Some Of Your Taxpayer Assets Will Be Sold Off To 'Vulture Funds,' In Case You Were Interested

Hey, everybody! Time now to check what's going on with that giant portfolio of foreclosed-upon homes that we, as taxpayers, own. Did you forget that we owned a giant portfolio of foreclosed-upon homes? Because we do. Anyway, the good news is that we may not have this portfolio for much longer. The bad news is that we'll be relieved of it in one of the worst deals possible.

At any rate, Ken Layne points us to some recent news on that front:

The largest transfer of wealth from the public to private sector is about to begin. The federal government will be bulk-selling the massive portfolio of foreclosed homes now owned by HUD, Fannie Mae and Freddie Mac to private investors -- vulture funds.

These homes, which are now the property of the U.S. government, the U.S. taxpayer, U.S. citizens collectively, are going to be sold to private investor conglomerates at extraordinarily large discounts to real value.

You and I will not be allowed to participate. These investors will come from the private-equity and hedge-fund community, Goldman Sachs and its derivatives, as well as foreign sovereign wealth funds that can bring a billion dollars or more to each transaction.

In the process, these investors will instantaneously become the largest improved real estate owners and landlords in the world. The U.S. taxpayer will get pennies on the dollar for these homes and then be allowed to rent them back at market rates.

See, what's happening is that the Treasury Department, acting in concert with some other federal agencies, has submitted a "Request For Information" about this big pile of sad homes we "won" in the financial inferno of 2008. As the article notes, the point of an RFI is to stage a private sector consultation about the best way forward. However, the private sector interests here have already come up with the plan -- the federal government just has to go through these motions to make whatever comes next technically legal, while hoping that taxpayers don't loudly object. If there's no massive protest, the federal government will proceed to make a bargain-basement offer for this housing portfolio.

Back to the article:

The way to keep taxpayers from pushing back is to structure the RFI so that the real intention, the bulk sales, is masked by feel-good goals, such as stabilizing neighborhoods and increasing the supply of rental properties.

As intended, the mass media are playing their part in classic style. Every major newspaper in the U.S. has run articles discussing the plan as a rental conversion, allowing readers to assume that Fannie, Freddie and HUD will be renting the properties directly to families who need housing. And although there is an allowance for these kinds of rentals, it is a minor political facade to the obvious true goal of bulk-sale privatization of these homes.

In fact, here's Jared Bernstein, attempting to sell this deal, on these pages! The short version of his argument is: "Fehhhh, I have a hunch that taxpayers might not get screwed, maybe."

I've heard two arguments against the idea. One is that it's a bad deal for taxpayers -- I mean, we're the "investors" behind these properties right now -- who will get stung by firesale prices. Eh -- maybe, but from what I'm picking up, that's happening anyway. The return on these sales is already lousy. I'd just as soon try something that could help carve out a real bottom on home prices.

Just a tip, when the guy you've asked to assess whether you're about to get screwed in some sort of deal involving actual money says, "Eh -- maybe," don't make that deal!

At any rate, that's all very interesting, because from what I'm picking up, we could sell from this portfolio any old time we wanted to. It's just that it may take a long time to get individual retail buyers to draw the portfolio down. People are choosy, and these properties aren't ideal. Still, did anyone think about offering retail investors the bargain-basement prices they are offering Goldman Sachs and sovereign wealth funds? Because maybe somebody out there is interested in paying pennies on the dollar to be their own landlord.

Speaking of!

Second, investors buying foreclosed properties in bulk make lousy landlords. It's a valid concern, but there's a policy wrinkle in the FHFA/admin's plan that should help: the proposal -- the RFI noted above -- should include requirements regarding property management and the Feds should reject proposals that aren't convincing in that regard.

Given that this deal involves taking distressed assets currently owned by taxpayers and selling these clients clean assets back for a song, what if I tell you that I don't trust the federal government when it says it will make sure Lloyd Blankfein is a good and just landlord? Is there any evidence in the world that suggests that the Obama administration and our lawmakers in Congress are prepared to erect a rigorous regulatory environment to govern the aftermath of these sales? (One piece of evidence against this is the presence of that word, "should," in the above paragraph.)

Anyway, not to be difficult, but if you're not personally angling to secure a bunch of Wall Street money to secure your reelection bid, this is essentially a massive fleecing!

