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Friday, November 13, 2015

The Stench Of Freddie Mac Is Back——An $18 Billion Spree Of Crony Capitalist Thievery - (Too big not to steal?)

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 deeply subsidized debt financing in order to undertake $18 billion in 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 roughly $150 million per year on the loan amounts in play.
Yet this largesse will serve no discernible public purpose whatsoever. Indeed, over the 10-year term of these loans the bonanza will amount to billions, 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 so-called “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.