When Wall Street is your slumlord

Ask anyone in the real estate or financial industry: we are not in middle of another housing bubble! You can be sure of that!

OK. Sure.
Home prices have exceeded the peak Housing Bubble prices.
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And it's true that housing affordability is at an 8-year low, despite rock-bottom interest rates.
Plus the total value of housing stock is at all-time highs, while home buyer traffic is at bubble levels.

And, of course, house flipping is back.

A tactic that helped define the height of homebuying madness in the U.S. in the years before the market collapsed is rearing its head again.
Home flippers, who buy homes as a speculative bet on short-term price appreciation, accounted for 6.1 percent of U.S. home sales in 2016, according to Trulia, which defines a flip as a property sold twice in a 12-month period in arm’s-length transactions. That’s the highest share since 2006, when flips accounted for 7.3 percent of sales.
Flipping has made a strong comeback in cities that were battered by the foreclosure crisis. That includes Las Vegas, where 10.5 percent of 2016’s sales were flips, the highest in the country, as well as Tampa, Fla., and Fresno, Calif. Eleven metropolitan areas, including Memphis, Tenn., and Atlanta, had flip rates that reached 17-year highs, according to the Trulia data.

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Nevertheless, this is not a housing bubble!
Why is that? Because rich people are buying. Specifically, wealthy investors.

Anyone who has ever struggled to get her landlord to fix a broken appliance can imagine how much worse it could have been if she were paying rent to a faceless hedge fund based thousands of miles away. That tenant’s nightmare may be on its way to reality for hundreds of thousands of Americans, as Wall Street firms have snapped up 200,000 family houses with the intention of renting them out.

Banks, hedge funds, and private equity firms have been amassing those real estate holdings for a few years now, but their plan for wringing profit out of the rental market is just starting to draw real scrutiny. The New York-based hedge fund Blackstone Group is now the nation’s largest landlord after purchasing over 40,000 foreclosed family homes for the purpose of renting them out.

While firms like Blackstone often farm out the day-to-day management of the rental properties to third-party companies, those intermediaries are often also based in faraway states. Some have a track record of being unresponsive to basic things like broken sewer pipes, as the Huffington Post has reported. The banks and their intermediaries may neglect basic upkeep of these properties. In that worst-case scenario for renters, local and attentive property managers and building supers will get replaced with “Wall Street-based absentee slumlords,” in David Dayen’s phrase.

So what is it like to have a "Wall Street-based absentee slumlord"?
It turns out that it's pretty much what you would assume.

Now among America’s biggest landlords, some of these companies are leaving tenants like Allen in the cold. In a business long dominated by mom-and-pop landlords, large-scale investors are shifting collections conversations from front stoops to call centers and courtrooms as they try to maximize profits.
American Homes 4 Rent, one of the nation’s largest operators, and HavenBrook filed eviction notices at a quarter of its houses, compared with an average 15 percent for all single-family home landlords, according to Ben Miller, a Georgia State University professor and co-author of the report.

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In January 2012, then-Federal Reserve Chairman Ben Bernanke encouraged investors to use their cash to stabilize the housing market and rehabilitate the vacant single-family houses that damage neighborhoods and property values.
Now, the Atlanta Fed’s own research suggests that the eviction practices of big landlords may also be destabilizing. An eviction notice can ruin a family’s credit and make it more difficult to rent elsewhere or qualify for public assistance.

Imagine that. Poor people, especially blacks and millennials, are getting screwed by Wall Street yet again.

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Fortunately, President Obama felt your pain.
No really! I kid you not.
Obama, on his way out the door, came to the rescue...of Wall Street.

Invitation Homes, the 2012 buy-to-rent creature of private-equity firm Blackstone, and now owner of 48,431 single-family homes, thus the largest landlord of single-family homes in the US, accomplished another feat: it obtained government guarantees for $1 billion in rental-home mortgage backed securities.
The disclosure came in an amended S-11 filing with the SEC on Monday in preparation for Invitation Homes’ IPO. Invitation Homes bought these properties out of foreclosure and turned them into rental properties, concentrated in 12 urban areas. The IPO filing lists $9.7 billion in single-family properties and $7.7 billion in debt.

So now the taxpayer is on the hook for Wall Street-based absentee slumlords.
Hurray?

