Busted retailers use bankruptcy to break leases by the thousands • Hacker News Board

Re: Busted retailers use bankruptcy to break leases by the thousands

#171

Post by true_religion » Thu, Aug 06, 2020, 10:29 PM UTC

munk-a wrote: post #156

valuearb wrote: post #122

Earlier quoted context omitted.

I’m fine with bailing out companies as long as the owners and managers forfeit all their equity.

It's not an easy thing to find out who did what - trying to figure out which managers and owners were purposefully over-inflating equity to secure larger loans (or whatever) from those who were duped by the other managers and were just trying to keep the ship afloat is a really hard problem. And, in this fun world, you might find a terribly over-leveraged business where no one ever tried to act fraudulently but some…

That’s why the above poster suggests all owners forfeit equity. The company survives but it is nationalized, at least temporarily.

In practice, I think we will see companies being sold off the friends of the sitting president, and powerful senators.

Today, at least they must at least pretend to be equal in their bailouts, which gives non affiliated companies a chance to receive money.

Re: Busted retailers use bankruptcy to break leases by the thousands

#172

Post by true_religion » Thu, Aug 06, 2020, 10:32 PM UTC

shard wrote: post #153

dencodev wrote: post #38

Earlier quoted context omitted.

Won't somebody please think of the landlords and banks

I don't understand this attitude that someone who decides to invest their money into real estate instead of the stock market should be derided as a plague on society, as if it's not much more work to be a landlord than a stock market investor. When you are a landlord, you have to worry about tenants that don't pay (and threaten you with physical violence when you try to collect), tenants that damage your property, ha…

I don’t think it’s derision, just the attitude that people in power ought to defend themselves.

Banks have no shortage of money, lawyers, and friends in high places. They do not need you or I also apologizing their actions. If anything we should be extremely suspicious of ant bailout and scrutinize it to ensure it’s well deserved, and will result in a better society overall.

Re: Busted retailers use bankruptcy to break leases by the thousands

#173

Post by munk-a » Thu, Aug 06, 2020, 10:32 PM UTC

pgrote wrote: post #131

mikestew wrote: post #16

Man, with (currently) four comments mentioning that this is "what bankruptcy is for", I think the point of the article might have been missed. This isn't some sneaky "one weird trick", and that's not the reason Bloomberg is reporting on it. In fact, the tone of the article to me is, "yup, companies do it all the time, but..." And the "but" is: But the moves threaten to upend huge swaths of the real estate market and…

>But the moves threaten to upend huge swaths of the real estate market and the half-trillion dollar market for commercial mortgage-backed securities. And? Seriously. We either have to choose to be a market that is somewhat free or not. At this point, the government is choosing winners and losers. It is a repeat of 2008. Oh no, it is too big to fail. Someone will come by with the investment to buy what is left. Perhap…

The US has never been a free-market and, honestly, the vitriol that folks use when talking about socialism has just hurt efforts to apply sane regulations that would help stabilize the market.

The US still uses SSNs for everything because everyone is too afraid of government identification to pursue a more sane approach, the result is a government issued identification that is poorly designed for what it's used for and extremely insecure. The same thing happens with our economy, instead of taking sane measure to fight against the penultimate death of capitalism (the slide into oligopolies) the vitriol against any form of government intervention has placed us in a situation where heavy handed government intervention is regularly required - we're avoiding a soft form of socialism and ending up with having to intervene like a planned economy about once every decade.

I really hope this can be solved by some smart people without trying to enlist wide-spread political support since I don't think that support is ever going to materialize.

Re: Busted retailers use bankruptcy to break leases by the thousands

#174

Post by [deleted] » Thu, Aug 06, 2020, 10:33 PM UTC

supertrope wrote: post #109

wins32767 wrote: post #100

Earlier quoted context omitted.

You need a 4. Federal government issues $$$ to property tax authority to cover income gap. The property tax authority needs that revenue now to pay their bills (teachers, sanitation, fire, EMT, police, etc), an easement won't cut it. They need a backstop before they can do that since all of those are critical or legally mandated services and municipalities run very lean.

Yes. Property tax shortfalls leads to laying off teachers.

[deleted]

Re: Busted retailers use bankruptcy to break leases by the thousands

#175

Post by nick_kline » Thu, Aug 06, 2020, 10:35 PM UTC

rcpt wrote: post #116

coliveira wrote: post #107

Earlier quoted context omitted.

If capitalism is to be the law of the land, why not let the rich lose everything? I guess they can easily live on the streets.

"socialism for the rich, rugged individualism for the poor"

Aka socializing the losses, privatizing the gains.

Re: Busted retailers use bankruptcy to break leases by the thousands

#176

Post by slowmovintarget » Thu, Aug 06, 2020, 10:37 PM UTC

throwanem wrote: post #69

mikestew wrote: post #16

Man, with (currently) four comments mentioning that this is "what bankruptcy is for", I think the point of the article might have been missed. This isn't some sneaky "one weird trick", and that's not the reason Bloomberg is reporting on it. In fact, the tone of the article to me is, "yup, companies do it all the time, but..." And the "but" is: But the moves threaten to upend huge swaths of the real estate market and…

Malls being ghost towns is a side story. After the 2008 residential MBS crash, as I understand it, a lot of that money moved to the then relatively stable commercial MBS market. If that market goes toes up in turn, with this... (That hasn't been in the news for a few months, so I had to look around for some perspectives. Cf. https://daily.jstor.org/the-commercial-real-estate-markets-i... and, perhaps more controversi…

It's a bit worse than that. The same practices that caused the 2008 crash came back in the guise of "non-prime mortgages". They are functionally identical to sub-prime mortgages.

