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Busted retailers use bankruptcy to break leases by the thousands (bnnbloomberg.ca)
213 points by finphil 53 days ago | hide | past | favorite | 268 comments

Man, with (currently) four comments mentioning that this is "what bankruptcy is for", I think the point of the article might have been missed. This isn't some sneaky "one weird trick", and that's not the reason Bloomberg is reporting on it. In fact, the tone of the article to me is, "yup, companies do it all the time, but..." And the "but" is:

But the moves threaten to upend huge swaths of the real estate market and the half-trillion dollar market for commercial mortgage-backed securities.

It's not "Busted US Retailers Use Bankruptcy to Break Leases", but more the "...by the Thousands" part. Malls are going to start becoming ghost towns, especially with no anchor stores like Penny's and the since-departed Sears.

>But the moves threaten to upend huge swaths of the real estate market and the half-trillion dollar market for commercial mortgage-backed securities.


Seriously. We either have to choose to be a market that is somewhat free or not. At this point, the government is choosing winners and losers. It is a repeat of 2008. Oh no, it is too big to fail.

Someone will come by with the investment to buy what is left. Perhaps they will run it better. Prepare better.

We're going through this with airlines and cruise companies now fighting for more money and loans from the government. Perhaps Delta grew too large to be what they are now. Maybe there are too many malls in existence. Maybe the method in which we collateralize mortgages doesn't make sense anymore.

Our economy has developed the too big to fail mindset and forgotten, largely, you can lose.


It's a news story, there doesn't have to be any underlying editorial message. Sometimes the news is just "thing happens".

For most publications that time past a long time ago. There’s a limited space so even “presenting the facts” has an editorial bias when you decide which facts you are presenting.

The extreme example of this is a political news site that dedicates its entire site to posting anything that paints its opponents or their positions in a negative light. They can all be “thing happens” stories, but the filter alone gives it an angle.

The article here is not of that kind. Business publications tend to be the most report-fact-based, simply because their readers don’t make money by deluding themselves with confirmation bias.

Well, you have the existence of this article as a counterpoint. :)

> For most publications that time past a long time ago.

The exception would be Bloomberg, or the Financial Times. Publications read for information to make decisions on.

>>But the moves threaten to upend huge swaths of the real estate market and the half-trillion dollar market for commercial mortgage-backed securities.


And if you're a trader reading Bloomberg news, maybe factor that into your trading decisions, or something. Not every piece of news is a call for government regulation.

Sounds like the underlying question behind the “and?” is, why is this news on HN?

As has been stated, this happens, it’s what bankruptcy is for, and is not all that shocking or worth particular notice here.

Considering that there will be a huge amount of unused, cheap real estate, and that only tech companies seem to be holding off the crisis, it is pretty much relevant - real estate will be a huge opportunity for tech.

Opportunity for what? Given the increase in WFH, tech companies are also using less real estate.

Opportunity for more datacenters? A lot of datacenters are built inside abandoned warehouses and other buildings: https://www.datacenterdynamics.com/en/analysis/recycled-buil...

These places tend to be connected to useful infrastructure like rail lines, and at least in the US, the internet kinda borrowed rail's right of way to lay fiber. Not sure how well connected malls are; they tend to be near highways so it might have a similar advantage?

Tech enabled homes, for example. Converting malls into homes, and managing building complexes using a tech stack...

If you really can't figure out one single use for cheap empty space, man, you need take a step back and just play around with your imagination a bit :)

I can think of plenty of uses of empty space. Housing is just one of them. What I didn't come up with was any need that tech companies might have. (I hadn't thought of datacenter, which another commenter mentioned, but I doubt the space opening up will be particularly useful for that.) Regardless, I've not heard of any tech companies needing huge amounts more space recently. Starting a new housing company to use this space might make sense, but I doubt any of the tech companies have any desire to become housing companies. I guess I could be wrong. If they do, I'll be removing any investments I might have with them, though.

Well, they would rightly argue that if you want to ensure market freedom, then you should let them keep their doors open and let people decide whether to attend and let people decide whether they want to work. Just free parties making decisions.

If you decide you're going to force a shutdown and result in the unemployment of millions, you're going to have to ensure they have jobs to come back to.

When corporations start buckling during sharp economic downturns, everyone's first instinct is always "let them burn."

But it's often not a choice between letting entire swaths of our economy collapse, and dumping absurd amounts of our tax dollars to prop up these poorly-run companies. We can give them loans with strings attached, force them to go through bankruptcy, wipe out the shareholders but preserve the structure of the company, bail them out but subject the industry to much greater regulatory scrutiny, etc.

