It’s one of those red-letter days when you absolutely have to go over to MarketTicker and read the entire article. Here are few prime quotes that go hand in hand with the ‘Dominoes’ post and what your own common sense has been telling you for years.
Stay with this video because the visuals starting at 4:00 are background information that Americans need to understand the problem. Also, Stossel interviews Paul Ryan as the ‘Paul Revere’ on the tsunami of debt headed our way. Wait until you see the interest on the debt that is coming in Part 2.
Part 3, the Entitlement Game and Joel Kotkin, ‘America in 2050’:
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.
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.
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?
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:
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.
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….