Jan 6, 2014
In November, the Blackstone Group, one of the biggest Wall Street private equity firms, issued a rated bond backed by securitized rental payments. In plain English, Blackstone is bundling rental payments of thousands of single-family homes and selling them to investors, the same way that Wall Street firms bundled home mortgages and sold them before defaulted mortgage payments burst that bubble, leading to the financial crisis of 2008.
During the “Great Recession” that followed, millions of people lost their homes to foreclosure. Now, Wall Street firms and banks have been buying a lot of houses, foreclosed as well as new. Blackstone alone has spent 7.5 billion dollars to buy 40,000 houses across the country. Blackstone and other Wall Street companies and banks are not selling the houses – at least not yet. Instead, they are renting many of them – and now, “bundling” and “securitizing” these rental agreements to make more money off them too.
It’s another housing bubble – this time a rent bubble – waiting to burst. And the money feeding this bubble comes from the billions of dollars of taxpayer money the government gave the banks to bail them out when the previous bubble burst. It’s a crazy, vicious cycle driven by the unstoppable urge of the capitalist class to increase profit.