Property Grunt

Thursday, December 25, 2008

Where is my golden notepad?

Web of Spiderman #6

Charles Anderson (in thought): Proud of yourself, Anderson?
Spider-Man: Proud of yourself, Anderson?
Charles Anderson: Spider-Man!
Spider-Man: Yeah, that's right. You know -- the guy you shot at for trying to save some innocent lives before -- Yeah, THAT Spider-Man. Y'know, it's funny. A few minutes ago, I would've happily chased ol' tubby for you.. to finally nail him for a convictable crime: stealing those typewriters. Only, it's NOT a crime now, is it? It's government sanctioned! He's not a criminal -- I AM!
Charles Anderson: Go on. Make me feel bad. Done yet?
Spider-Man: Almost. The Kingpin got HIS reward?! Well, take a gander friend! I've got MINE!

I hope all of you had an excellent holiday and before the year ends, I have some more financial implosions to present.

Developers Ask U.S. for Bailout as Massive Debt Looms

With a record amount of commercial real-estate debt coming due, some of the country's biggest property developers have become the latest to go hat-in-hand to the government for assistance.

A recent report by Deutsche Bank shows a sharp drop in the number of loans paying off from October to November. (.pdf)

They're warning policymakers that thousands of office complexes, hotels, shopping centers and other commercial buildings are headed into defaults, foreclosures and bankruptcies. The reason: according to research firm Foresight Analytics LCC, $530 billion of commercial mortgages will be coming due for refinancing in the next three years -- with about $160 billion maturing in the next year. Credit, meanwhile, is practically nonexistent and cash flows from commercial property are siphoning off.
Unlike home loans, which borrowers repay after a set period of time, commercial mortgages usually are underwritten for five, seven or 10 years with big payments due at the end. At that point, they typically need to be refinanced. A borrower's inability to refinance could force it to give up the property to the lender.

There is absolutely no logic to support an argument to include these developers in the bail out because all they want to do is to hold onto to their buildings. And with the commercial rental market tanking, they want the government to act as their surrogate tenant until the market picks up again. These developers are not lending out any money to others nor are they are providing any services to the public.

Back in the 80’s the real estate developers got hit, albeit, it was not as large as what is happening now, but those developers did not run to the government for milk money when their teets ran dry. If they could not hold onto to their buildings, they declared bankruptcy and turned the keys in.

Real estate development is akin to making a movie because there are so many moving pieces involved and the chaos it brings. And like movies, alot of them fail to make any money. That is why the successful developer needs to act like Roger Corman in order to make a profit.

As for them bitching and moaning about how dire the situation is, I believe the expression is “You sleep in the bed you s**t in .” Real estate development is not a risk free endeavor. One of those risks is being able to pay a mortgage. If you can’t pay, you can’t play and you can’t stay. These developers were fully aware of what they were getting into. So what the hell happened? These geniuses rolled the dice and came up Snake Eyes. So when they jumped off the cliff. Instead of water they landed on concrete. So they should bend over and take it like a man.

Here's more fun news about the bailout.

Where'd the bailout money go? Shhhh, it's a secret

It's something any bank would demand to know before handing out a loan: Where's the money going?

But after receiving billions in aid from U.S. taxpayers, the nation's largest banks say they can't track exactly how they're spending the money or they simply refuse to discuss it.

"We've lent some of it. We've not lent some of it. We've not given any accounting of, 'Here's how we're doing it,'" said Thomas Kelly, a spokesman for JPMorgan Chase,
which received $25 billion in emergency bailout money. "We have not disclosed that to the public. We're declining to."

The Associated Press contacted 21 banks that received at least $1 billion in government money and asked four questions: How much has been spent? What was it spent on? How much is being held in savings, and what's the plan for the rest?

None of the banks provided specific answers.
"We're not providing dollar-in, dollar-out tracking," said Barry Koling, a spokesman for Atlanta, Ga.-based SunTrust Banks Inc., which got $3.5 billion in taxpayer dollars.

Some banks said they simply didn't know where the money was going.
"We manage our capital in its aggregate," said Regions Financial Corp. (RF) spokesman Tim Deighton, who said the Birmingham, Ala.-based company is not tracking how it is spending the $3.5 billion it received as part of the financial bailout.

