IEHI Feed: The Bank Implode-o-Meter http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us iehi-feed-65409 Fri, 03 Jul 2020 22:05:54 GMT Dalio: "Capital Markets Are No Longer Free Markets" Due To Central Bank Interference http://bankimplode.com/viewnews/2020-07-03_DalioCapitalMarketsAreNoLongerFreeMarketsDueToCentralBankInterfe.html iehi-feed-65408 Thu, 02 Jul 2020 18:18:10 GMT Real Estate Market in NYC Hammered by Pandemic http://bankimplode.com/viewnews/2020-07-02_RealEstateMarketinNYCHammeredbyPandemic.html The number of closed sales in the second quarter were down 54 percent compared to the same period last year, the largest decline in at least 30 years, according to a new report from the brokerage Douglas Elliman. The median sales price fell 17.7 percent, compared to the same time last year, to $1 million, the biggest drop in a decade.

The number of contracts signed for apartments in June, the latest indicator of buyer appetite, was down 76 percent, compared to the same time last year... More than 90 percent of the sales recorded in the second quarter were actually signed before the virus gripped New York in March, said Bess Freedman, the chief executive of the brokerage Brown Harris Stevens.

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Several agents have said that units in larger buildings have been a particularly hard sell, because of concerns over crowded elevators and shared lobbies. And even though state guidelines no longer prohibit in-person showings, some buildings have not relaxed their rules and are still refusing to allow move-ins or apartment showings.

There may be more lasting changes in the months to come. The share of all-cash buyers dropped to 41 percent, down from an average of about 50 percent over the last several years, Mr. Miller said. That could have major implications for the luxury market, which had been propped up by investment buyers who typically bought without financing.

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iehi-feed-65407 Tue, 30 Jun 2020 21:18:13 GMT The Fed is buying some of the biggest companies' bonds, raising questions over why http://bankimplode.com/viewnews/2020-06-30_TheFedisbuyingsomeofthebiggestcompaniesbondsraisingquestionsover.html ``Disclosures filed this week surrounding its credit facilities show the Fed is not only buying the bonds of struggling companies hit hard by the coronavirus pandemic but also some of the stalwarts of American industry -- Microsoft, Visa and Home Depot just to name three companies whose debt the Fed holds directly.

The Fed holds an expansive list of other companies indirectly, including names like Apple and Goldman Sachs, through exchange-traded funds it has purchased.

In addition, it has purchased bonds in speculative-grade companies as well as ETFs, including the SPDR Bloomberg Barclays High Yield Bond, a fund in which the Fed holds a $412 billion position.

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"It does sort of make you wonder if it makes sense for them to be buying bonds of Apple. Spreads are so tight and stocks are doing so well. You wouldn't think they would need support from the Fed," said Kathy Jones, director of fixed income at Charles Schwab. "The reasoning I guess makes sense. But when you look at the outcome, you scratch your head and wonder whether this is where we need the money to go."

To be sure, the purchases thus far have been modest.Disclosures the Fed filed over the weekend show it owning nearly $430 million in individual bonds and $6.8 billion in ETFs. That's barely a sliver in a corporate bond market worth more than $10 trillion and fixed income ETFs with assets of $961 billion.

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Those purchases thus far have come in the secondary market, or bonds already issued. The Fed announced Monday it soon would open its primary market facility, which will buy directly from companies.

"They've achieved a couple things. They've managed to follow through while having very little impact on how those bonds actually trade," said Tom Graff, head of fixed income at Brown Advisory. "This is literally saying we're going to go through the motions of doing what we said we were going to do, but we're going to do the bare minimum and have as minimal impact as possible beyond what we've already created by acknowledging the program will exit at all."

This is at least a bit unseemly given it takes place while small businesses have no Fed facility of their own, and must struggle through SBA programs and unemployment to get any assistance (with possibly the majority of them not getting any, so far).

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iehi-feed-65406 Tue, 30 Jun 2020 20:02:03 GMT Land loss has plagued black America since emancipation -- is it time to look again at 'black commons' and collective ownership? http://bankimplode.com/viewnews/2020-06-30_LandlosshasplaguedblackAmericasinceemancipationisittimetolookaga.html Discriminatory practices have also affected who owns property as well as land. In 2017, the racial homeownership gap was at its highest level for 50 years, with 79.1% of white Americans owning a home compared to 41.8% of black Americans. This gap is even larger than it was when racist housing practices such as redlining, which denied black residents mortgages to buy, or loans to renovate, property were legal.