Personally, I wish we had a straightforward way to bail out a company and have the U.S. government take ownership in the company until the stake can be safely unwound, or the too-big-to-fail company can be broken up. Theoretically, with a controlling stake and the corresponding board seats, you could force out the lousy management that didn't take adequate precautions as well.

It'd kind of be socialism-esque nationalization of industries with extra steps, but Japan has been doing a similar-style thing since the 90s, and I can't imagine it would be any worse than the relatively strings-free bailouts we've seen, or the collateral damage and runaway collapse that would occur from letting a monstrous chunk of the economy fail all at once.

Or you know, make up for the missed opportunity of 2008/2009, where the government could have bailed out underwater homeowners so that the bailout would have trickled up to the mortgage holders, instead of pouring money into banks and letting people suffer. Thanks, Obama.

Canada's CERB and CECRA have been doing wonders to keep ordinary people either afloat or employed, trickling up to small businesses all over.

(I don't mind your plan either, but it involves more per-company hand-holding than simply giving out generous unemployment and employment-support benefits)

Just to clarify, both TARP and Emergency Economic Stabilization Act were signed into law in October 2008 before Obama was even elected president.

Not saying he wouldn't have also signed the acts but the crisis was well underway by the time Obama was in the White House.

obama did vote for TARP as a senator, so it's likely he would have supported it (or a variation) as president.

The point he was making was the thanks obama doesnt make cents. Thank bush for the economic catastrophe for obama to inherit.

> the government could have bailed out underwater homeowners

Why reward people who gambled and lost? Bust them out.

People will either buy the houses at more reasonable prices or (more likely in this case) the banks will renegotiate more reasonable terms with the original mortgage holders because they have too much supply and no buyers.

> instead of pouring money into banks and letting people suffer. Thanks, Obama.

That wasn't possible as liquidity also died. Solvent businesses couldn't give people paychecks because the banks had no cash. You had to bail the banks.

HOWEVER, what needed to happen was that the bank investors needed to get busted out. That was where Obama went wrong.

>Why reward people who gambled and lost? Bust them out.

Why reward corporations and investors who gambled and lost? Bust them out.

>People will either buy the houses at more reasonable prices or (more likely in this case) the banks will renegotiate more reasonable terms with the original mortgage holders because they have too much supply and no buyers.

Other companies will buy the businesses at more reasonable prices or (more likely in this case) the banks will renegotiate more reasonable terms with the original mortgage holders because they have too much supply and no buyers.

And this was the issue with the 2008 fiasco. The government chose to save large financial institutions instead of breaking them up so the problems would be less likely to happen again. They chose to save large corporations over homeowners.

It is happening now with the pandemic response. I get the federal government wanted to dump a ton of money into the economy through PPP, but man, you cannot tell me the Catholic Church needed it. They are sitting on assets worth billions they could have sold/borrowed against to stay afloat. Same with large private educational institutions and public corporations.

The next round, and there will be a next round, will be more of the same. Carve outs will be rampant.

The USA should have looked at other countries providing direct income replacement to citizens. 70% income replacement sent to citizens and not force them through state's unemployment processes. Other countries did this and it worked.

> Why reward corporations and investors who gambled and lost? Bust them out.

Um, exactly?

As I said, the bank investors should have gotten wiped out.

The worst part is that a bank is probably the single business type that the Federal government can actually replace on a short timescale.

I would argue the gambler's are those buying insane billions in MBS and derivatives of derivatives of MBS, with what turns out to be totally BS ratings and a whole lot of what should have been obvious to see fraud

In this case, the downturn is caused by deliberate government action. How can you call a small local cafe forced to shut by government "poorly-run"? They were literally forced out of business by legislation that prevented them from even trading.

I was specifically discussing how we could better handle bailing out these too-big-to-fail corporations, not small companies, which should obviously be assisted in different ways.

You could look at it from the perspective of adapt or die. But you can also look at certain industries/companies like an endangered species. Once the last rhino dies, it's gone forever. Not a totally straightforward decision.

I understand why we’d want to save the airlines (for instance) from extinction, but why bail out the current equity holders as opposed to an orderly, Government-backed restructuring in bankruptcy court?

The US has never been a free-market and, honestly, the vitriol that folks use when talking about socialism has just hurt efforts to apply sane regulations that would help stabilize the market.

The US still uses SSNs for everything because everyone is too afraid of government identification to pursue a more sane approach, the result is a government issued identification that is poorly designed for what it's used for and extremely insecure. The same thing happens with our economy, instead of taking sane measure to fight against the penultimate death of capitalism (the slide into oligopolies) the vitriol against any form of government intervention has placed us in a situation where heavy handed government intervention is regularly required - we're avoiding a soft form of socialism and ending up with having to intervene like a planned economy about once every decade.

