Posts Tagged ‘global credit crisis’

Wells Fargo, LNR Looking to Sell $2 Billion in Distressed Assets

Thursday, June 3rd, 2010

One bank, one special servicer, both offering $1 billion in distressed real estate.  Wells Fargo & Company and LNR Property Corporation are hunting for buyers for $1 billion each of distressed commercial real estate assets and loans.  San Francisco-based Wells Fargo, the nation’s largest commercial real estate lender, is soliciting bids on $500 million to $1 billion worth of office and hotels.  LNR, the nation’s largest CBMS special servicer, is looking for buyers for approximately $1 billion worth of defaulted loans.

“The availability of capital and better prices than a year ago are driving sellers to move things off their balance sheets,” says Matthew Anderson, managing director at research firm Foresight Analytics.  “Depending on how the auction goes, you may see more of this.”  According to Anderson, banks and special servicers currently are holding approximately $185 billion in distressed loans.  Of those, Wells Fargo had $12.9 billion in non-performing loans in the 1st quarter.  LNR is the special servicer for $24 billion in delinquent assets, according to Bloomberg.

Wells Fargo and LNR were left holding real estate debt once the global credit crisis and recession sent commercial values down a whopping 42 percent from their October of 2007 high.  The majority – as much as 60 percent — of the assets that Wells Fargo is selling were inherited when the bank purchased Wachovia Corporation in October 2008.  If Wells Fargo and LNR can sell the properties, the move would represent an improved market for distressed assets, according to Ben Thypin, an analyst with Real Capital Analytics, Inc.

“We’re certainly aggressive in terms of liquidating the portfolio,” said David Hoyt, who heads Wells Fargo’s wholesale banking arm.  “At the moment, there is a lot of liquidity in the market to resolve problems.”

“The Giant Pool of Money”

Thursday, May 21st, 2009

$70 trillion dollars.  That’s all the money in the world, or to get technical, the subset of global dollarsavings known as fixed-income securities.  And it almost doubled from $36 trillion in just six years.  How did this happen?

The Federal Reserve presided over the creation of what we have learned (the hard way) is a monster of unregulated investment vehicles run amok, resulting in the global credit crisis.

In the words of National Public Radio’s international business reporter Adam Davidson, “What he (former Federal Reserve Chairman Alan Greenspan) is saying is he’s going to keep the Fed Funds rate at the absurdly low level of one percent.  It tells every investor in the world:  you are not going to make any money at all on U.S. treasury bonds for a very long time.  Go somewhere else.  We can’t help you.  And so the global pool of money looked around for some low-risk, high-return investment.  And among the many things they put their money into, there was one thing they fell in love with.”

Investment companies fell in love with securitizing mortgages, bundling them into enormous pools – in some cases, pools of as many as 16 million loans — and selling them in shares to investors.  To make the pool of mortgages even larger, they created vehicles like adjustable-rate mortgages (ARMs), subprime mortgages and no-income, no-asset loans that allowed people to buy homes or take out home equity loans that they simply could not afford.  Last 02192006_iraglassSeptember, this house of cards came crashing down, setting off the global credit crisis and making an ongoing recession the worst in a generation.

Click here  to listen to the full “The Giant Pool of Money” podcast from “This American Life” to learn exactly what happened and why.  I know of no better description of how the recession happened.