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.