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Comments

[xtralucky47]

08:17 AM on 09/07/2011

This is the biggest bunch of B.S i have ever heard.HUFFINGTON POST YOU ARE JUST AS BIG OF CROOKS as our govt for hiding this story.

[MehersKid]

12:55 PM on 08/28/2011

Why is this story not on the front page of the Huffington Post? Why is it buried in some backwater? This is just another prime example of how the current administration is working hard and fast to guarantee a full and complete transfer of wealth to those who already have the most. It's not just bad policy, it's criminal.

[dawlishgal]

11:10 AM on 08/28/2011

Of course, ordinary people can't buy this stuff privately because we have to support the realiy biz. Is there going to be anything left of this country once these vultures stop stripping the meat from the middle class while both political parties give them carte blanche to do it.?

why can't these properties be sold at auction to the highest bidder? At least that, so ordinary people can afford to buy back their own houses that were stolen from them by unregulated speculators.

[HooYoo2say]

05:53 AM on 08/28/2011

They should first offer these homes to the communities where they are located to purchase, revitalize and sell for a profit with profits to be reinvested in the communities themselves . The communities could then decide among themselves how they wish to use the profits. Whether it be in tax breaks for the taxpayers or investments mutually agreed with the profits derived put back into the communities for schools or various other benifits or enhancements. Call it a really cheap economic stimulus plan where the middle class taxpayers actually benefit this time. Or plan B, a lot of neighbors who have been living next door to these foreclosed homes that are sold to WallStreet investment banks for pennies on the dollar have a terrible time containing their fall leaf burnings and they spread like wildfires to these most unfortunate recently purchased $3000 homes that were worth far more than that. I'm sure these vultures will be required to have these homes insured so there shouldn't be any problem building them back from the ashes up. (-: Sometimes you have no choice but to fight fire with fire. Of course our crooked politicians can prevent the flames by choosing not to fleece We the Peons again and save Rome from burning. Then again maybe Rome is due for a burnng more than the peasants piles of fall leaves. Bottom line, We the Peons refuse to get burned again. We've been put through H#LL for the last time.

[HooYoo2say]

04:56 AM on 08/28/2011

Oh that's just great! Turn one out of every ten homes in this country into a rental property and see what that does for the value of the other 9 homes that people were somehow able to hold on to in this crisis. You can bet very few "mansions" will be rented, if they are it will only be until they are sold and the rent will not be cheap. All the rental properties will land in the neighborhoods of the middle class stagnating their home values for the foreseeable future. Only a certain percentage of these homes should be allowed to be purchased as strictly rental property and only a certain number should be allowed within a community. The rest should have to acquired for resale only and until sold be rented or leased under a maximum 3 year lease with 3 one year options. After that the property investers should only be able to offer rent to own, owner financed contracts or outright sales only. I think it's vital that only a percentage of these homes be sold to each large investor strictly to be used as rental property.

[HouseOfMirrors]

02:49 AM on 08/28/2011

Vote in Ron Paul. We only need him for four years to flip the apple cart over. He hates those Wall Street serpents. They caused the mortgage meltdown, we bailed them out and bought their "distresse­d mortgages"­. Now they're getting interest free loans from the demonic Federal Reserve so they can buy them back from the tax payer for pennies on the dollar? God I wish there was an NFL lockout this year so my countrymen would learn about the screwing they've been taking for 100 years. Never mind, eat your nachos, go ahead and re-elect that puppet Obama, or better yet, that used-car lizard Rick Perry.

[wsdave]

11:53 PM on 08/27/2011

LMAO!!!!!

[seachange525]

10:54 PM on 08/27/2011

Okay, so what shall we do? As far as I can tell, writing my representatives and congresspersons has no effect; even protests at the White House (such as the one last week) barely get noticed because the media are owned by the vested interests. I am serious. I WANT to do something. Please, Jason, can you give us any ideas?

[wsdave]

11:47 PM on 08/27/2011

V for Vendetta?

[HooYoo2say]

04:14 AM on 08/28/2011

P for Pyromania?

[dadw5boys]

01:46 AM on 08/28/2011

Form a LLC and bid on the Homes. Get small SBA Loan .

