Big Transfer of Wealth to the Wealthiest as Federal Government Sells of Housing for Fraction of the Cost
Taxpayers Lose Again to Wealthy Connected in the Crony Capitalist Economy
By Roger Arnold
The Street, August 18, 2011
NEW YORK (RealMoney) — The largest transfer of wealth from the public to private sector is about to begin. The federal government will be bulk-selling the massive portfolio of foreclosed homes now owned by HUD, Fannie Mae and Freddie Mac to private investors — vulture funds.
On Wednesday, the Federal Housing Finance Agency (FHFA), the Department of Housing and Urban Development (HUD) and the U.S. Treasury Department issued a Request for Information concerning the disposition of the inventory of foreclosed homes owned by the federal government.
An RFI is ostensibly a way for the federal government to get input from the private sector on how to accomplish the goals laid out in the request. But that’s really just a facade, as the RFI was structured by the investors to begin with.
The investors in this program have been waiting for this opportunity since the portfolio of homes owned by HUD began to spike in 2007, when foreclosures surged first in the "Rust Belt, " principally Ohio and Michigan.
In the process, these investors will instantaneously become the largest improved real estate owners and landlords in the world. The
U.S. taxpayer will get pennies on the dollar for these homes and then be allowed to rent them back at market rates.
In reality, the RFI is a way for the members of Congress to find out if they can get away with bulk-selling these homes to private companies without incurring the wrath of their constituents, taxpayers and former owners of the properties.
These homes, which are now the property of the
U.S. government, the
U.S. taxpayer,
U.S. citizens collectively, are going to be sold to private investor conglomerates at extraordinarily large discounts to real value.
As intended, the mass media are playing their part in classic style. Every major newspaper in the
U.S. has run articles discussing the plan as a rental conversion, allowing readers to assume that Fannie, Freddie and HUD will be renting the properties directly to families who need housing. And although there is an allowance for these kinds of rentals, it is a minor political facade to the obvious true goal of bulk-sale privatization of these homes.
Since then, of course, the systemic collapse of housing has engulfed all of the major urban coastal regions of the
U.S., as well as
Phoenix and
Las Vegas, and caused the homes owned by Fannie Mae and Freddie Mac, which are now under the direct control of the U.S. Treasury Department, to spike as well.
Even before this crisis occurred, HUD, i.e. the
U.S. government, was the largest improved real estate owner in the world, because of its portfolio of foreclosed homes, which is classified as 'real estate owned' (REO). The entire massive HUD REO Portfolio is quietly managed by a handful of private firms already, a group listed as Management and Marketing Contractors.
These M&M companies are principally owned by and employ former high-ranking government officials from the various germane agencies — the Treasury, HUD, FHA and others.
And they will provide the necessary access to the current government employees who are tasked with bringing this program to fruition. Once the privatization is complete, those government employees will move from their positions, and many will take up new employment at one of the M&Ms or the new vulture funds.
I am not currently aware of any way for retail investors to participate in this process. You and I will not be allowed to participate. These investors will come from the private-equity and hedge-fund community, Goldman Sachs and its derivatives, as well as foreign sovereign wealth funds that can bring a billion dollars or more to each transaction.
Assuming taxpayers don’t push back, the next step will be to issue a Request for Proposals (RFP). The RFP will be the bid and plan for these homes by investors.
(Source)