So in its waning hours, the Obama Administration gave a completely unjustified bailout to private equity landlords, that Fannie Mae is guaranteeing the income of all but the bottom tranches of Blackstone’s latest rental securitization.
Let us stress that there is absolutely no policy justification for this. The mission of the government sponsored agencies is to promote home ownership, not to give real estate speculators a “get out of losses or underwhelming returns for free” card. Even worse, rather than forcing the private equity industry to take some well-deserved lumps for miscalculation, it will encourage them to continue to compete with lower-income prospective homeowners for purchasing properties. That means it will be even more difficult for young people to buy homes. Lambert has pointed out repeatedly in his stats wrap in Water Cooler that real estate markets are suffering from a shortage of homes. Having private equity continue to be on the prowl for lower priced properties that they know they can unload from an economic perspective means that the pauperization of the middle class is now official policy.
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And you can't read it in GOS, only C99P

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sojourns's picture

@gjohnsit n/t

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"I can't understand why people are frightened of new ideas. I'm frightened of the old ones."
John Cage

@sojourns

I've seen rising home prices represented as a good thing a number of times. Guess it is for the rarefied few suffering oxygen deficiency at their giddy and ever-rising financial heights - aided in America by the unwilling and long-suffering public they've impoverished via political corporate party representatives such as Obama.

Not so hot for the average person unable to buy a home or even to rent a decent one after they've all been spiffed up by investment groups at great expense to appeal to a relatively small market able to afford the atrociously hiked-up rents. And not allowing pets, smokers or any concept of payment renting a comfortable home for old farts who grew up with such things as a basic 'my home is my castle' notion.

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Psychopathy is not a political position, whether labeled 'conservatism', 'centrism' or 'left'.

A tin labeled 'coffee' may be a can of worms or pathology identified by a lack of empathy/willingness to harm others to achieve personal desires.

All over the country, except for counties where the population is decreasing, rents are jumping. People who can't dream of owning a house are finding that it's tough to find an affordable rental unit.

People in the most productive years of their lives are finding that not only are they job insecure, they are now housing insecure.

Thanks for the essay on this situation that affects the majority of people. I am glad you put blame on the Enabler-in-Chief, Obama, as well as the underlying culprit, monopoly capitalism.

There seems to be no end to the pain, suffering, and grief the 1% is willing to heap on the 99%.

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"The justness of individual land right is not justifiable to those to whom the land by right of first claim collectively belonged"

ZimInSeattle's picture

Republicans will be completely to blame since they control the whole government. Privatize the profits, socialize the losses. 'Twas ever thus.

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"Those who make peaceful revolution impossible will make violent revolution inevitable." - JFK | "The more I see of the moneyed peoples, the more I understand the guillotine." - G. B. Shaw Bernie/Tulsi 2020

It is worse than it was during the primary. The diaries there are crap. They're still selling corporate Dems - poor, poor Hillary.

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"Religion is what keeps the poor from murdering the rich."--Napoleon

@dkmich No.

When I was invited to leave on March 15, I left.

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"The justness of individual land right is not justifiable to those to whom the land by right of first claim collectively belonged"

redacted

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~annominous

@dkmich
I just took a look and everything is still about Trump.

Doesn't that get repetitive and boring?

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PriceRip's picture

@dkmich
          Somehow the "log in" daemon activated and the passive / aggressive "acknowledge your prior unmutual behavior" dialogue popped up.

          I carefully made sure I was logged out. Then I closed out the application's Tab. Never gonna make that mistake again!

Stop
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Phoebe Loosinhouse's picture

@PriceRip

Posting there is like an episode of The Prisoner:

The Prisoner "A Change of Mind"

From the IMBD storyline:

Whilst exercising in the woods Number Six is accused of being 'unmutual' for not using the village gym and a fight breaks out. He is summoned before the village committee who decide he must undergo instant social training

,

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" “Human kindness has never weakened the stamina or softened the fiber of a free people. A nation does not have to be cruel to be tough.” FDR "

PriceRip's picture

@Phoebe Loosinhouse
          the sincerity, and intellectual abilities of the denizens at TOP. They lack the grace and subtly I have come to expect in my fellow-travelers.

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Strife Delivery's picture

Yup, I'm one of those dreaded millenials.

You know, those super lazy, entitled kiddies.