The lack of ownership is crucial to understanding the crippling economic disparity that has hollowed out the black middle class and continues to plague black America -- making it harder to accrue wealth and pass it on to future generations.

A 2017 report found that the median net worth for non-immigrant black American households in the greater Boston region was just US$8, but for whites it was $247,500. This was due to "general housing and lending discrimination through restrictive covenants, redlining and other lending practices."

Nationally, between 1983 and 2013, median black household wealth decreased by 75% to $1,700 while median white household wealth increased 14% to $116,800.

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iehi-feed-65405 Mon, 29 Jun 2020 13:38:39 GMT FLORIDA COVID19 UPDATE: Florida Creates $250M Assistance Fund http://bankimplode.com/viewnews/2020-06-29_FLORIDACOVID19UPDATEFloridaCreates250MAssistanceFund.html iehi-feed-65404 Fri, 26 Jun 2020 22:02:48 GMT Millennials Will Be Poorer Than Parents If They Can't Buy Homes - What Singapore's Example Teaches http://bankimplode.com/viewnews/2020-06-26_MillennialsWillBePoorerThanParentsIfTheyCantBuyHomesWhatSingapor.html Many analysts have zeroed in on housing as the reason millennials have failed to match their predecessors. As of 2019, millennials owned only 5% of the U.S. housing stock, compared with 15% for the previous generation at the same age. The homeownership rate for households headed by Americans younger than 35 was 43% in 2005, but only 31% in 2015. Instead of accumulating mortgage debt like their predecessors, they've racked up student loans and consumer debt.

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The U.S. used to facilitate mass wealth-building via homeownership. The GI Bill helped WW II veterans buy homes en masse, and the expansion of the suburbs gave them and the boomers who followed plenty of new homes to buy. But those homes have appreciated in price and nationwide construction has stalled, leaving many millennials priced out of the market amid a slow-growing stock of housing. Today, U.S. housing, rather than a driver of wealth accumulation, has become an engine of intergenerational inequality.

Some countries have done a better job than the U.S. of using housing to build and transfer wealth across generations. One of these is Singapore. Although most of Singapore's housing is government-built and is technically government-owned, the government allows occupants to buy and sell 99-year leases that essentially function as title deeds. Homeownership, therefore, is near-universal. The government also gives out subsidies to help young families buy starter homes. Because the government manages the supply of new homes, it can ensure that young people earn a decent return by the time they retire.

The U.S. could adapt this system to promote mass homeownership and wealth creation for millennials and later generations. The government could build and sell new housing, especially in inner-ring suburbs, potentially using eminent domain to keep construction costs low. Young people -- especially young families -- could get down-payment assistance to buy their first home. By carefully managing the amount of new housing construction, the government could make sure that home prices appreciated enough to provide people with a decent return over their lifetime, but not too much to price younger people out of the market.

Each generation would thus get to enjoy what the WW II generation and boomers enjoyed -- the security and personal freedom of owning a home at a young age, coupled with the knowledge that their wealth would appreciate over time. And because down-payment assistance would be funded by progressive taxation, the system would redistribute wealth to those who weren't born with rich parents.

The alternative -- letting young Americans reach middle age without a stake in the U.S. economic system -- is both sad and frightening to contemplate because it could lead not just to ennui but to unrest. A housing system built loosely on the Singaporean model would allow today's young people to enjoy the same life progression as their parents and grandparents, preserving the American dream in perpetuity.

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iehi-feed-65403 Fri, 26 Jun 2020 20:26:39 GMT Workers Were Allowed To Return To New York Offices This Week. Almost None Of Them Did. http://bankimplode.com/viewnews/2020-06-26_WorkersWereAllowedToReturnToNewYorkOfficesThisWeekAlmostNoneOfTh.html ... the city entered into Phase 2 June 22, allowing commercial office properties to operate at 50% capacity, outdoor dining to commence, barbershops to reopen and real estate agents to tour properties. There were fewer than 1,000 hospitalizations from the virus Thursday, the lowest number since March 18, per state figures. But businesses remain cautious with back-to-work plans, and occupancy at many office buildings this week has been even lower than some predicted, industry experts told Bisnow. Sources pointed to the summer lag as a contributing factor. Most acknowledged anxiety around the subway as a serious obstacle, and some said exploding infection rates in states that opened sooner has slowed the return.

