The New Stench of Freddie Mac
Washington’s capacity to foster crony capitalist larceny and corruption never ceases to amaze. But according to the Bloomberg story below, Wall Street’s shameless thievery from US taxpayers is about to get a whole new definition.
To wit, Freddie Mac is handing three private equity billionaires deeply subsidized debt financing in order to undertake $18 billion in rental apartment deals. According to no less an authority than Morgan Stanley, the subsidy embedded in this cheap financing amounts to 150 basis points or roughly $150 million per year on the loan amounts in play.
Yet this largesse will serve no discernible public purpose whatsoever. Indeed, over the 10-year term of these loans the bonanza will amount to billions, but it will not generate a single new unit of housing. Nor will it provide a single dollar of incremental rent relief to any low or moderate income tenant.
Why all this largesse?
At the end of the day it will mean that a mere 500 units out of the 11,000 will be reserved for families making no more than $62,000 per year, and another 4,500 for families making up to $128,000 per year.
That’s right. The taxpayers of America are being dragged into a $5 billion LBO on the very site where an identical one blew up less than seven years ago—–purportedly to help families that are in the top 10% of income earners in the nation.
Needless to say, there is a simple alternative. Abolish Freddie Mac, Fannie Mae and all the rest of the Washington’s crony capitalist machinery and turn housing finance over to the free market where it belongs.
If there are citizens in need who can pass a means test and can’t work owing to age or genuine disability give them cash to fund their own shelter choices. And if they are able bodied and willing to work, top up their wages with earned income tax credits or similar cash transfers.
But let’s stop being stupid. Blackstone is not the United Way.
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