This Threat to Your Wealth Is Growing

Andy Snyder|March 23, 2023

Pay attention… the warning signs are all around us.

The latest one is quite daunting.

Do you remember when the president announced his yearning for nationwide rent control a few weeks ago?

If it sees the light of day, Biden’s Renters Bill of Rights would “encourage rental affordability” and “limit egregious rent increases.”

It’ll create more bank failures too.

The fine folks at Bloomberg came out with some interesting research this week. It looks at some of the debt that helped bring Signature Bank to its demise… and some of the assets the bank’s rescuers refuse to buy – even for pennies on the dollar.

The report shows Signature owned more than $11 billon in loans that were backed by rent-stabilized apartment buildings. Originally, the owners of these buildings could raise the rent when a tenant moved out. But thanks to a law passed in 2019, it now takes little short of a notarized affidavit from the Man Upstairs himself to hike prices.

The values of these buildings have been cut in half.

Once again, the government meddled in the name of doing good… and nothing but bad came from it.

But it gets worse.

A House of Cards

Don’t forget that 2019 came before 2020. And 2020 had some doozies in store for the rental world. The government handed out trillions in free money… and made it illegal to evict folks who didn’t want to pay their rent.

It papered over the giant hole in the wall.

But those programs have come and gone, leaving a trail in the prairie like a herd of stampeding buffalo.

Soaring interest rates have made rental properties quite expensive to finance… or refinance.

When Signature saw deposit outflows and was forced to go to the market to sell some of this ugly debt at today’s prices, the bid wasn’t quite what it was asking.

I’m talking pennies on the dollar.

But don’t blame the banker.

Blame the dopes inside the Beltway.

And here’s the nastiest part of all: Signature’s assets are being gobbled up by its former competitors, but they won’t touch any of this lousy debt. They know it’s likely only going to get riskier and cheaper from here.

They won’t buy it.

So what’ll happen to it? Ultimately, the little guy will pay. The notes will be written off and papered over by the government’s non-bailout bailouts. The owners of these buildings will have fewer ways to finance their projects. Housing will become scarce, prices will rise and quality will fall.

The oh-so-poor renter who was supposed to be protected from his greedy landlord just got screwed over by the greediest of them all.

It’s nothing new.

Healthcare, farming, manufacturing, education… they’ve all suffered. As governments get bigger, the stakes get higher.

This isn’t the first time a government program has backfired and put folks on the street. And it certainly won’t be the last…

Not if the folks in charge get what they want.

The threat to your wealth continues to grow.