The answers highlight the secrecy surrounding the Troubled Asset Relief Program, which earmarked $700 billion - about the size of the Netherlands' economy - to help rescue the financial industry. The Treasury Department has been using the money to buy stock in U.S. banks, hoping that the sudden inflow of cash will get banks to start lending money.

Cash is king right now and the banks with access to the bailout want to sit on the throne as long as they can before they are dragged kicking and screaming to lend it out. So what are they really doing with the money? Maybe they are using it to acquire their competitors, maybe there waiting for the economy to get a lot worse to leverage their position. I have no idea. I am not a bank. But I will not fault them for their actions because it is in their nature to act in their own best interests.

What we have here is a financial Katrina and TARP is playing the role of FEMA. Despite having a deal put together between the government and finance industry, Paulson, whether through his own incompetence or he just did not want his friends in finance experience any interference, did not install the infrastructure to ensure proper use of the money. And this is just the beginning of the stories we will here of bailout money not being utilized properly.

And of course we have Bernard Madoff who should be called the Dr. Kevorkian of Wall Street.

L’Oreal Heiress Bettencourt Invested With Madoff (Update3)

Liliane Bettencourt, the world’s wealthiest woman, entrusted part of her $22.9 billion fortune with Bernard Madoff through the fund manager found dead in New York yesterday, two people familiar with the matter said.

The 86-year-old daughter of L’Oreal SA founder Eugene Schueller was the first investor in a fund managed by Access International Advisors, the people said, speaking on condition of anonymity because her investment isn’t public. The body of Access co-founder Thierry Magon de La Villehuchet, 65, was found in his Madison Avenue office yesterday. Police said he probably killed himself.

Here’s another reason why not to bother going to NYU for school.


NYU, one of the largest private universities in the US, says it may have lost more than $24 million due to Merkin's investments with Madoff "in the face of an extraordinary number of 'red flags.' "

NYU had some $94 million invested with Merkin's fund of hedge funds, Ariel, according to the complaint. Merkin, in turn, entrusted a good portion of that money to Madoff, who recently confessed to swindling $50 billion from a worldwide network of investors.

It appears that NYU is still maintaining their current record of making horrible investment choices. But they have nothing to worry about. All they have to do raise tuition again in order for their amigos on Wall Street to get liquidity.

And where is Madoff? Is he spending his time at Riker’s with 3 hots and a cot?

F**k no!

He is at his nice warm, spacious co-op under house arrest.

The quotes presented in the beginning of this entry are from an issue of the Web Spider-Man #6 which had a Secret Wars II crossover. I am not going to explain Secret Wars II because then I would have to explain the first Secret Wars, which is a great read but would require a dissertation to fully understand what is going on.

This particular issue is quite fascinating since it deals with corruption, imminent domain, government ineptitude and how people react when faced with a literal mountain of gold that has appeared in midtown Manhattan.

What occurrsin this particular issue is that the Beyonder turns an entire office building into solid gold which collapsing onto itself resulting in the deaths and injuries of innocent people.

Spider-Man being Spider-Man swings to the rescue but is shot at by the authorities led by Federal agent Charles Anderson who declares that it is now a federal matter.

After rescuing as many people as he can, Spider-Man spots the Kingpin of crime in a limo who has concluded a transaction with Anderson. In exchange for the Kingpin’s help in securing the site of gold and preventing looters from overrunning it , the Kingpin is given several gold typewriters.

Obviously Spider-Man is pissed and screams at agent Anderson does something that is complete out of character. He takes a solid gold notepad for himself.

This particular issue resonates with me because of the developments that I have presented in this entry.

I have a good understanding of how this game is played and who the players are. Perhaps I am a little wiser in my old age but I realize getting angry at forces that are beyond my control is pretty useless. So these quotes from Spider-Man do not reflect my state of mind.

However Spider-man's mental state in that issue reflect a lot of what people are feeling in America. Who are they? These are the people who are getting foreclosed upon, the people who are watching their 401Ks disappear, the people who are seeing those with more still getting more even though they made the same mistakes as everyone else.

These are the have nots. And sooner rather than later they are not going to take it anymore and will demand their golden notepad.

And if there are no golden notepads to appease the masses, well our government has that covered.