The largest transfer of wealth from the public

[lostinblue 1,989]

A Huge Housing Bargain -- but Not for You

By Roger Arnold 08/18/11 - This column by Roger Arnold originally appeared on RealMoney on Aug. 11. For a free trial to RealMoney, follow this link.

More from Roger Arnold

The Goldman Sachs Group Inc| GS UPNEW YORK (RealMoney) -- 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(GS_) 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.

On Wednesday, the Federal Housing Finance Agency (FHFA), the Department of Housing and Urban Development (HUD) and the U.S. Treasury Department issued a Request for Information (RFI) concerning the disposition of the inventory of foreclosed homes owned by the federal government.

An RFI is ostensibly a way for the federal government to get input from the private sector on how to accomplish the goals laid out in the request. But that's really just a facade, as the RFI was structured by the investors to begin with.

In reality, the RFI is a way for the members of Congress to find out if they can get away with bulk-selling these homes to private companies without incurring the wrath of their constituents, taxpayers and former owners of the properties.

Assuming taxpayers don't push back, the next step will be to issue a Request for Proposals (RFP). The RFP will be the bid and plan for these homes by investors.

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.

The investors in this program have been waiting for this opportunity since the portfolio of homes owned by HUD began to spike in 2007, when foreclosures surged first in the "Rust Belt," principally Ohio and Michigan.

Since then, of course, the systemic collapse of housing has engulfed all of the major urban coastal regions of the U.S., as well as Phoenix and Las Vegas, and caused the homes owned by Fannie Mae and Freddie Mac, which are now under the direct control of the U.S. Treasury Department, to spike as well.

Even before this crisis occurred, HUD, i.e. the U.S. government, was the largest improved real estate owner in the world, because of its portfolio of foreclosed homes, which is classified as "real estate owned" (REO). The entire massive HUD REO Portfolio is quietly managed by a handful of private firms already, a group listed as Management and Marketing Contractors.

These M&M companies are principally owned by and employ former high-ranking government officials from the various germane agencies -- the Treasury, HUD, FHA and others. And they will provide the necessary access to the current government employees who are tasked with bringing this program to fruition. Once the privatization is complete, those government employees will move from their positions, and many will take up new employment at one of the M&Ms or the new vulture funds.

I am not currently aware of any way for retail investors to participate in this process.

It is probable, however, that once the privatization has occurred and the properties are generating rental income for the investors, the initial investors will cash out by forming real estate investment trusts (REITs), real estate operating companies (REOCs) or limited partnerships (LPs) that will be made available to retail investors.

http://www.thestreet.com/story/11224917/1/a-huge-housing-bargain--but-not-for-you.html?puc=tsczacks&cm_ven=tsczacks#disqus_thread

[lostinblue 1,989]

Wall Streeters Top Obama Re-Election Supporters

Friday, 22 Jul 2011 03:58 PM

By Julie Crawshaw

just-released study by the Center for Responsive Politics shows that President Obama is relying more on Wall Street to fund his re-election this year than he did in 2008, according to CNBC, which obtained an advance copy of the report.

The report says that one-third of the money Obama's elite fund-raising corps has raised on behalf of his re-election has come from the financial sector.

"Individuals who work in the finance, insurance, and real estate sector are responsible for raising at least $11.3 million for Obama's campaign and the Democratic National Committee," the report says.

And, all of Obama's “bundlers” — top fundraisers who obtain donations from people and groups in their business, professional, and personal networks — have raised a minimum of $34.95 million.

Obama has even added new Wall Streeters who did not work for him in 2008, including former Goldman Sachs CEO Jon Corzine, Evercore Partners executive Charles Myers, Greenstreet Real Estate Partners CEO Steven Green, and Azita Raji, a former investment banker for JPMorgan.

Obama and the DNC combined are on pace to far exceed the amounts Obama raised from Wall Street donors in 2008, both in raw dollar amounts and as a percentage of what he raises overall.

According to the Center's research, Obama fundraisers who worked in the finance, insurance and real estate sector were responsible for a minimum of $16 million, or about 21 percent of the $76.5 million estimated minimum amount brought in by top bundlers.

