31–40 of 74 posts
Seems plausible. Vacancy rates of commercial property is ~~down~~ up significantly in major cities (SF, ATX, NYC, SEA, ...). What I want to know is: is it possible to find out how many of these commercial loans contain a "non-recourse" clause?
Not sure if UCC filings have this information in them, but that's one place I'd look first.
Why would a bank give a "non-recourse" loan for commercial property? Doesn't make sense to me.
it was considered safe because a commercial tenants was likely trying to run a stable business and moving location is very expensive, so it was unlikely for a business to want to change location on a whim.
Putting aside the nonsense of "absolutely disgusting", this is incredibly vague and exceedingly implausible. Critiquing: > They say the largest property companies in the US (they named names, I can’t) are raising huge amounts of money... if they stop paying the loan, and the bank gets the building back, the bank cannot sue them for the remainder of the loan. For this reason, banks generally do not loan more than what…
The building's worth was often based on pre-pandemic rent expectations. Lots of buildings are very empty these days, even if they're still currently leased. I wonder what the rates of renewals will be on suites where practically nobody goes to.
Putting aside the nonsense of "absolutely disgusting", this is incredibly vague and exceedingly implausible. Critiquing: > They say the largest property companies in the US (they named names, I can’t) are raising huge amounts of money... if they stop paying the loan, and the bank gets the building back, the bank cannot sue them for the remainder of the loan. For this reason, banks generally do not loan more than what…
Historical evidence suggests otherwise. Obvious bullshit like this was the root cause of the 2008 housing collapse. As long as your bank isn't the one sacrificial goat the government chooses to let fail you will be fine.
Putting aside the nonsense of "absolutely disgusting", this is incredibly vague and exceedingly implausible. Critiquing: > They say the largest property companies in the US (they named names, I can’t) are raising huge amounts of money... if they stop paying the loan, and the bank gets the building back, the bank cannot sue them for the remainder of the loan. For this reason, banks generally do not loan more than what…
> banks generally do not loan more than what the building is worth. The building's worth was often based on pre-pandemic rent expectations. Lots of buildings are very empty these days, even if they're still currently leased. I wonder what the rates of renewals will be on suites where practically nobody goes to.
Earlier quoted context omitted.
Maybe you missed the part about a bail out. That's not a transfer of wealth from bankers to commercial real estate companies, it's a transfer of wealth from the tax payers to the real estate companies.
Wouldn't the government be taking an ownership stake in the banks at the banks' reduced market cap? How does the taxpayer lose out in this scenario?
Putting aside the nonsense of "absolutely disgusting", this is incredibly vague and exceedingly implausible. Critiquing: > They say the largest property companies in the US (they named names, I can’t) are raising huge amounts of money... if they stop paying the loan, and the bank gets the building back, the bank cannot sue them for the remainder of the loan. For this reason, banks generally do not loan more than what…
Earlier quoted context omitted.
Do you really think bankers are lending their own money here? They’re lending yours and mine
But if the bank fails, the bank owners get wiped out.
So even if "the bank fails", there's been destructive speculative misallocation whose social costs can be far larger the nominal owners' losses.
Of course, the government also doesn't let the "systemically important banks" fail - so related politically-mobbed up interests don't even get "wiped out".
Earlier quoted context omitted.
> banks generally do not loan more than what the building is worth. The building's worth was often based on pre-pandemic rent expectations. Lots of buildings are very empty these days, even if they're still currently leased. I wonder what the rates of renewals will be on suites where practically nobody goes to.
The article is talking about new loans, which are always going to be based on current valuations, not pre-pandemic ones.
But I agree that the story as a whole made very little sense.