Capmark Files Chapter 11

Here we go kids – with all the hullabaloo about a national emergency for a milder version of the seasonal flu, Cheney’s comments about the resident, Joey Biden off to a GM plant on Tuesday, and the war on Fox News; the collapsing commercial real estate market may just fly under the radar.

Capmark Financial Group Inc. Seeks To Restructure Balance Sheet Through Chapter 11 Reorganization Process (Reuters)

HORSHAM, Pa.–(Business Wire)–
Capmark Financial Group Inc. (“Capmark”) today announced that Capmark and certain of its subsidiaries have filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. Capmark intends to use the reorganization process to implement a restructuring that reduces its corporate debt and maximizes value for its stakeholders. Capmark`s businesses are continuing to operate in the ordinary course.

Capmark Bank, which recently received $600 million of new equity from Capmark, is not part of the filing. The Chapter 11 proceedings are not expected to have an impact on Capmark Bank, its existing lending commitments and deposits or its ability to conduct trust services. Capmark Bank will continue to serve its customers.

Jay Levine, president and chief executive officer of Capmark, said: “We view this reorganization process as an unfortunate but necessary response to recent unprecedented conditions in financial and commercial real estate markets, which presented a significant challenge for Capmark and similarly situated finance companies. By constraining the availability of capital, these difficult market conditions had a negative effect on all our core businesses.”

Capmark`s subsidiaries filing for Chapter 11 protection include Capmark Finance Inc.; Capmark Capital Inc.; Capmark Equity Investments, Inc.; Mortgage Investments, LLC; Net Lease Acquisition LLC; SJM Cap, LLC; Capmark Affordable
Equity Holdings Inc.; Capmark REO Holding LLC; Summit Crest Ventures, LLC; Capmark Affordable Equity Inc. and 33 other Low Income Housing Tax Credit entities.

Capmark`s financial advisors are Lazard Frères & Co. LLC and Loughlin Meghji + Company. Capmark`s bankruptcy counsel is Dewey & LeBoeuf LLP.

For more information please visit Capmark`s web site at www.capmark.com.

About Capmark®:

Capmark is a commercial real estate finance company that operates three core business lines: lending and mortgage banking, investments and funds management, and servicing.

Are you wondering who Capmark is in the scheme of things?

Major Commercial Real Estate Lender Capmark To File Chapter 11

It’s happening. The long-awaited bankruptcy of big-time commercial real estate lender Capmark is just about here.

WSJ: In 2006, a group led by KKR & Co., Goldman Sachs Capital Partners and Five Mile Capital Partners acquired the lender GMAC LLC’s commercial-real estate business and renamed it Capmark. As of March 31, the investor group owned about 75% of the company, with GMAC and its employees owning the balance.

The Horsham, Pa., company recently reported a $1.6 billion second-quarter loss and warned it might be forced to seek Chapter 11 bankruptcy protection. KKR has already written down its investment in Capmark to zero.

Capmark recently entered an agreement to sell its North American servicing and mortgage-banking operations to a new company owned by Warren Buffet’s Berkshire Hathaway and Leucadia National Corp. for as much as $490 million. Under the deal’s terms, the sale could occur while Capmark is in bankruptcy, but would require a bigger cash payment. Read the whole thing >

Capmark is a very interesting entity:

GMAC from Wiki:

To raise money for reorganization, General Motors divested various assets including GMAC. This divestiture was accelerated at the prompting of investor Kirk Kerkorian and his former representative on GM’s board, Jerome York.

On March 23, 2006, GM announced that it completed the sale of a 78% interest in GMAC Commercial Holding, its commercial real estate subsidiary, for $1.5 billion in cash to a private investment group including Kohlberg Kravis Roberts & Co., Five Mile Capital Partners and Goldman Sachs Capital Partners. The deal includes the payoff of all intracompany debt owed to GMAC, bringing the total value of the deal to $9 billion. The new entity, in which GMAC owns a 21% interest, is known as Capmark Financial Group, Inc.

Now for something completely related.

