By Joy Rose
Portions of this article were taken from the Wall Street Journal, Aug. 4, 2011. They are in quotes. Original article: By ROBBIE WHELAN
“VALLEJO, Calif.—Agustin Gutierrez, a construction worker from this town in the hills northeast of San Francisco Bay, lost his job in 2009, then, 10 months later, he lost ownership of his home.
Now, the husband and father of four rents the same five-bedroom ranch from McKinley Capital Partners, an investment company that’s at the forefront of a new breed of big-money landlords.
McKinley, which has acquired more than 300 foreclosed single-family homes in the Bay Area over the past two years, recently teamed up with Och-Ziff Capital Management Group LLC, a New York hedge fund, with plans to buy at least 500 more foreclosed homes in the next year. Those homes, too, will be rented to people like the Gutierrez family.
Buying foreclosed homes as investment properties has long been dominated by mom-and-pop investors. But now hedge funds, private-equity firms, pension funds and university endowments are dipping into that market. The attraction is double-digit returns at a time when most bonds and other income investments yield very little.
The most popular strategy is for a big investor to team up with a local company that scouts out houses and finds the renters. The hope is to flip the homes in the future when prices recover.
“It’s kind of the Wall Street meets Main Street phenomenon,” says John Burns, an Irvine, Calif.-based real-estate consultant who has discussed investing in single-family rentals with hedge funds. “The Main Street guys need the capital, and Wall Street needs the expertise.”
One internet blog called ‘Futile Democracy‘ shares it’s point of view on all this in an article called, Big Business Rules The World. It begins with a quote from Teddy Roosevelt; “We are not hostile to Corporations; we are merely determined that they shall be so handled as to subserve the public good.”
It goes on to say that in 1902, President Teddy Roosevelt and his Attorney General at the time, shocked both the Republican Party and the Country on the whole by announcing it’s intention to sue J.P.Morgan’s Northern Securities Company for breaching the Sherman Anti-Trust act. President Roosevelt did not particularly care about the actual breaching of a largely pointless act, he wanted instead to show the Country that the office of President was more powerful than the Office of a banker. He wanted to show that power of the public could not be bought or sold. It was a symbol against the power of private companies, even more so because Morgan ha contributed to campaigns Roosevelt had run in the past. It was an ingenious way of letting big business know “You can contribute all you want, but you do not own power over the public.”
While I’m not naive enough to believe our forefathers were really the pure idealists they’re portrayed as, in romantic depictions in our high school history books – we all know now they were slave owners, wealthier than their pioneering brethren and prone to self-service as much as they were committed to a vision of one nation, under God – I’m also hoping against all hope that the founding ideals were more than the laying of the groundwork for corporate greed to take over the planet.
Capitalism rocks for sure. We do have an awesome country that has stood up for so much good, freedom and growth. Our immigrants (we are all immigrants in one way or another) have been able to carve out a life that is far better than the life they left behind, in so many cases. However, we must beware the pitfalls of greed.
Again, I pull from the article in ‘Futile Democracy’; John Thain, the last Chairman of Merrill Lynch, who after destroying the company, begged for a $10million bonus, managed to secure $15million from the Bank of America bail out fund; taxpayers money. Within a month, he had offered employees of Merrill Lynch bonuses as much as $4million. He then spent $1.2million of tax payers money on redecorating his office. Thain is working at The Bank of America. Why aren’t the Governments of the World “coming to get” Thain? Surely using $1.2million of public money is a hell of lot worse than a single mum needing the extra £20 she’s “stolen” to feed her kids? Businessmen are exempt from the law.
In the cases of big businesses taking over ownership of foreclosed homes and then renting them to their previous owners, it boggles my mind, why a corporate ‘benefits’ department couldn’t be created to run at a discounted profit rate to facilitate the re-aquirement of these families homes, rather than bilking the poorest among us for a few more almighty bucks.
The other great issue at hand is the ‘buying of American politics’ through big business. Morris Panner on CNN Money writes, in his article ‘Washington is for lobbyists, not entrepreneurs‘ that lobbying alone was a $2.6 billion industry in 2010, according to the Center for Responsive Politics. Open Secrets cites the 2010 , the 20 companies represented have spent $104.6 million on federal lobbying this year, or an average of $5.2 million a piece, according to a Center for Responsive Politics analysis. That is, these 20 businesses alone fueled 4 percent of the $2.61 billion spent by all companies, unions and other organizations during the first three quarters of 2010. You can read more about the ten top lobbies in 2011 here. They include pharmaceutical and health products industries at $25 million, big oil at $150 million and the mining industry at $100 million.
Does anyone else notice the the horrific pattern of greed, corporate blindness, perversity and rape of our home and earth here? I know I am not sleeping any better at night when I think about the world we are handing to our children. What are we doing about it? I admit – I feel helpless, and I protest.