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I don't know that I agree with the author's assessment that this is "disgusting"; it just seems like a shift in wealth from bankers to commercial real estate co

I don't know that I agree with the author's assessment that this is "disgusting"; it just seems like a shift in wealth from bankers to commercial real estate companies, and I am not particularly sympathetic to either. Maybe there is another angle here.

anoonmoose 3y ago
I also came here to comment on that word choice. It's disgusting to activate a clause of a contract that both parties agreed to, when neither party seems to have a substantial power imbalance relative to the other? Seems pretty odd to me.
- flutas 3y ago
  I think I could say that it's disgusting if you view it as a mafialike group getting ready to cause a financial shock for their own gain to the detriment of everyone else... But that's a hyper specific view point that I doubt many hold, but I feel like that's the view the author has.
- N_A_T_E 3y ago
  That's not the disgusting part. It's the assumption by banks that they will be bailed out (by us) for their bad investments if the investments are large enough.
  - cudgy 3y ago
    And even more disgusting that taxpayers and their elected representatives keep allowing this to happen over and over again. There is no accountability.
rcme 3y ago
Maybe you missed the part about a bail out. That's not a transfer of wealth from bankers to commercial real estate companies, it's a transfer of wealth from the tax payers to the real estate companies.
- fundad 3y ago
  The government is in a unique position to take over the properties and convert them to public housing. We have a way to administer it. Between FHA and DOD, they operate more residential units and than any private firm. This ensures housing stays affordable rather than just handing money to billionaires.
- wewtyflakes 3y ago
  Wouldn't the government be taking an ownership stake in the banks at the banks' reduced market cap? How does the taxpayer lose out in this scenario?
  - rcme 3y ago
    What if there isn't positive equity left in the banks? What about opportunity cost? The money for the bail out likely needs to be borrowed, what about inflation and anemic economic growth due to interest costs?
    - wewtyflakes 3y ago
      Good point regarding potential negative equity, I hadn't considered that.
rightbyte 3y ago
Ye. Just sounds like a deal where the bank takes the risk. I guess the interest rate was higher from the get go due to this.
DaveExeter 3y ago
Did you read the article carefully? The disgusting part is where taxpayers make the banks whole for their commercial real estate losses! It is a multi-billion taxpayer bailout of private corporations.
gojomo 3y ago
…but the big banks don't actually lose wealth, given their blank check from the government. Losses cause crunches elsewhere, via the taxing/printing/managed-decay policies which buy the banks an unlimited number of get-out-of-bad-decisions-free options. Who finally pays is left as an exercise for the reader, both figuratively & literally.
hluska 3y ago
The author mentioned how the US government will have no choice but to bail out the banks. That’s the part they considered disgusting.
CryptoBanker 3y ago
Do you really think bankers are lending their own money here? They’re lending yours and mine
- eli 3y ago
  But if the bank fails, the bank owners get wiped out.
  - gojomo 3y ago
    But banks keep using the leverage of gigantic – but not fully admitted/accounted-for – de facto government subsidies to make destructively-reckless bets out of proportion to the nominal "bank owners" capital-at-risk. So even if "the bank fails", there's been destructive speculative misallocation whose social costs can be far larger the nominal owners' losses. Of course, the government also doesn't let the "systemically important banks" fail - so related politically-mobbed up interests don't even get "wiped out".

anoonmoose 3y ago

I also came here to comment on that word choice. It's disgusting to activate a clause of a contract that both parties agreed to, when neither party seems to have a substantial power imbalance relative to the other? Seems pretty odd to me.

flutas 3y ago
I think I could say that it's disgusting if you view it as a mafialike group getting ready to cause a financial shock for their own gain to the detriment of everyone else... But that's a hyper specific view point that I doubt many hold, but I feel like that's the view the author has.
N_A_T_E 3y ago
That's not the disgusting part. It's the assumption by banks that they will be bailed out (by us) for their bad investments if the investments are large enough.
- cudgy 3y ago
  And even more disgusting that taxpayers and their elected representatives keep allowing this to happen over and over again. There is no accountability.

rcme 3y ago

Maybe you missed the part about a bail out. That's not a transfer of wealth from bankers to commercial real estate companies, it's a transfer of wealth from the tax payers to the real estate companies.

fundad 3y ago
The government is in a unique position to take over the properties and convert them to public housing. We have a way to administer it. Between FHA and DOD, they operate more residential units and than any private firm. This ensures housing stays affordable rather than just handing money to billionaires.
wewtyflakes 3y ago
Wouldn't the government be taking an ownership stake in the banks at the banks' reduced market cap? How does the taxpayer lose out in this scenario?
- rcme 3y ago
  What if there isn't positive equity left in the banks? What about opportunity cost? The money for the bail out likely needs to be borrowed, what about inflation and anemic economic growth due to interest costs?
  - wewtyflakes 3y ago
    Good point regarding potential negative equity, I hadn't considered that.

rightbyte 3y ago

Ye. Just sounds like a deal where the bank takes the risk. I guess the interest rate was higher from the get go due to this.

DaveExeter 3y ago

Did you read the article carefully? The disgusting part is where taxpayers make the banks whole for their commercial real estate losses! It is a multi-billion taxpayer bailout of private corporations.

gojomo 3y ago

…but the big banks don't actually lose wealth, given their blank check from the government. Losses cause crunches elsewhere, via the taxing/printing/managed-decay policies which buy the banks an unlimited number of get-out-of-bad-decisions-free options. Who finally pays is left as an exercise for the reader, both figuratively & literally.

hluska 3y ago

The author mentioned how the US government will have no choice but to bail out the banks. That’s the part they considered disgusting.

CryptoBanker 3y ago

Do you really think bankers are lending their own money here? They’re lending yours and mine

eli 3y ago
But if the bank fails, the bank owners get wiped out.
- gojomo 3y ago
  But banks keep using the leverage of gigantic – but not fully admitted/accounted-for – de facto government subsidies to make destructively-reckless bets out of proportion to the nominal "bank owners" capital-at-risk. So even if "the bank fails", there's been destructive speculative misallocation whose social costs can be far larger the nominal owners' losses. Of course, the government also doesn't let the "systemically important banks" fail - so related politically-mobbed up interests don't even get "wiped out".