Get ready, America: Great Depression 2.0
Author who predicted current crisis shows why it’s ‘only the beginning’

Drawing striking comparisons between the Japanese economy in 1988 and the American economy today, a new book by an author who predicted the current crisis warns it’s going to get much worse before it gets better.

Vox Day, a WND columnist, asserts in “The Return of the Great Depression,” by WND Books, the U.S. is only now entering the early stages of the Second Great Depression.

Day said the ideal reader of his book is anyone who scratches his head wondering how the Dow Jones Industrial Average could rise 50 percent in six months despite a rapid increase in unemployment, massive loan defaults and declining global production.

“I think anyone who is shocked at the way the politicians of both parties have continued to put the interests of Wall Street ahead of the interests of American homeowners, workers and small businesses is going to get a lot out of it,” he told WND. “I don’t know if those who were burned by the tech and real estate bubbles will necessarily enjoy reading the book and how the odds were always stacked against them, but it should help them avoid buying into the next investment charade.”

Day writes in “The Return of the Great Depression” that “for anyone equipped with the correct theoretical models of economics, the financial crisis was entirely predictable.”

He points to “the bipartisan push for increased homeownership through low interest rates and relaxed lending standards,” which destroyed wealth rather than creating it.

“But what is less well known,” he writes, “is that long before the subprime lending market erupted in 2004, it was already apparent to a few clear-eyed and contrarian economists that the housing market was possessed of the same irrational exuberance that had propelled the 1999 technology stock bubble to such gravity-defying extremes.”

He cautions: “Many of the same individuals who did not see the crisis coming are now loudly assuring the public that the worst is already past, whereas those who correctly anticipated it tend to be somewhat less optimistic about the future.”

The river is rising

In his detailed analysis, Day explains the U.S. economy has relied on a constant increase of the level of debt to fund its economic growth.

He points out the average annual expansion of commercial bank credit since 1973 is 8.4 percent, which has sustained an average of 3 percent yearly GDP growth.

But total loans and leases at commercial banks have fallen 6.8 percent this year and 8.3 percent since their peak in October 2008. (emphasis mine)

“This is an unprecedented decline,” he warns, “as the largest previous annual contraction was -1.0 percent in 1975. This strongly indicates the onset of the debt deleveraging process predicted by those who foresee a depression-sized event.”

The amount of failed bank deposits as a percentage of total bank deposits is more than twice as high as the rate during the first two years of the Great Depression, he points out, and the FDIC has announced its insurance fund is already in the red and does not anticipate returning to solvency until 2012 at the earliest.

Meanwhile, executives at large multinational industrial companies are privately reporting their future order books look worse for the first quarter of 2010 than they did for the first quarter of this year when the effects of the current crisis were being realized.

The numbers do not lie; unlike politicians….

Today’s AYFKM? Award Goes To Ben Bernanke…

…for the continued audacity of diversion that The Fed and this administration have become known for.  So far this year, 77 banks have been closed and the last report dollar amount in the F.D.I.C. account was $13 Billion at the end of March with numerous bank failures since then.  The dollar is weakening because Bernanke and his buddies are pumping trillions into our economy and now the F.D.I.C. wants to loosen rules so that private equity firms can buy banks.  Now why would that be?  Could it be because F.D.I.C. is broke and we are on the verge of the commercial real estate bubble implosion and many more banks are going to sink when that happens?

Bernanke: U.S. economy on cusp of recovery

JACKSON, Wyo. (AP) — Federal Reserve Chairman Ben Bernanke declared Friday that the U.S. economy is on the verge of a long-awaited recovery after enduring a brutal recession and the worst financial crisis since the Great Depression.

Economic activity in both the U.S. and around the world appears to be “leveling out,” and “the prospects for a return to growth in the near term appear good,” Bernanke said in a speech at an annual Fed conference in Jackson Hole, Wyo.

Y’all know what I am thinking about this POS and The Fed, but Karl Denninger has definitely got it going on better than I ever could state.

Webster Definition Of Hubris: Ben Bernanke

That is a lie.

The two largest remaining free-standing investment banks, Morgan Stanley and Goldman Sachs, were stabilized when the Federal Reserve approved, on an emergency basis, their applications to become bank holding companies.

