The Brandon Five

Even after Morgan Stanley got $10 billion in TARP money it still was not enough to prop up the diseased portfolio of over-leveraged assets:

Morgan Stanley fund fails to repay $3.3 bln debt on Tokyo property | Reuters

Some have been warning of a mortgage crisis in commercial real estate for awhile:

Half of Commercial Mortgages to Be Underwater: Warren

Can the U.S. government still act as the "lender of last resort"?

Nikolai

LOL, the CRE mortgage crisis started May 15-16, 2007. I was working in one of the largest CRE firms in the world on those days and it was pandemonium. By the time September 2008 rolled around, the CRE industry had already been beaten like a rented mule.

Don't let them fool you. It's been a disaster for years already.

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PatriotsReign

The CRE industry has been in crisis for a while, you're right, but it hasn't reached "crisis" stage in the financial sector yet. But it's inevitable.

The financial sector still holds the mortgages on these properties and the mortgagees can't charge enough on the leases to cover the monthly payments.

Let's just hope they don't get bailed out again...let them fail. Even if these companies try to tell the public it's a catastrophic situation, I don't care & I don't believe them.

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scout

Since Tarp money and Stanley Morgan was brought up (and I didn't want to start a new post), has anyone seen any interviews with Matt Taibbi? Two wifes of Morgan Stanley recieved loans of 200 million, which if they defaulted would not have to be paid back.

Taibbi on a Fed Bailout the Business Press Buried : CJR

The interview I saw, he also tells of these loans given to Saud Arabia, Toyota, and Wayne Huizenga among others.

chicowalker

That story sounds misleading. They were investors in the fund, which has nothing to do with "leading it". Also, the idea that they would get 100% of the upside sounds wrong -- because if that's the case, why would somebody else run it?

According to this release a year ago, there was a very experienced professional running that fund:

Waterfall?s TALF Fund Reaches $18.8M - cbl - Citybizlist New York

The details of it would be available through SEC filings, it appears.

None of this means it was a good use of federal $, but at first glance it looks like Taibbi's claims are overstated.

Real World

I'm involved in CRE and just leased some sizable space that had been vacant for a couple of years now. We agreed to sign for a rate that was about 25-30% below what had been considered "market". I actually consider ourselves fortunate. There simply hasn't been much interest over the last few years, and there are a number of surrounding properties searching for tenants. Where we're located, that used to be unheard of, as we're in one of the more desirable geographic locations in the metro boston area.

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"The most difficult subjects can be explained to the most slow-witted man if he has not formed any idea of them already; but the simplest thing cannot be made clear to the most intelligent man if he is firmly persuaded that he knows already, without a shadow of doubt, what is laid before him."
Leo Tolstoy, 1897

scout

Your a credible member, thus, I'm replying to get more details, not to argue. Taibbi makes the claim that the two housewives would make 100 % on any gains and the taxpayer would eat 90% of the losses. In addition, he claimed a number of foreigners were given loans. I'm not saying he overstated the issue, but his reputation would be in serious jeopardy if he makes bogus claims. He also said that the whole situation was very complicated which does not help verifying his claims.

chicowalker

Actually, one of the lines I took issue with was from the author at the link, not Taibbi: "...Why did Christy Mack and Susan Karches suddenly make huge, arcane vulture-capital gambles with taxpayer money when they had no apparent prior experience? ..." So that strike isn't against Taibbi.

My guess (I'm just not intereested enough to pour through SEC filings) is that there were in fact loans and they did in fact heavily subsidize these funds.

The funds weren't run by Mack and Karches, but Mack and Karches were significant investors.

As significant investors, they probably received 80% of the upside or so, less fees, not 100%, and had their losses heavily covered by those loans.

All of which, if correct, would make the loans dubious but not quite as noxious as portrayed. Again, all of this is my own speculation based on knowledge of how many investment funds are structured and the 1st filing I found a link to, along with some common sense.