"When we see high spikes outside of New York, there may be a fear factor here for going back to work, and it's not a surprise," said CBRE Senior Managing Director of Investor Services Thomas Lloyd, whose company handles property management for 80 office buildings in Manhattan and 20 across Westchester and Long Island. The company has been tracking occupancy levels each day since Monday. In the Downtown portfolio, which covers buildings south of 42nd Street, occupancy over the last two days was at around 6%. In properties north of 42nd Street, occupancy has been hovering around 9%, Lloyd said, and out of a total of 41 multi-tenanted buildings, six are still totally empty.

In buildings in the suburbs, which entered Phase 2 ahead of the city, occupancy is at around 30%, Lloyd said. "They are lower than expected, given the circumstances that the state of New York allowed 50% [capacity] and our surveys of tenants. We were expecting a 15% return to work in the first few days," he said.

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iehi-feed-65402 Fri, 26 Jun 2020 18:18:47 GMT Manhattan Office Rents Seen Plunging 26% in Prolonged Downturn http://bankimplode.com/viewnews/2020-06-26_ManhattanOfficeRentsSeenPlunging26inProlongedDownturn.html Asking rents could decline 26% to about $62.47 a square foot (roughly $672 per square meter) in a prolonged recession, according to a report from Savills. Rents haven't fallen to that level since 2012, the real estate services firm said.

Some offices in New York City have reopened, though many buildings remain empty. The city faces a long recovery with workers wary of public transportation and dense workplaces.

"Many assume that when the stay-at-home measures are lifted, there will still be Covid-19 fears that will continue to materially influence behaviors and the economy," Savills said. "These fears will likely remain until a vaccine or antibody therapy is developed and widely available, which experts currently estimate is at least 12 months away."

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iehi-feed-65401 Fri, 26 Jun 2020 12:35:31 GMT Specialized Loan Servicing Spanked By The CFPB http://bankimplode.com/viewnews/2020-06-26_SpecializedLoanServicingSpankedByTheCFPB.html iehi-feed-65400 Thu, 25 Jun 2020 17:19:42 GMT Wirecard goes bust as loss of 1.9bln EUR scandal puts focus on German oversight http://bankimplode.com/viewnews/2020-06-25_Wirecardgoesbustaslossof19blnEURscandalputsfocusonGermanoversigh.html An accounting scandal at one of Germany's fastest-growing blue-chip companies has raised doubts about the national financial watchdog and, coming on top of other high-profile cases of fraud, led to questions about the country's ability to oversee its corporate titans.

Some 1.9 billion euros ($2.1 billion) vanished from payment systems provider Wirecard, until recently heralded as Germany's emerging giant of the financial tech sector. Its CEO was arrested on suspicion of market manipulation and inflating financial numbers. And on Thursday the company said it was filing for insolvency, a form of bankruptcy protection.

Adding to the damage to Germany's corporate reputation was the reaction of the financial regulator, BaFin, when media reports last year questioned the company's accounting. Rather than investigate Wirecard, it targeted investors, banning them from betting on a drop in the share price, which plunged more than 40%.

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"WireCard was until now one of the few functioning tech companies that have come up with new ideas in the market place and now it turns out that that was to a great extent smoke and mirrors."

BaFin's head, Felix Hufeld, has conceded that Wirecard's implosion was "a disaster." But the agency is standing by its decisions throughout the scandal, details of which are still emerging.

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iehi-feed-65399 Thu, 25 Jun 2020 01:36:13 GMT ‘Will the Fed spend trillion of dollars, every year, forever to support the market?' asks billionaire Howard Marks http://bankimplode.com/viewnews/2020-06-24_WilltheFedspendtrillionofdollarseveryyearforevertosupportthemark.html iehi-feed-65397 Wed, 24 Jun 2020 02:52:00 GMT Trump's "Boy Wonder" Kushner Faces Foreclosure Auction on Times Square Building http://bankimplode.com/viewnews/2020-06-23_TrumpsBoyWonderKushnerFacesForeclosureAuctiononTimesSquareBuildi.html The massive retail condominium owned by Kushner Companies at 229 West 43rd Street in Midtown Manhattan is headed for a Uniform Commercial Code (UCC) foreclosure auction scheduled for June 30, according to an auction notice from JLL, which is marketing the sale.

