Wall Street’s latest trillion-dollar idea involves slicing and dicing debt tied to single-family homes and selling the bonds to investors around the world.
That might sound a lot like the activities that at one point set off a global financial crisis. But there is a twist this time. Investment bankers and lawyers are now lining up to finance investors, from big private equity firms to plumbers and dentists moonlighting as landlords, who are buying up foreclosed houses and renting them out.
via The New York Times>
There is absolutely nothing that distinguishes this particular scam from the one the banks pulled the last time. If anything, this will encourage even worse misbehavior on the part of all concerned. Start with the reasonable assumption that the people writing these loans won't give a damn if they are ever repaid. Add to that the fact that the people taking out the loans will also not care if the loans are ever repaid, so long as they can drain as much money as possible from these properties while they let them rot. For, unlike the last time, the individual actors will be safely ensconced behind corporate shields; when the properties go into foreclosure the only entity owing any money will be an LLC. These people have learned their lesson all too well; when this all blows up in their faces they will be well protected on our dime, and in the meantime they can skim money out of the economy while once again adding no value to it. This time the nation will be left with yet another crash and crumbling housing stock to boot.
One added feature, which some small minded people might call a bug: this hastens the feudalization of the United States of America. It won't be long, I suppose, before they drop the “land” and just ask us to call them “lords”.
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