I really hope this can be solved by some smart people without trying to enlist wide-spread political support since I don't think that support is ever going to materialize.

>The US has never been a free-market

Pretty much every market in the US has been insanely free, like "just don't kill people quickly and we don't care" free at some point. They all stopped being free when they got big. Then government got involved and regulation, regulatory capture and whatnot happened (I'm intentionally glossing over the details because they vary by industry and I don't want to pass judgement).

Commercial mortgaged backed securities are an investment. Investments come with risks. Bankruptcy is just part of that risk.

The US is thirty years out from the previous commercial real-estate reckoning. The S&L crisis. Everything that was booming a year ago was built on top of that reckoning.

Exactly. That is the whole deal with being a commercial landlord. It isn't just "upward-only rent adjustments" every 5-10 years and cream a load of profit. There is meant to be some risk in return.

In London a lot of commercial rents in newly gentrified areas have went up 10x+ in the last 10-20 years. There has been an awful of lot of value transferred to these landlords for really not a huge amount of work in many cases.

Yes, but we're overleveraged. And I mean "We're" because the people who hold the debt is actually quite spread out and obfuscated.

I don't disagree with you in principal, but unfortunately, we have a parallel problem of how the debt market works, which is essentially to generated and then sell the debt to investors, diffusing the "risk", or rather, I think of it more as displacing it. Much less incentive for active participation in investing via debt. People who end up holding the debt are many steps away from being able to have conducted due diligence.

Not to harp on a point, but the big theme of this whole fiasco starts with the displacement of risk from the risk taker. And since we've permitted that, we're all stuck with it.

> People who end up holding the debt are many steps away from being able to have conducted due diligence.

And they should face the losses. And maybe learn from their mistakes.

And the people that were responsible with their money, didn't take on the risky assets that generated out-sized returns will be able to invest because they preserved capital.

Malls being ghost towns is a side story. After the 2008 residential MBS crash, as I understand it, a lot of that money moved to the then relatively stable commercial MBS market. If that market goes toes up in turn, with this...

(That hasn't been in the news for a few months, so I had to look around for some perspectives. Cf. https://daily.jstor.org/the-commercial-real-estate-markets-i... and, perhaps more controversially, https://www.propublica.org/article/whistleblower-wall-street..., suggesting that some of the same practices that turned the residential market into a crash-in-waiting may have been applied in the commercial market as well.)

It's a bit worse than that. The same practices that caused the 2008 crash came back in the guise of "non-prime mortgages". They are functionally identical to sub-prime mortgages.

The new laws did nothing to prevent this. They weren't meant to. We had a law designed to stop it that was enacted following the Great Depression. It was called the Glass-Steagall Act, passed in 1933. It was repealed in 1999 during President Clinton's administration... because Citigroup was too big to fail, and they promised to be good... honest.

2008 was an opportunity too great to pass up. Congress used the opportunity to enact a Federal bureaucracy that controlled banking and is not directly answerable to the Executive branch. This was the Dodd-Frank Act. Congress could have restored the rules in Glass-Steagall, which would have broken up Citigroup as a side effect. But they didn't.

Seems like recipe for disaster.

Oh, hey, I hadn't looked in detail at how residential paper works these days, but I think you may be on the mark here. I can't speak to the deep-state stuff, but in terms of mortgages, "qualified" and "non-qualified" appear to mean substantially what you say they mean.

I'm sure that can't possibly go wrong. Especially since the entire SERP when I looked up the "non-prime" term you used was pages put up by fly-by-nights to reassure the suckers that there's nothing wrong with the paper and if anyone tries to tell you otherwise, you should probably punch them in the face.

"deep state" meaning... information you didn't know already?

Meaning the whole "power struggle between branches of government" claim, which I referenced in a deliberately dismissive way because I really don't want to get into it. I'm more interested in trying to figure out how the Fed potentially buying up toxic securities via FOMC, instead of letting them blow up on their own, might affect the outcome this time.

Almost every single horror story of what could happen has NOT happened. Yes, too many people have tragically died, but a lot less than the horror stories of a million+ people. There is barely a recession, and the stock market is at all time highs. There was no supply chain implosion for food. There are no food bank lines. There is no mass homelessness.

Basically the Fed and the US government did their job. They stabilized the markets. The state governments (at least the competent ones) implemented lockdowns that cut the virus down. They will stabilize anything that is too big to fail.