I have been trying to get into graduate school (the number of slots seem to be getting smaller). And the work I am trying to find in the interim requires experience that I don't have...because I can't find the work necessary in the field to have said experience but can't get them....because I don't have the experience.

Regarding housing...good luck. Instead of buying homes on your own, if you do even buy a house, you buy it with someone else. Otherwise you stay in an apartment or renting a house...with 2-3 others.

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Phoebe Loosinhouse's picture

housing crisis: creating the boom by underwriting bad and/or fraudulent mortgages, securitizing bad mortgages, foreclosing on bad mortgages, reselling foreclosed properties, buying bundled foreclosed properties at a discount and then dominating the rental housing market. As a side bonus, their greed has made a hash of the American title and deed system and robbed every city and town of mortgage recordation fees. And this was all facilitated over the last eight years by the executive branches of a Democratic administration, whose Justice Department turned a blind eye to rampant frauds being perpetrated and whose HUD and Treasury departments were feckless, incompetent or worse in offering any meaningful help to homeowners. But hey, Go Dems!

Now that the American Dream of individual home ownership has been greatly curtailed, the PTB can now turn their attention to ruining another sector of the American economy, rental housing.

I was aware when the bulk buying of single family homes was going on and I made a prediction that it would NOT work out for the hedge funds getting involved, largely because single family homes do not scale out and balance the costs of maintenance and repairs the same way an apartment complex does. In an apartment complex, an on-site repair crew can provide timely and efficient response to whatever issues arise - electrical, plumbing, etc. This is not the case with single family housing which is spread out over a larger area and requires additional time to even get to the property. It's hard enough to make a profit on one single family home run as an investment, once taxes, insurances, maintenance and repairs are factored in, plus any down time between tenants or if a tenant stops paying rent, and then there's the cost of eviction. Now, even assuming the funds got a great buy on the original house, they have all those factors PLUS they are expected to be making a profit for their investors while paying for the overhead of their own company to boot. Trust me, the average rent in an average town is not going to make enough to cover expenses and make a reasonable return for the time,money and energy expended.

But it looks like our great Dems and President Obama put us all on the hook once again in order to "privatize profit and socialize losses" which is the basic tenet underlying all their financial actions.

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" “Human kindness has never weakened the stamina or softened the fiber of a free people. A nation does not have to be cruel to be tough.” FDR "

CS in AZ's picture

@Phoebe Loosinhouse

When my in-laws were moving back to AZ about five or six years ago, they looked at a lot of houses and two they liked happened to be foreclosures, or "bank-owned properties" that were sitting empty, which you might imagine they would be anxious to sell.

The in-laws had good credit and enough money for a good-sized down payment, they were prepared to make full price offers, and wanted quick closing as they were in the process of moving and had already sold their house up north. In both cases, they were told by the listing agents that the escrow/closing process would take at least 6 to 8 months, and it would be at least 2-3 months to even hear if their offer was accepted or not! They couldn't possibly wait that long, obviously, so they stopped even looking at bank-owned houses, which were essentially impossible to buy for anyone needing to get into a house.

We could not understand at the time why the banks were making it impossible for regular people to buy these empty houses, and preferred letting them stay unoccupied for months. It seemed bizarre.

It looks like maybe the whole game was set up to make sure that only these big investment companies could buy them, and intentionally keep out people who wanted to buy a home to occupy and live in. Now I see what they were up to.

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sojourns's picture

@CS in AZ but perhaps it takes so long because many of the foreclosures are still in dispute? With whatever awkwardly instituted programs the gov't is offering.

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"I can't understand why people are frightened of new ideas. I'm frightened of the old ones."
John Cage

CS in AZ's picture

@sojourns

if maybe the lengthy timeframe was just due to stupid bureaucracy within the banks. But if the foreclosures were still in dispute on those particular houses, I would think they shouldn't have been listed as For Sale. And the previous owners were long gone... I don't really think that was the reason, but I could be wrong. It just seemed weird to have houses listed for sale and then not be able to accept a full price offer in a timely manner.

We asked the real estate agent why it would take so long, and I remember her just vaguely saying something like that's just how they operate. At any rate, they sure were not interested in selling the houses to qualified buyers who were ready to move in.