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The auction-- which fast-tracks the foreclosure timeline -- is being pursued by one of the property's mezzanine lenders, Paramount Group, under the entity 229 WEST FUND VIII LP. Paramount had provided a $70 million mezzanine loan as part of larger refinancing in 2016. The 251,000-square-foot asset will be sold at a "as is, where is" basis -- all cash ...

Kushner made a splash with its $296 million purchase of the condo in the fall 2015, receiving a $470 million appraisal not long after closing the acquisition and then subsequently locking in a $370 million debt package a year later to refinance the asset (Kushner bought it from Africa Israel USA, a U.S. subsidiary of Israeli investment firm Africa Israel Investments, at a 7.53 percent cap rate, according to data from CoStar Group.) That package included a $285 million commercial mortgage-backed securities (CMBS) loan from Deutsche Bank as well as Paramount's $70 million mezzanine loan and a separate $15 million mezz loan from SL Green Realty Corp., as CO previously reported...

In the middle of an unpredictable and volatile retail market last year that spilled into the early part of this year, that $285 million CMBS loan was sent to its special servicer KeyBank last December due to income struggles caused by tenancy financial troubles. Its transfer came after Kushner failed to fund "a shortfall on the loan's debt service payments and required reserves," according to a previous statement from Kroll Bond Rating Agency (KBRA) that was reported by CO. The loan itself -- which had been previously watchlisted in Sept. 2017 -- is split among four CMBS conduit transactions, including the JPMDB 2017-C5, the CD 2016-CD2, the CD 2017-CD3 and the CGCMT 2017-P7. At the time of the transfer, Kushner had also defaulted on the building's junior mezzanine debt and was in negotiations with that lender, according to KBRA.

Not long after Kushner's purchase, tenancy issues began to set in, muddying its cash flow outlook. In the first two years, the landlord had unfruitful experiences with two different celebrity chefs. Guy Fieri's Guy's American Kitchen closed in 2017 after a 5-year-long stint at the location. And the landlord had also gotten embroiled in a lawsuit in early 2018 over leased space and rent payments with chef Todd English's operating company Outstanding Hospitality Management. English had been selected to oversee a food hall there that never came to fruition.

These misses, coupled with eventual troubles with two of its largest tenants -- experiential attractions in Gulliver's Gate and National Geographic's Ocean Odyssey -- culminated in the special servicing transfer of the $285 million senior mortgage earlier this year.

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iehi-feed-65393 Sun, 21 Jun 2020 17:13:25 GMT FHA Mortgage Alert! FHA Extends Foreclosure And Eviction Moratorium http://bankimplode.com/viewnews/2020-06-21_FHAMortgageAlertFHAExtendsForeclosureAndEvictionMoratorium.html iehi-feed-65392 Wed, 17 Jun 2020 16:35:35 GMT New York City Landlords Panic! 25% Of NYC Renters Didn't Pay June Rent http://bankimplode.com/viewnews/2020-06-17_NewYorkCityLandlordsPanic25OfNYCRentersDidntPayJuneRent.html iehi-feed-65391 Mon, 15 Jun 2020 18:46:39 GMT Slimy Florida Landlord Uses Ejection Law To Evict 91-Year Old Tenant http://bankimplode.com/viewnews/2020-06-15_SlimyFloridaLandlordUsesEjectionLawToEvict91YearOldTenant.html iehi-feed-65390 Mon, 15 Jun 2020 01:42:07 GMT Trump DOL Throws Pension Investors To The Private Equity "Hollowing Out America" Wolves http://bankimplode.com/viewnews/2020-06-14_TrumpDOLThrowsPensionInvestorsToThePrivateEquityHollowingOutAmer.html Trump's U. S. Department of Labor just opened the door for private equity wolves to sell the highest cost, highest risk, most secretive investments ever devised by Wall Street to 401k plan sponsors. 401k investors will be devoured like lambs to the slaughter.

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The Chairman of the world's premier securities regulator evidently is unaware a decade-plus of private equity investing by so-called "well-managed" pensions has resulted in increasingly disappointing, not to mention inflated and unauditable performance results. Warren Buffett, arguably the world's most respected investor, recently escalated his criticism of private equity firms.