[HooYoo2say]

05:10 AM on 08/28/2011

But it sounds like they are only looking to sell them in large quantities. The SBA doesn't give 1B in loans to startup LLC's. Unless of course the loan is secured by three quarters of a billion in collateral. These homes, on paper, are only worth pennies on the dollar. You would have to have 50 billion of these homes to use as security for your 1 billion in loans lol.

[Progressive forever]

10:44 PM on 08/27/2011

Say hello to 1900s again. It seems that no matter how much progress is made, at some point the resistance against becomes so huge that the progress is rolled back again.
The new reality seems to be quite intimidating.

[giatny]

10:16 PM on 08/27/2011

Many multimillionaires emerged from the Resolution Trust giveaway after the savings and
loan crisis. As part of Obama's campaign, he is desperately searching for a way to buy
some votes by reducing the principal and interest for the millions in arrears on their
mortgages. The bots even found an economist to say this can be done without costing the
taxpayer anything! How bloody stupid do they hope we are? Only a very very small percentage were defrauded by unscrupulous mortgage brokers but they lost their homes early
in the crash. Even worse, Obama is looking to let student loans be discharged through
bankruptcy. How difficult will it be for a new graduate to declare bankruptcy? They are
all bankrupt until they've begun a career. For the Latino vote, he has in effect enacted the
Dream Act (with additions) under the guise of prosecutorial discretion. Some illegals interviewed were thrilled that now they can get financial aid also at taxpayer expense. Obama's agenda is decimating the law of the land and the integrity of contracts. The
economy is being held hostage by his regulatory machine and gangster agencies. I
wonder how the country can survive another year of this insanity.

[zSpin2001]

09:38 PM on 08/27/2011

Why be enraged? We have been fleeced and even if you care, there isn't anyone to turn to for just compensation.

[seachange525]

10:57 PM on 08/27/2011

If you can't manage rage on your own behalf, how about feeling some on behalf of the people who have lost their homes once to greedy business and are about to do so again? Try a little compassion for those who have lost so much so that the rich could continue to line their pockets.

[StillMadMatt]

03:08 AM on 08/28/2011

Compassion aint gonna shelter he homeless I fear.

[Marginal1]

08:48 PM on 08/27/2011

This is not capitalism, this is cronyism. Here's the business cycle. The bankercrats buy companies that build the houses and profits from the sale. The bankercrats finance the purchase of the houses and profit from the financing. The taxpayer recapitalizes the bankercrats and investment houses during forclosure process. The government "gifts" the houses to the bankercrats. The bankercrats then lobby government for employment assistance (to reduce high unemployment) and so the government pays half wage for the first year of employment to the bankercrats so the employees fix up the property to rentalable condition. The government then subsidizes housing for low income people so that the bankercrats have sufficient rental demand and reap about a 30-40% profit on cash flow alone. Then the bankercrats distribute the profit as dividends so they pay only 15% income tax. When the housing industry picks up, they sell the houses off at 4 or 5 times what they paid for the houses and runs them through their off shore businesses and pay no taxes. When they are ready to bring the capital home, they lobby the government aggressively because of recession, claiming to be the job generators.
The only pertinent argument I read for this action was that it would stabilize home prices. There are many other ways to dispose of these properties without giving them to the people that contributed substantially to the properties being foreclosed upon. This action guarantees the hogs will be back at the public trough.

[dadw5boys]

01:49 AM on 08/28/2011

This is the Central Bankers paying off their cronies !

[Caniculus]

04:47 PM on 08/27/2011

If the Treasury sells all these houses to the banks for pennies on the dollar, then the banks turn around and unload them all at the same time, that will only cause a further decline in all home values.

Depending on the size of this "giant portfolio", a massive infusion of cheap homes into the market would cause another steep slide in home prices. Which means those homeowners who are not now already underwater will have to start treading water. And those who are already underwater will feel even more pressure to allow foreclosure.

Before this over, few people in America will own their home. . . and maybe not even the shirt on their back.

[dadw5boys]

01:50 AM on 08/28/2011

Wait till they lower wages

[jhNY]

03:33 PM on 08/27/2011

The kleptocracy is practically immortal.

[belladio]

03:30 PM on 08/27/2011

These greedy freaking giants won't be satisfied until there is nothing left to strip from this country. Then they'll move on to the next one, like locusts. I utterly despise them.

Nice job selling us out again, government.

[dadw5boys]

01:51 AM on 08/28/2011

that's Capitalism