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Phoebe Loosinhouse's picture

@CS in AZ

foreclosed, has title, and the authority to sell. Trying to buy a house with bank ownership is insane and ridiculous, every sale is like the touring company of Bleak House. Short sales( a property that is still ostensibly owned by an underwater seller and has to have bank agreement to sell) are even worse! Meanwhile, the foreclosed houses sit empty, cold dank and unheated. As an unoccupied, unsold asset, they are depreciating every second. There is still a huge shadow inventory of housing not on the market and empty and not owner occupied and yet the bank has not yet foreclosed. People have no idea of how f!@ked up the housing landscape actually is.

And lest I forget, this is all the result of eight years of a Democratic administration where all these issues fell under the direct control of the executive branch of Barack Obama - SEC, Treasury, HUD and Justice. Maybe sometime someone will write a real book dovetailing all the issues, all the personalities and all the incompetence (or worse).

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" “Human kindness has never weakened the stamina or softened the fiber of a free people. A nation does not have to be cruel to be tough.” FDR "

sojourns's picture

@CS in AZ The banks just do what they want regardless of the law, either in spirit or letter. Whatever the reason, it is profit motivated.

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"I can't understand why people are frightened of new ideas. I'm frightened of the old ones."
John Cage

@CS in AZ

Fits the notion of corporate monopolies on everything and the public ultimately owning nothing, doesn't it? I saw a reference to the World Bank 'privatizing' seeds in my inbox earlier today, but haven't been able to muster up the heart or energy to look at that one yet.

Years back, (perhaps 6-8 years back?) I came upon a whole huge related series of papers on the internet, each of which detailed the prospective carving up of what seemed to be every purchasable need in every area of life in seemingly every country as allocated specifically to various of the largest corporations, such as Monsanto, but had no means of verifying authenticity; this seemed evidently related to the sort of corporate coup 'trade deals' we mostly now know enough about to fight them tooth and nail, but at the moment, at least, I can't recall much about them, except that they sounded all too plausible.

But each of the largest corporations seems to want a total monopoly, that being how they became among the largest, and to regard public property, non-multi-millionaire private property, anything in the commons and life itself all as nothing more than commodities to pirate away for their own ever-increasing profits, by hook or by crook...

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Psychopathy is not a political position, whether labeled 'conservatism', 'centrism' or 'left'.

A tin labeled 'coffee' may be a can of worms or pathology identified by a lack of empathy/willingness to harm others to achieve personal desires.

@Phoebe Loosinhouse

Plus, absentee corporate slumlords can more easily manage to delay/evade repairs - bonus!

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Psychopathy is not a political position, whether labeled 'conservatism', 'centrism' or 'left'.

A tin labeled 'coffee' may be a can of worms or pathology identified by a lack of empathy/willingness to harm others to achieve personal desires.

karl pearson's picture

The Home and Garden TV channel airs a program called "Flip or Flop". Making thousands of dollars looks so easy.

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snoopydawg's picture

@karl pearson guesss who was in the business of doing just that?
Why our mostest progressivest SAVIOR Elizabeth Warren. Yep she who is constantly yelling at the banks and the student loan people (has she actually gotten any legislation passed that would help people) was into buying foreclosured houses and flipping them for a tidy profit. In fact she was so into doing that, she loaned money to her family members so that they too could get in on buying up foreclosed homes and making money from people's misery.
And that Barry, he was the greatest president ever since FDR, right? That's what I see written everywhere. And boy do people miss him and want him back in the WH because he did so much for Main Street Americans and made sure that the banks can't screw people again ever.
Damn him for what he did after campaigning on what he was going to do.
Biggest con artist bait and switch ever.
IMG_0887_0.JPG

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Which AIPAC/MIC/pharma/bank bought politician are you going to vote for? Don’t be surprised when nothing changes.

Mark from Queens's picture

@karl pearson It's the biggest character flaw of our countrymen, sold to us since birth generation after generation, as the ultimate American Dream. Look at all the dumb tv shows that cropped up in the 80's and after, "Lifestyles of the Rich & Famous," "Who Wants to Be A Millionaire" etc.

The original premise for the American Dream was far different in the 1930's when it was first used during the Great Depression:

From the "The Great Gatsby and the American Dream":

"Throughout our history, the pure gold of this vision has been heavily alloyed with the dross of materialistic aims. Not only did the wage scales and our standard of living seem to promise riches to the poor immigrant, but the extent and natural wealth of the continent awaiting exploitation offered to Americans of the older stocks such opportunities for rapid fortunes that the making of money and the enjoying of what money could buy too often became our ideal of a full and satisfying life. The struggle of each against all for the dazzling prizes destroyed in some measure both our private ideals and our sense of social obligation."

