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Earlier quoted context omitted.
But will the demand be there for the new housing to live in an expensive poorly run city with fewer jobs in the commercial centers?
I am not worried about running out of demand in the Bay Area anytime soon.
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…
Might be true. But everything they can is not enough.
First, there’s the principal-agent problem: the owners (aka share holders) can not fully control managers or staff in general.
Second, the goals of an organization do not necessarily align with the goals of the individuals that contribute to the organization. For example, young bankers who know that they will switch jobs some time will work differently than those who also own the bank. So usually there’s a bias towards more short-term profit and higher risk.
Also for the bank as a whole there’s a bias towards risk because they have to compete with other banks. If I’d be a well-intentioned CEO I would still be forced into that behavior because otherwise I would simply be fired or the bank would lose against other banks.
I don't know that I agree with the author's assessment that this is "disgusting"; it just seems like a shift in wealth from bankers to commercial real estate companies, and I am not particularly sympathetic to either. Maybe there is another angle here.
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.
thatsnothowanyofthisworks.tiff But back in reality, of course we all know that the commercial real estate market is by and large looking at a world of hurt. But I think by and large they’re going to muddle through. Some developers will lose their buildings, equity is definitely taking a hit and there will surely be some losses on loans. But on balance, I think the banks will be fine (and some fulcrum security holders…
Free money led to overbuilding restaurants and offices. This is a correction, value is lost and companies will go under. The remaining industry will match the remaining demand.