Bombs and bake sales

Remember the line about advocacy against the Vietnam War and the military:

"It will be a great day when our schools get all the money they need and the Air Force has to hold a bake sale to buy a bomber".

It looks like that day has come.

-- "Pentagon accepts $130 million donation to help pay the military during the government shutdown," Associated Press

The Pentagon confirmed Friday that it has accepted an anonymous $130 million gift to help pay members of the military during the government shutdown, raising ethical questions after President Donald Trump had announced that a friend had offered the gift to defray any shortfalls. 

While large and unusual, the gift amounts to a small contribution toward the billions needed to cover service member paychecks. The Trump administration told Congress last week that it used $6.5 billion to make payroll. The next payday is coming within the week, and it is unclear if the administration will again move money around to ensure the military does not go without compensation.

“That’s what I call a patriot,” Trump said during a White House event Thursday when he disclosed the payment from the donor. The president declined to name the person, whom he called “a friend of mine,” saying the man didn’t want the recognition.

-- "US army taps private equity groups to help fund $150bn revamp," Financial Times

The US army has asked private equity groups including Apollo, Carlyle, KKR and Cerberus to pitch “meaty” strategic projects to help the service fund a $150bn infrastructure overhaul.

Driscoll told the Financial Times he gathered the private investors to say, “‘Hey, here are all the assets we have in our arsenals and our depots that we are underutilising . . . What are those types of deals where we can work with you and invite you in?’”

... The proposals mark the latest example of the Trump administration’s efforts to work with the $13tn private capital industry — and an unprecedented effort to enlist some of Wall Street’s biggest investors directly in US national security. 

Driscoll added the projects could include data centres and rare earth processing facilities, and could involve the federal government swapping land for computer processing power or output from rare earth processing.

Moms 4 Housing in Oakland California raise the concept of tenant right to purchase laws

One of the things about "capital" is that well funded operators are situated to take advantage of downturns.

Reproducing at scale single family housing for the rental market.  With the last recession, in a quantum change for the single family housing market, large well funded Wall Street operators like Blackstone bought thousands of foreclosed houses and started renting them out ("Blackstone cashes out on Invitation Homes," HousingWire).

This shouldn't be a surprise.  Large organizations like banks would rather sell chunks of their portfolio in one fell swoop, to other larger operators, rather than one by one to individuals.

While some companies rehabilitate these properties and eventually sell them off, many do not and a significant tranche of this housing has been shifted to the rental market permanently.

Image from The Intercept article "OAKLAND’S MOMS 4 HOUSING WERE EVICTED BY A GIANT CORPORATION THAT RUNS NATIONAL HOME-FLIPPING OPERATION."

But another phenomenon within the national market for real estate property and financing is the creation of firms that flip single family properties--buy properties, fix them up (either well or badly), and sell them--usually contributing to a resetting of the pricing within the subdistrict.

They've also created a system to enable small real estate investors to invest in properties outside of their local area, both in terms of fixing and selling properties, and also in managing properties, which makes it much easier for out-of-market investors to own such properties ("Startups Reshape Home Investing," Wall Street Journal, 1/8/20).

One such firm is Wedgewood Properties ("Examining Wedgewood: A Look at the Home-Flipping Giant in Battle with Homeless Mothers," NBC San Francisco).

Moms 4 Housing.  In Oakland California the activist group Moms 4 Housing shifted the debate ("When Cops Evicted These Moms, the Housing Conversation Changed," Yes Magazine).  A couple of homeless families decided to squat in a house that had been vacant for many years.  From the article:

The house had sat vacant for several years. Walker and a woman named Sameerah Karim and their children moved into the house in November 2019. The two longtime Oaklanders were homeless and thought it made more sense for them and their families to live there than to leave it empty.

They call themselves Moms 4 Housing. During their occupation, they cleaned up the home. Community members donated furniture. They were later joined in the home by two more Black homeless mothers named Tolani King and Misty Cross.

The occupation was always about more than just putting a roof over their heads. It was also a campaign to call attention to the role housing speculation was playing in Oakland’s gentrification, displacement, and homelessness crisis.

The house on Magnolia Street had been bought for $501,000 in August by Wedgewood Properties, one of Oakland’s most prolific home flippers. The San Francisco Chronicle reported that Wedgewood had rehabbed and sold about 160 homes there in the past nine years.

While they were evicted, attention brought to the case means that they might get to go back to the house, as the city is negotiating with the property owner to sell to the Oakland Community Land Trust, which would then sell or rent the house to the Moms 4 Housing, with an easement on the property maintaining its affordability.  From the article:

In exchange for the lower-than-market sale price, CLT buyers who later move out agree to also sell the home at a below-market rate to income-qualified buyers. The owners are able to build some wealth off their home’s equity, but less than they likely would if they’d been able to buy a market-price home. Even with less equity, CLT supporters say, the model still gives lower-income residents access to stable housing and wealth generation they likely wouldn’t have otherwise in a high-cost market such as the Bay Area.

AU Professor Carolyn Gallaher authored a book, The Politics of Staying Put: Condo Conversion and Tenant Right-to-Buy in Washington, DC, on the DC Act. (Interview with the author in Washingtonian Magazine.)

Tenant right to purchase on sale clause legislation being considered.  Like how DC has a Tenant Opportunity to Purchase Act (TOPA) act to give tenants the right of first refusal to buy a property when its sold, Oakland and other Bay Area communities are now considering passage of similar laws ("Moms 4 Housing-inspired policy could shake up Oakland real estate market," San Jose Mercury News).

Although more recently DC changed the TOPA law, so it no longer pertains to single family dwellings, only multiunit properties.

DC isn't a place where private equity has assembled a large portfolio of single family housing.  In places where that is the case, TOPA-type laws should not except single family housing from the mix, although individually owned properties probably should be exempt, unless a tenant has lived there "for a long time".

Private capital is amoral and can generate negative outcomes as frequently as positive outcomes

Just a brief point.

Besides the problems of financialization of the economy, rentier behavior, and the agenda of capital, neoliberalism, etc. is the problem of lots of money out there, seeking some kind of positive marginal return, preferably extranormally positive returns.

I saw this title of a book review in the Guardian, "Evicted by Matthew Desmond review – what if the problem of poverty is that it’s profitable to other people?," and it reminded me of this issue.

One of the problems with so much capital sloshing around in private equity is that it will fund anything.

For example, one of the reasons that Robert Mugabe stayed in power so long in Zimbabwe was because even as traditional sources of funding to governments dried up, vulture capital was willing to step in ("The investor who saved Mugabe," Mail & Guardian).

Similarly, how private equity buys up bonds issued by bankrupt government agencies in Puerto Rico, making it harder to come up with socially optimal outcomes ("'Bottom-feeding' hedge funds are big winners on Puerto Rico bonds," Financial Times).
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Or Warren Buffett, who benefits from vulture financial loan products sold to people who buy mobile homes ("Buffett's mobile-home empire makes record profits while foreclosing on homes," Seattle Times). Even though he's pledging to give away most of his wealth on philanthropic purposes.

Etc.

As long as money is to be made, some firm is out there willing to put out the money to make it, whether its for good or ill.