The new laws did nothing to prevent this. They weren't meant to. We had a law designed to stop it that was enacted following the Great Depression. It was called the Glass-Steagall Act, passed in 1933. It was repealed in 1999 during President Clinton's administration... because Citigroup was too big to fail, and they promised to be good... honest.

2008 was an opportunity too great to pass up. Congress used the opportunity to enact a Federal bureaucracy that controlled banking and is not directly answerable to the Executive branch. This was the Dodd-Frank Act. Congress could have restored the rules in Glass-Steagall, which would have broken up Citigroup as a side effect. But they didn't.

Seems like recipe for disaster.

Re: Busted retailers use bankruptcy to break leases by the thousands

#177

Post by TheOtherHobbes » Thu, Aug 06, 2020, 10:39 PM UTC

seibelj wrote: post #3

This is exactly why we have bankruptcy! These businesses are failing and need to renegotiate their liabilities. This is expected and healthy if you want any retailers to have any hope of survival going forwards.

There's a difference between strategic failure caused by poor management and interruption of a viable business by an external event - force majeure.

You can buy insurance policies to protect your business against the latter. (Although with Covid a lot of insurers are refusing to pay out, and some are being taken to court.)

Where there's no insurance it's reasonable for government to act as an informal insurer of last resort, because it's hugely more expensive and damaging to allow businesses that are otherwise viable to go to the wall.

You don't just lose a viable business, but you create losses that ripple through the entire system causing upstream insolvencies. So you lose the productivity of all the businesses affected and the spending power of their employees. It takes a good long time to rebuild both.

The problem is in the grey area where it's hard to tell if businesses are genuinely viable and just need temporary reinforcement, or whether they're already zombies and need to be killed off.

Patronage and politics makes this even more complicated.

But the principle is still sound: in a national disaster insolvency is not a clear signal of failure, and allowing all business to crash regardless will do much more harm than good.

Re: Busted retailers use bankruptcy to break leases by the thousands

#178

Post by WanderPanda » Thu, Aug 06, 2020, 10:39 PM UTC

munk-a wrote: post #132

marcosdumay wrote: post #92

Earlier quoted context omitted.

Pausing debt collection on a temporary disruption is a best practice, not some shady number-hiding. If the disruption happens to not be temporary, then it will be a problem (retroactively, so a huge one). But in that case, there are more pressing issues.

A large proportion of those debt collectors are gigantic soulless corporations that nobody would mind watching suffering somewhat - but that's the same as every industry. There are a lot of smaller property owners that are really hurting here and pausing debt collection might free those owners from debts but it won't put food on their table. This is, unfortunately, a very complicated problem.

- A large proportion of those debt collectors are gigantic soulless corporations that nobody would mind watching suffering somewhat

I would argue that in Germany this is not the case. Everyone minds the gigantic soulless corporations suffering, because only they have the unions deeply intertwined with politics and the sympathy of the media (for whatever reason, ad money maybe?).

The Lufthansa bailout was clearly made to benefit the workforce and not the general population.

This crises lifts the high-level corruption here in Germany to the next level it seems.

Re: Busted retailers use bankruptcy to break leases by the thousands

#179

Post by throwaway0a5e » Thu, Aug 06, 2020, 10:45 PM UTC

munk-a wrote: post #173

pgrote wrote: post #131

Earlier quoted context omitted.

>But the moves threaten to upend huge swaths of the real estate market and the half-trillion dollar market for commercial mortgage-backed securities. And? Seriously. We either have to choose to be a market that is somewhat free or not. At this point, the government is choosing winners and losers. It is a repeat of 2008. Oh no, it is too big to fail. Someone will come by with the investment to buy what is left. Perhap…

The US has never been a free-market and, honestly, the vitriol that folks use when talking about socialism has just hurt efforts to apply sane regulations that would help stabilize the market. The US still uses SSNs for everything because everyone is too afraid of government identification to pursue a more sane approach, the result is a government issued identification that is poorly designed for what it's used for a…

>The US has never been a free-market

Pretty much every market in the US has been insanely free, like "just don't kill people quickly and we don't care" free at some point. They all stopped being free when they got big. Then government got involved and regulation, regulatory capture and whatnot happened (I'm intentionally glossing over the details because they vary by industry and I don't want to pass judgement).

Re: Busted retailers use bankruptcy to break leases by the thousands

#180

Post by linuxftw » Thu, Aug 06, 2020, 10:48 PM UTC

sharklazer wrote: post #164

martinald wrote: post #148

Earlier quoted context omitted.

Exactly. That is the whole deal with being a commercial landlord. It isn't just "upward-only rent adjustments" every 5-10 years and cream a load of profit. There is meant to be some risk in return. In London a lot of commercial rents in newly gentrified areas have went up 10x+ in the last 10-20 years. There has been an awful of lot of value transferred to these landlords for really not a huge amount of work in many c…

Yes, but we're overleveraged. And I mean "We're" because the people who hold the debt is actually quite spread out and obfuscated. I don't disagree with you in principal, but unfortunately, we have a parallel problem of how the debt market works, which is essentially to generated and then sell the debt to investors, diffusing the "risk", or rather, I think of it more as displacing it. Much less incentive for active p…

> People who end up holding the debt are many steps away from being able to have conducted due diligence.

And they should face the losses. And maybe learn from their mistakes.

And the people that were responsible with their money, didn't take on the risky assets that generated out-sized returns will be able to invest because they preserved capital.