That too is a lie.  These firms survived only because you negotiated a back-door transfer of taxpayer money, free of all obligation, through AIG to these companies.  Their application to become bank holding companies also came with exemption requests for BHC leverage limits, which you granted, thus leaving the liability for their continued gambling (and boy have they!) on the taxpayer’s back as well.

The failure of Lehman Brothers demonstrated that liquidity provision by the Federal Reserve would not be sufficient to stop the crisis; substantial fiscal resources were necessary. On October 3, on the recommendation of the Administration and with the strong support of the Federal Reserve, the Congress approved the creation of the Troubled Asset Relief Program, or TARP, with a maximum authorization of $700 billion to support the stabilization of the U.S. financial system.

You and Hank Paulson lied about your intentions for that $700 billion dollar appropriation.  That this was a knowing lie, in that the intended disbursement changed before it was finally voted up in Congress, is fact, not supposition – it was disclosed by Neal Kashkari during questioning under oath by Congress that The Fed and Treasury had shelved the “bad asset” purchases several days prior to the final vote, but you never informed Congress of your altered intent.

In short, you and Treasury acquired access to that $700 billion under false pretense.  In an honest world we would call that theft by conversion, or simple fraud.  But we live in a world where regulatory capture and fraud are part and parcel of everyday life in Washington DC.

Make sure to go over and read the whole article, and do the math yourself.  Numbers don’t lie, but people do.

It Did Not Just Happen By Accident

It Did Not Just Happen By Accident

graypuzzlesphereA few days ago I posted this story about the impending commercial real estate bubble collapse.  Add the following editorial from Larry Kudlow of National Review Online and you will see what I have been seeing since the beginning of 2006 when my hours were cut the first time.

I am only quoting the most salient points, so I suggest you wander over and read the whole article, all the while keeping in mind, that no single administration or succession of administrations could possibly be so stupid as to drive America into extinction by accident. Then add the young lawyer and mentor to ACORN (Obama) with their Saul Alinsky and Cloward-Piven strategy who was then installed in our White House to complete the endgame of the strategy, and it is impossible for this student of history to believe that it just happened that way.

The Road to Economic Demoralization
Washington is going the wrong way.

There’s no question that current government policies for taxes, spending, and regulation are causing the U.S. to lose competitiveness in the global race for capital, prosperity, and growth.

And China has no capital-gains tax. It only has a 15-to-20 percent corporate tax. The U.S., on the other hand, is raising its cap-gains tax rate to 20 percent. It’s also increasing its top personal tax rates. (emphasis mine)

In fact, the scheduled income-tax hike along with a much-discussed 4 percent health-care surtax will balloon the top U.S. tax rate all the way to 51 percent. And there’s more. In order to finance so-called health-care reform, congressional Democrats are now talking about raising the tax rate on capital gains and dividends by another 1.5 percent while installing a value-added tax (VAT) that would begin at 1.5 percent.

So top tax rates in the U.S. may edge into the mid-50 percent range. Compare that to the OECD average of only 42 percent. And when those tax-hikes kick in, the top U.S. tax rate will rank above that of France, Germany, and Italy. That can’t be good.

Incidentally, our 40 percent corporate tax rate is already almost 15 percentage points higher than the corporate rates in most of Europe.

Washington’s enormous expansion of the state-, local-, and federal-government spending share of GDP to over 40 percent — including Bailout Nation, TARP, and takeovers in numerous industries — is eerily reminiscent of Old Europe’s old policies. And in an ironic twist, Europe seems to be moving toward a lower-tax-and-spend-and-regulate, Ronald Reagan–type approach, while the U.S. is regressing to the failed socialist model of Old Europe. This makes no sense.

Higher tax rates undermine the incentive model of growth. At the margin, investment risk and work effort become less rewarding. On top of this, Obama’s regulatory moves toward greater government control of the economy will further drown animal spirits in a sea of red tape born of bureaucratic officialdom.

