not deal at all with how we got into this crisis in the first place and the need to undo the deregulatory fervor which created trillions of dollars in complicated and unregulated financial instruments such as credit default swaps and hedge funds.
This bill does not deal with the absurdity of having the fox guarding the hen house. Maybe I’m the only person in America who thinks so, but I have a hard time understanding why we are giving $700 billion to the Secretary of the Treasury, the former CEO of Goldman Sachs, who along with other financial institutions, actually got us into this problem. Now, maybe I’m the only person in America who thinks that’s a little bit weird, but that is what I think.
So this is the sick game of financial bullshit Blackstone readily admits to play. It’s building a bubble. It knows it’s building a bubble. We can see it building the bubble. It’s not going to end well.
And when it doesn’t end well and the government has to act, Blackstone is counting on having bought President Hillary Clinton in this campaign.
When you google “Blackstone + Hillary” you learn a lot of bizarre shit about Blackstone and its involvement with the Hillary Clinton campaign.
The first hit that comes up has this to say:
Hillary Clinton is traveling the country, promising to get tough on corporate wrongdoers and “shadow banks.” But as she promises to crack down on investment firms that offer banking services outside the purview of traditional financial regulations, her presidential campaign is vacuuming in cash from executives at a Wall Street firm known as one of the country’s biggest shadow banks — one recently fined by federal regulators for allegedly ripping off its clients.
Last week, the president of Blackstone Group, Tony James, hosted a fundraiser for Clinton. The cashflowed to the Clinton campaign just two months after the private-equity giant settled with the Securities and Exchange Commission over charges that it used so-called monitoring fees to enrich the firm at the expense of investors. Clinton accepted the money from executives at the sanctioned firm even as she has criticized the Obama administration for not punishing the perpetrators of financial crime more strenuously.
Clinton has ties to some of the key players in the Blackstone entities targeted by the SEC. One of the specific Blackstone investment funds involved in the scheme, SEC documents say, was run by executives James and Laurence Tosi. Just two weeks after the SEC settlement, James — a high-profile defender of shadow banking — touted his support for Clinton.
Two months later, as Clinton continued to portray herself as a crusader against corporate crime, James headlined a $33,000-a-person fundraiser for her campaign at his home, according to the Wall Street Journal. James is expected to host another such fundraiser early in 2016, the paper reported.
In the past, James has been a featured attendee and participant at events hosted by the Clinton family foundation. Both James and Tosi have made maximum contributions to Clinton’s presidential campaign — two of more than a dozen executives who had previously deposited a combined $44,000 in her campaign treasury. During her previous Senate and presidential runs, Clinton was one of the top recipients of campaign cash from firms classified by the nonpartisan Center for Responsive Politics as “private-equity and investment firms.”
Here’s the second hit that comes up:
Even Stephen Schwarzman, the billionaire leveraged-buyout CEO who was a key fundraiser for George W. Bush, got a favor. After an event at the New York Stock Exchange in 2009, where she rang the opening bell, [Clinton] e-mailed her staff to follow up on Schwarzman’s request for help with a visa for a person whose name is redacted in the State Department release.
I don’t need to spin this story. There’s nothing to spin. Clinton literally takes huge gobs of cash from both Goldman Sachs and Blackstone. And her disclosed emails already show her, as head of the state department of the Obama administration, brokering personal favors for the CEOs of dark money banks who gave her lots of campaign money.
So what do you think will happen when this very predictable bubble bursts?
What do you think a Clinton administration would even bother doing about it?
God, this shit is tired, America. Can we fix this?