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Remarkable understatement on aspects of the housing crisis… December 30, 2014

Posted by WorldbyStorm in Economy, Irish Politics.
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…in the SBP editorial this last weekend. It notes that:

Completely under the radar, funds such as Lone Star, CarVal Investors, Cerebus, Deutsche Bank and Goldman Sachs have become the dominant players in Irish finance, controlling the debt secured against large amounts of commercial and residential property, personal loans, mortgages and businesses. They don’t own the assets; just the debt the assets are secured against. But this gives the new owner immense power, and the ability to seize the assets if the loan goes sour.

And:

Put bluntly, the vultures have well and truly landed. We are already feeling the effects. This paper has highlighted a growing trend whereby international property giants are seeking punitive rent hikes from apartment dwellers. These so-called vulture funds, which now control vast swathes of the capital’s private residential rental market, have sought rent increases of more than 20 per cent from residential tenants in recent weeks, as they seek to turn hefty profits from their assets.
The same is true of the commercial property market, with many funds seeking to raise rents to drive profits. That is their prerogative; indeed, it is their reason for existing.

But:

But it is also troubling for an economy with stagnant residential development and a sanguine commercial development market. The government knows as much, with finance minister Michael Noonan saying it is an issue he takes very seriously.

Troubling? Only troubling?

In another piece the SBP examines the rise of Uber – the taxi app/company and its impact on the indigenous taxi market, an impact that many would regard as massively distorting, just as the dynamics outlined above are distorting. And yet what would the SBP do in the latter case?

Nothing, is the answer. Absolutely nothing, for the editorial concludes with not one policy suggestion.

The arrival of these international funds has been the biggest driver of the Ireland’s tentative economy recovery; putting capital into the market and helping ease the balance sheet problems of the banks. But it also raises questions about the long-term plans of firms whose modus operandi is short-term profit.
Already, we have seen examples where funds have foreclosed on borrowers, or, in the case of the Cork developer Michael O’Flynn, sought to foreclose.
It is an ominous sign for the hundreds of businesses and thousands of mortgage holders whose loans have been acquired by other so-called vulture funds. Some will get deals such as debt write-downs. Others will not be so lucky.
The arrival of these funds has often been presented as a panacea for debt-laden companies and individuals. This is not the case. Nor does it represent a return to normal banking.

Comments»

1. CL - December 30, 2014

“These so-called vulture funds, which now control vast swathes of the capital’s private residential rental market, have sought rent increases of more than 20 per cent from residential tenants in recent weeks, as they seek to turn hefty profits from their assets.” SBP.
This too is driving homelessness. (Incidentally in NYC, de Blasio has appointed a Goldman Sachs executive to run his housing programme)
All this is an inevitable corollary of an economic policy whose main thrust is placating the bond markets and MNCs.

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sentinel - December 30, 2014

tbh I have not read the above post (will read it later): are there no countries now? do different groups in each state belong to different corporations? it is frightening.
Yet, in March ’09 Obama printed $1trillion; so, the poor and wealthy of any one ‘country’ indemnify all of the debt and wealth.
There is a stunning malaise among the poorer persons in the U.S., they simply will never be able to truly call any domicile a ‘home’ i.e. a place where you have the right, to defend your life, legally – in the first instance; and not to be ‘subject’, in the first instance, to the whims and ‘mores’ of investors. There is a very real muted intimidation amongst the poor in the U.S. (and I am not just talking about black persons).
And now, with this new HAP thing, we are aligning with this.

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