How Wall St. Investor Greed in Real Estate Can Devastate Families -- The Tragic Death of 2-Year Old

http://www.alternet.org/economy/how-wall-st-investor-greed-real-estate-can-devastate-families-tragic-death-2-year-old-zahara

How Wall St. Investor Greed in Real Estate Can Devastate Families -- The Tragic Death of 2-Year Old Zahara Cedillo



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The Private Equity Business Model

Global private equity firms have not been, historically, in the business of dealing with pool fences and the other hassles of maintaining single-family houses. But following the housing market collapse, the idea of buying a ton of these foreclosed properties suddenly made sense, at least to investors. Such private-equity purchases were to make money in three ways: buying cheap and waiting for the houses to gain value as the market bounced back; renting them out and collecting monthly rental payments; and promoting a financial product known as “rental-backed securities,” similar to the infamous mortgage-backed securities that triggered the housing meltdown of 2007-2008. Even though the buying of the private equity firms has finally slowed, economists (including those at the Federal Reserve) have expressed concern about the possibility that someday those rental-backed securities could even destabilize -- translation: crash -- the broader market.

Since Wall Street was overwhelmingly responsible for the original collapse of the housing market, many have characterized these new purchases as a land grab. In many ways, Progress CEO Donald Mullen is the poster-child for this argument. An investment banker who enjoyed a brief flurry of fame after losing a bidding war to Alec Baldwin at an art auction, he was the leader of a team at Goldman Sachs that orchestrated an infamous bet against the housing market. Known as “the big short,” it allowed that company to make “ some serious money“ when the economy melted down, according to Mullen’s own emails. (They were released by the Senate Permanent Subcommittee on Investigations in 2010.) As Kevin Roose ofNew York magazine has written, “A guy whose most famous trade was a successful bet on the full-scale implosion of the housing market is now swooping in to pick up the pieces on the other end.”

A Child’s Death

Unlike her cousin Jesus, two-year-old Zahara was afraid of the pool. She was much more likely to be found dancing in front of the television, or eating vegetables, which were -- to her family’s surprise -- her favorite food. She loved ketchup, and once disgusted her aunt Brenda by dipping her entire hand into the ketchup bowl at a restaurant and licking the condiment off her fingers. Describing herself as someone who “loves firsts,” Christine saved everything about her daughter’s life from her positive pregnancy test to the certificate she received for volunteering at Zahara’s Early Head Start program.