Moreover, the Center has identified 80 bundlers — out of 244 whose names were released by the Obama campaign last week — who are part of the financial sector.

Forty-four of these specifically work for the securities and investment industry.

United Press International reports that Obama has raised more money than his Republican rivals in 36 states and Washington, D.C.

http://www.moneynews.com/StreetTalk/obama-wallstreet-electioncampaign/2011/07/22/id/404563

Read more: Wall Streeters Top Obama Re-Election Supporters

[Pooky 3,652]

Good to see that the redistribution of wealth is alive and well in the USA.

[I AM NOT THAT GUY 5,715]

Wall Streeters Top Obama Re-Election Supporters

I didn't even get a chance to point that out!

[Bad_Daddy 2,209]

Other than skin color, I don't see much difference between Obama and Bush, other than the fact Obama wants grant amnesty to all the illegals in this country.

[lostinblue 1,989]

Bush started to give away the store and Barry will finish it. Pity the man who has rental property in some of these high foreclosure states. It is a bit like russia in the past. Government gives you housing,feeds you,pays for your health insurance and on and on and on. Talk about locking in the votes. How many bankers have gone to jail?.

[ready4ONE 5,400]

Excerpt from another article, same source as the OP:

"...

This means, in terms of fund-raising, that Romney has been more reliant on many of these special interests than President Barack Obama -- particularly, finance sector and energy sector interests.

For his part, Obama has raised about $2.2 million from the finance, insurance and real estate sector, according to the Center's research. That's just 4.4 percent of the overall $48 million Obama has reported raising through June 30.

Obama's fund-raising, unlike Romney's, has also relied extensively on individuals who donate $200 or less -- the threshold for itemized disclosure by the Federal Election Commission. About 47 percent of Obama's second-quarter fund-raising haul came from these small-dollar donors, while just 6 percent of Romney's did. No information -- no name, no address, no employer, no occupation -- is publicly released about donors who give $200 or less. Only one aggregate dollar amount of how much money a given candidate has raised from unitemized donations is reported.

To date, only $23 million of the $48 million that Obama has reported raising is from itemized sources..."

http://www.opensecrets.org/news/2011/08/what-special-interests-are-bankrolling.html

[SMR 368]

The author of the OP seems to think that selling these properties is a terrible idea, but what does he propose that the federal government do with them? Whether or not they would be sold under their real market value is a question of appraisals, but regardless of their real market value they aren't paying for the federal government right now. I suppose the government could try to sell these properties individually or rent them to tenants but I don't think either of those options is going to really be a better financial solution for the government and has certain implications about the role of government.

The real problem here is that the government came into possession of these properties in the first place. That should have never happened. Fannie Mae and Freddie Mac should have been allowed to fail if they couldn't survive.

[peejay 327]

Pretty much the same thing happened during the S&L debacle in the 1990's. Lots of properties the taxpayer ended up getting stuck with and eventually sold for pennies on the dollar to selected investors.

It's déjà vu all over again.

[kytwell 179]

Other than skin color, I don't see much difference between Obama and Bush, other than the fact Obama wants grant amnesty to all the illegals in this country.

I agree, but I think Bush would have given them amnesty too if given the opportunity to.

[bigdog 376]

Robin Hood is alive and well.

[Danno 1,228]

MAybe I am just not looking in the right way but it seems to me these banks are not really interested in selling these properties because to even have access to inventory one must join these third party pay sites or do extended searches.

If you search on Zillow.com or similar listing sites, often the foreclosed properties simply have a link to the pay site......instead of it being a normal listing with info and contact source.

If they want to move these houses, list them on-line line every other house for sale.

[peejay 327]

I agree, but I think Bush would have given them amnesty too if given the opportunity to.

But he didn't bypass congress and the constitution to hand out a purely political self serving "administrative amnesty" like Obama has done.

[I AM NOT THAT GUY 5,715]

But he didn't bypass congress and the constitution to hand out a purely political self serving "administrative amnesty" like Obama has done.

Bush did not have a coronation. It's good to be king.

Edited September 1, 2011 by Crusty Old Perv

[Mr. Big Dog 10,747]

Good to see that the redistribution of wealth is alive and well in the USA.

I thought the going theory is that it will all trickle down anyway.