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"If I should ever die, God forbid, let this be my epitaph:

THE ONLY PROOF HE NEEDED
FOR THE EXISTENCE OF GOD
WAS MUSIC"

- Kurt Vonnegut

CB's picture

Profiting from the misery of others while having fun doing it.

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Of course housing isn't a bubble. When housing prices went up under Bush, that was a bubble. Then went up under Obama because he saved the economy. It's completely different.

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CB's picture

was great while it lasted.

Now we have record numbers of children living with their parents while concurrently having record sales of houses to corporatists.

Here's what Karl Marx had to say about rentier capitalism (with a small update to reflect the times):

"Hence the extraordinary growth of a class, or rather, of a stratum of rentiers, i.e., people who live by 'clipping coupons' [in the sense of collecting interest payments on bonds], who take no part in any enterprise whatever, whose profession is idleness. The export hoarding of capital, one of the most essential economic bases of imperialism, still more completely isolates the rentiers from production and sets the seal of parasitism on the whole country that lives by exploiting the labour of several overseas countries and colonies indigenous citizens."

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@CB The mark of a good theory is if it causes other scientists to delve into subjects alluded to in the original theory. Marx holds up because he made contributions not only into the political economy of his time but also ecology, before it was recognized as a science; agronomy; and the health of workers & their families.

I think Americans have been misled into thinking that there was a large middle class when Marx would have termed them working class who were fairly well paid: Middle income not middle class. Today, most medical doctors work for a for-profit company or a for-profit hospital and even though they made a large salary(partly because of favorable visa requirements against foreign doctors) Charlie Whiskers classed them as "aristocrats of labor."

I agree with his use of the term parasitism.

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"The justness of individual land right is not justifiable to those to whom the land by right of first claim collectively belonged"

sojourns's picture

flipping houses should be illegal. One must own the house, not necessarily to live in, but own it for at least five years barring catastrophic need to sell. I'm just throwing numbers out here. I loathe parasitic business practices.

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"I can't understand why people are frightened of new ideas. I'm frightened of the old ones."
John Cage

@sojourns I don't know about illegal, but short term capital gains should absolutely be taxed vastly higher than long term. All capital gains need to take into account the length of time the asset was held. A 100% gain on an asset held for a day (house flipping, high frequency stock trades, etc.) should be extremely high vs a 100% gain on something held for a decade.

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Mark from Queens's picture

their positions in the real estate markets. And it's not just here, it's all over the world. From the NY Daily News, Juan "Gonzalez: U.S. firms buy housing in Spain, raise rent and evict tenants"

Major U.S. firms like Blackstone Group, Goldman Sachs, Apollo Management and Cerberus are on a mission to conquer the housing markets of other countries as well, hoping to reap huge profits in the process.

In Spain, for instance, these firms have been vying quietly for two years to gobble up tens of thousands of residential properties in Madrid and Barcelona at fire sale prices.

None has moved more quickly than Blackstone, which is why a group of Spanish emigres in this country has joined with local housing advocates for a planned protest Wednesday outside Blackstone’s Park Ave. headquarters.

Even as unemployment has eased in our own country, Spain remains mired in deep depression — with a 25% unemployment rate, the collapse of several major banks and astronomical budget deficits. Spanish real estate prices remain 40% below their level in 2007. More than 700,000 citizens have fled the country since 2008 and some 3 million housing units sit empty.

This angers me on so many levels. These fucking scumbags took all that monopoly money in 2008, printed up in a panic by the Fed after they held the gov't hostage with a gun to its head that the world would blow up if they weren't bailed out, and not only didn't stimulate the economy with loans to people, but paid themselves grand bonuses and deepened their positions in the real estate markets and into the myriad of ponzi schemes Wall St spends most of its energy on developing, which is done largely by luring in the best and the brightest from engineering and mathematics backgrounds with promises of bigger paydays than they would if they'd gone into science.

