Alarmed because, just as Wall Street crooks and speculators pumped up that market to insane highs only to then bring it crashing down with their toxic derivatives and exploding adjustable rate mortgage scams, some of the very same cast of characters now smell blood amidst the wreckage. And like vultures swooping down on the carrion flesh of middle class and low-income homeowners, they've been pumping billions into snatching up foreclosed homes to make a new killing in the rental and housing markets on the backs of destitute former homeowners.
Steve Schwarzman's Blackstone Group has been one of the most aggressive buyers in parts of the country hardest hit by the foreclosure crisis. In December, Schwartzman was featured at the New York Times' DealBook post-election-conference on a panel discussing where private equity and hedge funds see the best opportunities ahead in 2013.
The panel included many remarkably unabashed statements that showed just how little these star "job creators" are actually concerned about creating jobs through their investments. Billionaire Ray Dalio of Bridgewater Associates, for example, said "the biggest opportunity will be... shorting the bond market."
But none were as unabashed as Schwarzman, who began by noting the outsized role Blackstone has been playing in the housing market:
I guess we're close to the largest owner of U.S. homes that isn't an accidental owner... we've spent a little over $2 billion in the last four or five months buying homes one at a time... we're seeing that market swing... as long as nobody's building anything your buildings fill up...
And things are even peachier across the pond:
Europe -- we've been the largest buyer of distressed real estate paper in Europe... we were buying some warehouses close to 10 percent yield, so if you put some leverage on 10 percent, you make like 18 or 19, and you actually haven't done anything. Most people have to work pretty hard to get double-digit returns, and this is just a gimme.
If this is what's driving the rebound in home and real estate prices count me not exactly reassured. It's the attitude that also concerns communities across the country as they see investors like Blackstone and Silver Bay Realty moving big time into local markets. As Occupy Our Homes Atlanta activist Rob Call puts it, "The major concern for us is Wall Street and the financial sector being involved with housing again... Sure, they're pushing up home prices, but the plan is to turn around and sell the homes in five years or so. It's intentionally creating a bubble."
And if this weren't frightening enough in and of itself, the foreclosure industry is now prepping the next generation of vulture capitalists by dangling scholarships as bait to entice needy college students into their ranks. Given that student loan debt has now climbed to $1 trillion with a third of that belonging to sub-prime borrowers, scholarship money can indeed be a strong enticement.
In this vulture bait category was an item my wife spotted the other day while researching college scholarship opportunities. It turns out that Foreclosure.com(!) is running an essay contest for college students. The top prize: $5,000. And what, you might ask, is the essay topic?
You've been tasked with analyzing two foreclosure properties to determine which one is a better investment. Many factors come into play, including cost, location, renovations (if necessary/desired) and local market conditions, among others. The goal is to maximize profit, whether it is a buy, hold or flip strategy over the short -- and/or long-term.
So here we are, just a few short years past one economic Doomsday, and we're back to encouraging youth to make a career buying and flipping homes for profit. Not just any homes, but the still smoldering wreckage of the housing bubble. Is there any better illustration that financial crime syndicates have learned nothing, and are right back to the behavior that brought the economy to its knees?
So don't let the rosy forecasts fool you: we're far from both the economic recovery we need and the hard sanctions that will keep the vultures at bay. You can send President Obama that message by supporting the 100 Days to Fix What Wall Street Broke campaign.
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General Election: Nov 3, 2020
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