Think about this in terms of the threat to nationalize heath care, which is over 15 percent of the economy. (Author’s note: Factor in SEIU who has offices with ACORN and who is teaming up with Wal-Mart to back government healthcare.) Additionally, Washington’s cap-and-trade proposals will essentially nationalize the entire energy sector — another 15 percent of the economy — sending long tentacles into every nook of the economy that’s impacted by energy, which is virtually everything. (Author’s Note: Factor in GE who was a major backer of the Obama campaign and who is now part of the economic recovery team and a corporate member of the CFR.)

And all this comes on top of the U.S. government’s takeover of auto companies, banks, AIG, Fannie, and Freddie. Instead of Schumpeterian gales of creative destruction, we’re on the road to economic demoralization.

Here’s the clincher: Year-to-date, Dow Jones stocks are off 8 percent, while China stocks are up 71 percent. The world index is up 4 percent. Emerging markets are up 25 percent. They’re all beating us. None of this is good.

We’re going the wrong way. That’s why stock markets are not voting for the United States anymore.

It appears the Pilgrims and their front groups for the NWO are trying desperately to level the playing field.

They have been systematically trying to abolish the one major component that can and will derail their plans.

Patriotic Americans and their 2nd Amendment rights.

The Battle Plan:

  • DEMAND that the unspent funds from the Porkulus (Stimulus) Bill be repealed.
  • DEMAND that The Federal Reserve be audited and then abolished.
  • Melt the phone, fax and email lines at the House and Senate over Cap and Trade, Sonja Sotomayor’s appointment to the Supreme Court, the Socialized Medicine Rationing Bill, and whatever else this crack smokin’ Democrat controlled congress has up it’s sleeve. (3rd Stimulus Anyone?)
  • Fight every single attempt to disarm the American people.
  • Assemble in Washington, D.C. on 9.12.09 to put Congress on notice that their days are numbered.
  • Run for Political Office.
  • Flip the Congress in 2010 thereby depriving Obama/ACORN/SEIU and the shadow chess players in the background of all their rubber stamp power.
  • DEMAND that every single piece of paper that pertains to Barack Hussein Obama from his real long form birth certificate to all of his college records, university records, medical records, law review papers, court documents of his time as ACORN’S lawyer, Selective Service documentation, and Illinois Senate records are (unsealed) revealed to the public in their entirety to show exactly what Barack Hussein Obama is hiding; be it a British citizenship, an Indonesian citizenship, or whatever trouble he may have gotten caught up in while at campuses of higher education.
  • REMEMBER that both Dems and Repubs are showhorses for the Pilgrims.  There is no difference between them.

And Now For The Commercial Real Estate Bubble

Remember this back on 4.24.09:

The Commercial Real Estate Bubble…Coming To A Bank Near You

I know you folks are very savvy, paying attention, and doing math with a real pencil instead of a red crayon, so what comes next is NO SURPRISE to you.  Are we all ready for the next part of the rollercoaster ride when the commercial real estate bubble implodes? If you still have money in the stock market, why is that? (Once again, bold emphasis is mine, and may I repeat how screwed we are?)

Well today, 7.9.09, we have this:

Commercial real estate woes grow

WASHINGTON — Owners of shopping malls, hotels and offices are defaulting on their loans at an alarming rate, and the commercial real estate market is not expected to hit bottom for three more years, industry experts warned Thursday.

“The commercial real estate time bomb is ticking,” said Rep. Carolyn Mallory, D-N.Y., who heads the congressional Joint Economic Committee.

Delinquency rates on commercial loans have doubled in the past year to 7 percent as more companies downsize and retailers close their doors, according to the Federal Reserve. Small and regional banks face the greatest risk of severe losses from commercial real estate loans.

The commercial real estate market’s fortunes are tied closely to the economy, especially unemployment, which hit 9.5 percent in June. As people lose their jobs, or have their hours reduced, they cut back on spending, which hurts retailers, and take fewer trips, which hits hotels.

Funding for commercial loans virtually shut down last year as the financial system unraveled. Industry executives say financing is still extremely difficult to obtain, even for financially healthy properties.

While that may seem like an abstract problem, it has real-world consequences. New construction projects have come to a virtual standstill. That means reduced tax revenue for local governments and fewer construction jobs, said Jeffrey DeBoer, chief executive of the Real Estate Roundtable, an industry group.