If only voters were informed about such downright evil enterprise, you know like maybe newspaper front page/top of the hour radio reports/major prime-time tv expose/website headline instead of being tucked away to appear almost as afterthoughts, we'd be able to build a movement. Over one million people, I think, were thrown out of their homes based on fraudulent mortgages.

What we need is the proper riled up indignation that stories like these deserve. And with such a feckless media running interference for their corporate masters/bank advertisers there's no chance it will see the light it deserves. So the public remain largely ignorant to just how deep the criminality and greed goes, though they perceive the malaise in their local landscapes as they daily see shuttered businesses, new buildings being erected and rest soaring, as the rich get richer. People sort of get it, but don't seem to understand just how pervasive the criminality and greed are of these Economic Terrorists immunized from the "rule of law", and how acutely it effects their bottom line, even when they don't perceive to be directly effected.

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"If I should ever die, God forbid, let this be my epitaph:

THE ONLY PROOF HE NEEDED
FOR THE EXISTENCE OF GOD
WAS MUSIC"

- Kurt Vonnegut

Phoebe Loosinhouse's picture

@Mark from Queens

I always used to say that if I had a zillion dollars, I would go around the country leaving copies of A People's History of the United States, and Shock Doctrine in public places with a little sticker on them that said "Read this book and then pass it along".

I'm thinking that David Dayan's book Chain of Title deserves the same treatment,because it shows how the fraudulent behavior of the banks trickled down and disrupted and destroyed not just our financial systems and housing stock but the backbone of all property ownership as well, the deed and title system of the US which had been the envy of the world.

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" “Human kindness has never weakened the stamina or softened the fiber of a free people. A nation does not have to be cruel to be tough.” FDR "

@Mark from Queens

I recall seeing various articles and advertising promoting global purchases of homes all over the world as investments for consortiums years back, when I was doing a lot of internet research and had a more functional... everything, lol - there was often a lot more interesting factual info available re corruption tracing and actual stock ownership of various operations in business sections than most other places...

Personally, I'd say that the stinkers are after everything and will be sadly disappointed when they have it all and nobody and nothing but a dead planet and a lot of electronic data-dots which may not even appear as symbols if the power goes down for the count. What will they do for amusement then?

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Psychopathy is not a political position, whether labeled 'conservatism', 'centrism' or 'left'.

A tin labeled 'coffee' may be a can of worms or pathology identified by a lack of empathy/willingness to harm others to achieve personal desires.

solublefish's picture

Looks like "punctuated speculation" on the right side. Or perhaps "punctuated disequilibrium", /pace/ Stephen J Gould.

But hey, the scam worked out great for those grifters the first time around, so they would be fools not to try if again, right?

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Well, well, well - -

I wondered where you went. I haven't been paying much attention to DK of late - only to discover that you done been bojoed. Merciful heavens! Which is yet one more reason to leave and never look back. Identity politics and useless political theater. Meanwhile actual people are being increasingly harmed. I saw that you used the term "bullshit" in one of your last comments. It's an interesting thing over at DK - it can be used to send you a warning or time-out if you are on their shit list, but gains you uprates galore if you are their wunderkind.

This article - as is the case with everything you do - is wonderful. Thoughtful, well-researched, well-argued - and with a compelling conclusion. I don't think a limit on the choice of words, or requirement not to offend certain constituencies, or a list of persons/places/things which cannot be criticized contributes to intelligent dialog or the ability to engage effectively.

Which you do.

Best - J (fka Johnnygunn)

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@Jamawani
of ejecting all of their independent thinking people, GOS is making themselves irrelevant and boring.
And how are you going to keep people motivated and inspired when you don't stand for something, only against Trump?

A year from now it will be "Markos who?"

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The rising cost of housing is one of the major factors decimating the middle class lifestyle. In economic terms it is referred to as economic rent. You are paying someone for what the own, not for their contribution. It's speculation at its most evil. It underlies the the increase in cost of everything. All major cities in developed countries and developing countries are seeing this, from New York to London to Moscow and to Beijing. This is nuts. We subscribe to the principle that the free market is the only mechanism that can price things. In the case of housing this turns into a disaster. Some cities, for instance NYC, have realized this and implemented rent control. The slam is that it distorts the market. It depresses the rising cost of housing, and that's good. It also decreases the incentive to maintain and improve a housing unit, but that can be solved without huge transfers of wealth from the working class to the ownership class.

