enemies of America

This video from Bill Moyers reminds me of a science fiction story

http://www.pbs.org/moyers/journal/07182008/watch.html

All of this foreclosing does not make any economic sense. I know the prevailing story line is rich bastids taking advantage of the poor and/or stupid, and that would certainly be nothing new. But there is usually a certain logic to what rich people do. It makes them money, profit, and I do not see any profit here.

For one thing, renters being evicted. What is the economic sense of that? If I am a bank and I have foreclosed on a rental property, the last thing I want to do is evict paying tenants. I want a building full of tenants providing me with an income stream and making the property more saleable.

Then there is selling. Why is there no re-selling? A foreclosed house does not do anything for the bank profit-wise. It should be put on the market, in an auction if nothing else. Even getting $1,000 is better than nothing. The incompetence of the banks is staggering here. They are not making money by allowing houses that they own to sit idle and be destroyed by scavengers. Even the legendary tax write-off does not make sense. Since taxes are not 100% it does not help to lose $10,000 to save $4,000 in taxes. You are still out $6,000.

Anyway this whole thing reminds me of the Clifford Simak novella "They walked like men" and as the cover says "...but they were a race of fantastic aliens determined to conquer the earth without weapons." In the book a group (which turns out to be the aliens) is buying businesses and closing them, buying property and evicting the tenants, and so people are left homeless and jobless.

But on a more realistic level, are these banks owned by Saudis or Chinese or Russians, maybe people with money to burn who would rather hurt America than make money? And also, since they are not just playing with their own money, but the money of their depositors, it does not cost them all that much, and when the bank gets bailed out by the government that takes another bite out of the American economy.

Seriously though, all speculation aside, the behaviour of the banks in this story makes no economic or business sense that I can see, and I would like to know why or who benefits.

If a building is being foreclosed on, you want the renters out. Normal people don't thank like this, but many times when a building is being sold or foreclosed on the renters stop paying rent. Why? Who knows. But renters tend not to be the most trustworthy of people. Also, banks do not want to be property managers.

Why do they hold on to these properties? Hope that the market will get better.

I had a business in a foreclosed building. They did not kick me out. And bankers know better than that. Would they rather finance an empty building or a building full of renters? Nobody wants to buy a building and then have to hope they get renters. I want a building/house where people have been paying rent for years.

These are bankers, calculating people. They don't do business on hope. You make calculations, with an eye on the bottom line.

Maybe it is just a logical consequence of re-selling mortgages. The company that forecloses is far away run by a hedge fund that has some kind of mortgage insurance that pays them anyway even if the building is trashed. Even then, it seems like a quick sale with renters intact would improve the bottom line.