At last year's Berkshire Hathaway BRK.B annual meeting Buffett stated, "We have seen a number of proposals from private equity firms where the returns are not calculated in a manner that I would regard as honest... If I were running a pension fund, I would be very careful about what was being offered to me."

Chairman Clayton and DOL may think they know more about the risks and rewards of private equity investing than Buffett. They don't.

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iehi-feed-65389 Sun, 14 Jun 2020 22:26:47 GMT Meet Raz Simone, The Alleged ‘Warlord' Of The Capitol Hill Autonomous Zone http://bankimplode.com/viewnews/2020-06-14_MeetRazSimoneTheAllegedWarlordOfTheCapitolHillAutonomousZone.html iehi-feed-65387 Sun, 14 Jun 2020 02:01:04 GMT Mnuchin secrecy on bailout sparks rift with Congress http://bankimplode.com/viewnews/2020-06-13_MnuchinsecrecyonbailoutsparksriftwithCongress.html Treasury Secretary Steven Mnuchin is facing criticism from lawmakers and watchdog groups after refusing to disclose the businesses that received more than $500 billion in government-backed emergency loans.

Mnuchin ignited controversy on Wednesday when he said the Trump administration will not reveal the names of companies and nonprofits that got the so-called Paycheck Protection Program loans, which are guaranteed by the taxpayer and can be forgiven in full if borrowers maintain their payrolls.

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A senior House Democratic aide said lawmakers need to know the information to assess whether the administration is "trying to hide bad decisions, and the true impact of the PPP program, especially in meeting the needs of underserved communities."

Rep. Ben McAdams, a Utah Democrat who serves on the House Financial Services Committee, said "transparency, not secrecy, is the only way to keep faith with citizens that their money is getting to those for whom it was intended." "What part of `it's taxpayer money' does he not understand?" he said of Mnuchin.

The SBA has also withheld information from the Government Accountability Office, the watchdog agency that serves Congress. The GAO confirmed on Friday that it has received no information about when SBA will provide data the agency requested on the loans and the separate Economic Injury Disaster Loan program.

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iehi-feed-65386 Sat, 13 Jun 2020 19:57:49 GMT New York Homeowners Join Conga Line To Florida http://bankimplode.com/viewnews/2020-06-13_NewYorkHomeownersJoinCongaLineToFlorida.html iehi-feed-65383 Thu, 11 Jun 2020 18:17:28 GMT Another Bank Bailout Under Cover of a Virus | Ellen Brown http://bankimplode.com/viewnews/2020-06-11_AnotherBankBailoutUnderCoverofaVirusEllenBrown.html In March 2020, under cover of a national crisis, the Fed therefore flung the doors open to its discount window, where only banks could borrow. Previously, banks were reluctant to apply there because the interest was at a penalty rate and carried a stigma, signaling that the bank must be in distress. But that concern was eliminated when the Fed announced in a March 15 press release that the interest rate had been dropped to 0.25% (virtually zero). The reserve requirement was also eliminated, the capital requirement was relaxed, and all banks in good standing were offered loans of up to 90 days, "renewable on a daily basis." The loans could be continually rolled over, and no strings were attached to this interest-free money -- no obligation to lend to small businesses, reduce credit card rates, or write down underwater mortgages. Even J.P. Morgan Chase, the country's largest bank, has acknowledged borrowing at the Fed's discount window for super cheap loans.

The Fed's scheme worked, and demand for repo loans plummeted. But unlike in Canada, where big banks slashed their credit card interest rates to help relieve borrowers during the COVID-19 crisis, US banks did not share this windfall with the public. Canadian interest rates were cut by half, from 21% to 11%; but US credit card rates dropped in April only by half a percentage point, to 20.15%. The giant Wall Street banks continued to favor their largest clients, doling out CARES Act benefits to them first, emptying the trough before many smaller businesses could drink there.

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State and local governments with a mandate to serve the public interest deserve to be treated as well as private Wall Street banks that have repeatedly been found guilty of frauds on the public. How can states get parity with the banks? If Congress won't address that need, states can borrow interest-free at the Fed's discount window by forming their own publicly-owned banks. For more on that possibility, see my earlier article here.

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