The basic mechanism is that the housing market inflates the cost of a housing unit, far beyond inflation. When you buy or rent a housing unit you will pay for that inflated price, plus profit for the owner. The investment community steps in, writes mortgages and makes a fortune by casting these cash-flow assets into investment vehicles. Even at 4% mortgage you will pay 3.4 times the amount borrowed over a 30 year term. Everyone at the top gets rich off of the salary cash flow of the middle class. Even in rentals, the owner has a mortgage which you are paying for, plus his profit. This inflates the cost of living for everyone and has massive secondary effects in the cost of everything, since all people have to pay for housing.

The housing market is a "catch-22". If it inflates, then the market is "healthy". But to get back to historic housing unit prices and to restore the middle class the market has to deflate.. by a lot. This will wipe out much of the wealth accumulated by the owner class. It would collapse the economy as there would be massive foreclosures, dumping housing onto a dead market. We are stuck, because we aspire to the basic rules of protecting wealth at all costs. Paying economic rent to the ownership class is what decimates our lifestyles. If you think about it, bailing out the ownership class instead of the debtor class in the crash of 2007 is proof of this analysis.

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Capitalism has always been the rule of the people by the oligarchs. You only have two choices, eliminate them or restrict their power.

@The Wizard

But how would it dump houses into a dead market, with so many desperate to buy, if only housing were at a more affordable price? It's the investment groups which have globally hiked house prices as wages continue to effectively drop with prices rising on everything else.

Wouldn't a living wage and affordable housing create a boom in the real economy? Of course, democracy is required for such things and the people won't get that until they make it happe, as TPTB and their political lackeys certainly won't reverse their plans, being high on delusional and suicidal greed...

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Psychopathy is not a political position, whether labeled 'conservatism', 'centrism' or 'left'.

A tin labeled 'coffee' may be a can of worms or pathology identified by a lack of empathy/willingness to harm others to achieve personal desires.

@The Wizard I daresay that the housing market is in no way a free market. If it was, new housing would be popping up everywhere due to high prices which indicate high demand. That's how free markets work.

The housing market is crony capitalism, the unholy union of government and wealthy special interests. They ensure supply is constricted so that prices continue upwards.

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jwa13's picture

When I was driving to work in the 2006 - 08 timeframe, listening to morning "drive-time" talk radio, about one-half of the ads (every couple of minutes or so) were for "house-flippers". I knew then that we were in trouble.

Although I don't do "drive-time radio" anymore, I do tune in occasionally. About one-half of the ads (every couple of minutes or so) are for "house-flippers". We are in trouble again -- this time in deeper dogshit, because O'Bummer changed NOTHING!! ("How's that hopey-changey shit working out for ya??" -- "...look forward, not backward", yadda yadda --) and now a real-estate speculator(!) is in charge of everything --

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When Cicero had finished speaking, the people said “How well he spoke”.
When Demosthenes had finished speaking, the people said “Let us march”.

jwa13's picture

you are noticed and well-received (Welcome! -- in its original sense).

Be aware that c99 has functioned, and (we trust) will continue to function as an "open forum", in the original sense of the term (Greek/Roman forum/agora -- https://en.wikipedia.org/wiki/Agora "The agora was the center of athletic, artistic, spiritual and political life of the city. The Ancient Agora of Athens was the best-known example".

That is, anyone could haul out her/his own soapbox, stand up on it, and commence to address any audience that cared to gather and listen, about any topic whatsoever. (Socrates, Plato & Aristotle gained their first adherents in Western philosophy among the "hangers-on" who were just "hanging out" in the Agora.) In general, this community (OUR community) tends to lean "liberal" (although not in the sense that the demoRATS appear to define "liberal" these days); but there seems to be a lot of room for a numerous range of voices, and varying opinions, across the entire spectrum of human thought (and it isn't just "political opinion"; you will encounter essays addressing first-hand healthcare experiences; prison disasters; cute pet stories; potential useful [and detrimental] application of firearms; and consideration of the afterlife, among other topics). "Gatekeeping" seems to be minimal - JohnnyC (JtC) requires a modicum of dignity in our discourse; but any topic appears open for discussion.

Once again, welcome BACK -- and please post something soon --

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0 users have voted.

When Cicero had finished speaking, the people said “How well he spoke”.
When Demosthenes had finished speaking, the people said “Let us march”.