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Wall Street's Latest Gambit Might Re-Wreck the Economy

Wall Street's Latest Gambit Might Re-Wreck the Economy

(NEWSER– Remember the phrase "mortgage-backed securities" and stories about how they helped send the economy into a tailspin? Well, Wall Street has a new and not-so-improved version, this time involving rental homes, writes David Dayen at Salon. Private equity firms such as Blackstone have been buying as many single-family homes around the country as they can (many of them foreclosures), doing superficial upgrades, then renting them out to families. Some nuts and bolts:

  • "In order for this to work, firms need cash to outbid the competition," Dayen explains. "So Blackstone teamed with Deutsche Bank, Credit Suisse and JPMorgan Chase to put together the first-ever rental revenue bond, named 'Invitation Homes 2013-SFR1.' Basically, Blackstone took out mortgages with the banks on 3,207 of its rental properties, in exchange for $479 million in cash, and they will forward rental payments to the bondholders to pay back the loan."
   
 

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