The commercial property industry is “not going to turn around until consumers and businesses start spending money again,” he said.

Total losses in securities backed by commercial property loans could be as high as $90 billion in the coming years, according to Deutsche Bank analyst Richard Parkus. He says even more losses — up to $140 billion — are expected from construction loans made by regional and local banks, rather than those sold as securities held by investors.

“We believe the bottom is several years away,” Parkus told lawmakers.

Are you ready folks? Still have money in the stock market?

The Commercial Real Estate Bubble…Coming To A Bank Near You

I know you folks are very savvy, paying attention, and doing math with a real pencil instead of a red crayon, so what comes next is NO SURPRISE to you.  Are we all ready for the next part of the rollercoaster ride when the commercial real estate bubble implodes? If you still have money in the stock market, why is that? (Once again, bold emphasis is mine, and may I repeat how screwed we are?)

From the WSJ:

U.S. Presses Some Banks to Act After Stress Tests

WASHINGTON — Federal officials are pushing several of the country’s largest banks to bolster capital reserves, people familiar with the matter said, as regulators try to repair bank balance sheets and the public image of the U.S. banking sector.

I can almost hear you speaking…

The identities of the banks, among the 19 institutions that were subjected to federal “stress tests,” couldn’t be learned. Analysts believe they likely include regional banks with large exposures to commercial real estate in the Midwest and Southeast. Three people familiar with the matter said at least three banks are in this position.

Government officials believe most banks in need can improve their capital footing without taking money from the government bailout fund. This would be done by raising funds from private investors or converting the government’s existing investments in banks into a new type of equity that would better cover banks in case of future losses.

That would be common shares or nationalization.

In the latter scenario, the U.S. could end up owning large chunks of banks, raising the specter of something akin to nationalization. Federal officials have said any such move would be temporary. Some banks could end up requiring a cash infusion from the Treasury.

Is anything temporary with this government?

In February, the Obama administration said 19 bank holding companies with more than $100 billion of assets would have to undergo a stress test. The move was designed to calm fears about the solvency of the banking system. The exams, conducted by more than 150 federal regulators, analyzed potential losses from residential mortgages to complex securities products.

Oh, I am so calling b*llshit on that phrase.  The move was designed to see what would happen when the commercial real estate bubble imploded.

Regulators want banks in the future to be able to maintain an additional “buffer” of capital above the minimum standards, a Federal Reserve official told reporters Friday. The official wouldn’t identify the specific buffer.

Because that would give it away, yes?

The Fed released the methodology for the tests Friday, although didn’t provide many of the specifics that bank investors and analysts had been seeking.

Imagine that?

In embarking on the tests, government officials are walking a tightrope. The move could have the opposite its intended effect and raise public fears that banks ordered to raise more capital are on the verge of collapse. The Fed specifically said Friday that needing to boost capital should not be viewed as “a measure of the current solvency or viability of the firm.”

<snip>

Under the tests, all 19 banks are all believed to be “well capitalized” by current standards. The tests, however, pushed banks to determine what their conditions would look like if the economy worsened precipitously.

Like, for instance, trillions in commercial real estate defaults?

Fed officials and some of the banks wrapped up in less than 60 minutes; others dragged on for several hours, according to people familiar with the matter. Participants were told to keep mum on what was discussed.

Those would be the banks that are heavily leveraged in commerical real estate.

The 19 banks identified by the government, and the winners are: J.P. Morgan Chase & Co., Citigroup, Bank of America Corp.,  Wells Fargo & Co.,  Goldman Sachs Group, Morgan Stanley, MetLife, PNC Financial Services Group, US Bancorp, Bank of NY Mellon Corp., SunTrust Banks Inc., State Street Corp., Capital One Financial Corp., BB&T Corp., Regions Financial Corp., American Express Co., Fifth Third Bancorp, Keycorp, GMAC LLC.

Read the government’s methodology here, produced by the Board of Governors of The Federal Reserve System.  (A round of applause, please?  Did.Not.Think.So.)

Ladies and Gentlemen; once again, buckle up…

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