29 Trillion
Dance on the Blacktop Trillion


Blackstone lays to rest the aspirations of ex-homeowners.

I like Conor Sen. I must. I follow him on twitter, so that means I must, right? Or was it a hate follow? I can’t remember. I doubt it since I don’t hate follow anyone. He writes at Bloomberg, so he’s likely a knock-on effect of my standom for Matt Levine.

But damn, duhde, his recent post is just so…uninspired? I get it, the pressures of churning out daily content are stultifying to the point of stupefaction, and some days you just have to…like…push out a jumble of phrases and pray they form legible, grammatically sound sentences. If you’re lucky, an opinion piece has a clear point of view that is engaging enough to pull the reader through the finish line. And if you’re in the top 0.0000001% of content, your “opinion” might make a handful of readers view whatever topic you discuss with slightly more nuance.

His piece centers around two ideas and that one should not negate the other .
1) The investment group Blackstone helped America; it bought up foreclosed homes, stabilizing prices, and helped local economies by remodeling dilapidated properties, putting craftsmen to work. And more! They alo increased housing supply by renting out these homes to families who did not have homes.
2) Blackstone also created inequality

Here’s a metaphorical recap of Sen’s opinion:
Blackstone group leaves a turd in the toilet. That’s what toilets are for!
Blackstone: “Look mom, I made a dookie!”
Conor Sen: “Good boy! It could have been so much worse if someone else bought that toilet and they smeared feces on their faces and drank the toilet water.”

It’s true that after the Global Financial Crisis of ’09, many banks were left owning a bunch of houses because homeowners couldn’t pay for them anymore and the bank foreclosed. Banks are in the loans business. Not the Real-Estate business. A pretty strong case has been made that banks should not own homes, because, like, they’re a bank, and you can’t really deposit a home in a bank. Bankers presumably have homes or places to live and they don’t need another one. They exist to facilitate the ability for other people to live in homes, or start a business to build furniture or sell furniture, etc…

As he points out, a lot of banks at the time were sick with poor balance sheets, not just the Big Bad Wolves, but hundreds and hundreds of community and regional banks. Blackstone came in and bought up these assets (spending as much as 150 million a week) and provided some much needed medicine (liquidity) to these banks.

Let’s set aside for a minute all the reasons why so many foreclosures existed and how they impacted certain communities and individuals. Let’s only look at the response or lack of by one market participant: The Federal Government.

there’s no doubt that the federal government should have done more to help homeowners whose lives and finances were upended by the meltdown in the housing market.

Normally, that’s my line. But that’s actually Sen making it for me. Blackstone filled a funding gap in markets across the country because the government did not. People didn’t have jobs, or didn’t have enough for a down payment, or the houses that were available were too broken to make them attractive to buyers. Blackstone, being the savvy people they are, saw an opportunity. But what could they possibly have seen when unemployment was high, the stock market had wiped out savings accounts, and retirement were delayed or ruined for so many?

They saw America. They saw ’29, and ’87 and ’01 and knew this too shall pass. They saw what Warren Buffet saw when he gave Goldman Sachs a $5billion loan in 2008. A good buy for cheap. They saw a whole bunch of under-priced assets and put their money to work making them livable and rentable and holy smokes look at that Batman, the “Economy” recovered. And those humble landlords at Blackstone became billionaires.

A lot has been written about why the government’s response was actually quite narrow, how it favored “systemically important financial institutions,” and who was responsible for making these “decisions.” In fact, you can read memoirs by the people who made those decisions and how they had to fight tooth and nail just to get any kind of relief passed. As Sen might say, if Tim Geitner and Hank Paulson and Ben Bernanke hadn’t stepped in, it, “would have been much worse.”

We at 29 Trillion agree. It all would have been much worse. But as it stands now, it’s still not great. Why spend a whole article talking about how it could have been worse? He seems like a smart guy, reads smart things. Tell us how it could have been even better than “not as bad as this other nightmare scenario.”

And since we’ve spent all this time pointing out that Sen’s thoughts should be better, here’s a couple of ideas

  1. Accept that in a funding crisis, no one has more money on earth than the Federal Government.
  2. Accept that a lot of people show up to work everyday and try and do a decent job. Some people will be lazy and some people will do fraud. But we promise there’s a whole bunch of people in communities around the country that will help each other out. They’re called community bankers.
  3. Hand over that money to banks to make them healthy. When they are healthy enough they’ll figure it out, just like Blackstone did.

And before you come at us about how the Government shouldn’t do x, ask for a moment, who did the work of fixing up these homes? Who did the work of people selling them and renting them out? Americans who lived nearby. What Americans had then and have now is a desire to work, and as a group they do damn fine work. What they didn’t have then was the money to go to work.

What Blackstone did was smart. They cobbled together a whopping like 10 billion. Didn’t solve everyone’s housing problem. And neither would a government plan. But in the grand scheme, 100 billion is chump change. And here’s the best part, you’re paying Americans to do their building and renovating and managing. Even the corrupt are…like…Americans. It’s all money that goes into the economy. So what if a couple hucksters make a little extra dough and spend it all at the strip club? It’s all money in the local economy baby!

Cause we’re pretty sure Schwarzman is doing just fine. Doesn’t need another yacht, because that’s where he makes all his money anyway.





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