I'm not too worried at this point, I don't think there will be any big problems. The Fed has learned a lot from the Great Recession and they are acting a lot more decisively than before. And I've lost a lot of money shorting the markets over the last 6 months so I've taken the other side of this and learned a lot (ie. don't fuck with the Fed).

I think you saw the flash waited a couple seconds realized you weren’t incinerated and assumed everything is ok. I think you are missing the fact that there is enormous destabilizing energy traveling you way that’s going to wreck your world. It would be like calling the Great Depression over after in 1930 when the market recovered.

How can we track the progression of this wave? Earnings calls? Any other ideas?

Three things helped to survive majority of the businesses till now. PPP, EIDL, SBA.

SBA helped a lot. I have an SBA loan, and they gave us 6 months. Six months are up in October. At this point, we are not making money, but not using personal saving either. I won't be able to pay the mortgage after October.

The lack of mass homelessness is due to: expanded federal funding of unemployment, eviction moratoriums, and deferred mortgage payments. All of these are coming to an end in the next couple months and that’s when the mass homelessness starts.

>But the moves threaten to upend huge swaths of the real estate market and the half-trillion dollar market for commercial mortgage-backed securities.

I wouldn't worry about that. I fully expect the federal reserve to "fix" this by buying the toxic assets with printed money.

We can't have large investors losing money on any of their (inherently risky) investments. How will the market work if investors can lose money?

They bail out mom and pop, too. They bailed out hunrdreds of thousands of people who thought they could make money flipping condos during the 2008 housing bubble.

Weren’t they just bailing the banks servicing the debt and not the borrowers?

They excused the income tax on forgiven debt, they handed out "first time home buyers" tax credits, they excused tax on "imputed income" from living without mortgage payment for years in foreclosed houses while evictions were held back in court, etc.

Some of the largest investors in the world are pension funds and no we can't let those fall.

This has always been this way. Major investors will not plunge into some big investment without some kind of support from governments. The difference is that now we see this support given after the fact.

Major investors used to risk capital on large assets, but government backstops have really changed the game. Perceived risks have gone down, as have returns.

Many people cite the 1984 bailout of Continental Illinois as a turning point, but there are many examples before and after that.[1]

[1] https://en.wikipedia.org/wiki/Bailout#Examples

socialize losses, privatize gains. :\

If capitalism is to be the law of the land, why not let the rich lose everything? I guess they can easily live on the streets.

"socialism for the rich, rugged individualism for the poor"

Aka socializing the losses, privatizing the gains.

That’s one of the tenants (no pun) of capitalism.

Bad execution is punished by going out of business.

This forces everyone to be hyper efficient at taking raw resources and getting useful value out of them. Thus people have more goods for less money.

People get confused because government gets involved and you end up with cronyism.

Free market is as another comment says, the minimum amount of regulation possible that isn’t killing people.

> People get confused because government gets involved and you end up with cronyism.

Government was involved from the beginning; capitalism was historically a redirection of the power of government from serving the feudal aristocracy to serving the mercantile class.

The utopian (and largely self-inconsistent) rationalizations for capitalism as something that magically exists separate from government and cronyism came much later than capitalism itself, and most of them even later than the early socialist critique of the reality of capitalism.

> Bad execution is punished by going out of business.

That's true for the entrepreneurs, but this was about the investors and it tends not to be true for them. It should be.

Crony capitalism is something that doesn't exist. It is all capitalism. For example, Facebook using the support of the US government to control markets around the world (while TikTok is banned) is just capitalism. MZ's fortune can only happen due to this marriage of capitalism and government.

> That’s one of the tenants (no pun) of capitalism

Not sure if it's just part of the joke, but the word is "tenet".

I gathered the issue is when the rich lose everything that snowballs into failing business and low to middle class unemployment surge.

So... we'll let the bailouts trickle down?

No, other people will take their place, this is how capitalism works. Let the rich lose everything.

The rich may indeed deserve to lose everything ... or not, depending on your perspective.

But what's equally important is ... if they are going to lose everything, how much of the social, economic and political infrastructure do they destroy on the way down?

It may well be that the era of the mall is over, for example. But malls crashing and burning as the mortgages associated with them fail is very different than a slower process in which there is time to think about repurposing and to give those directly affected to contemplate their options.

Sure, other people will pick up the pieces but that doesn’t mean much to the blue collar worker who is out of a job for 2 years while someone “takes their place”.

I think it is better to reinforce social safety net programs for individuals (unemployment, food stamps, section 8 housing, etc) than it is to subsidize businesses. Businesses can restructure and re-allocate assets through sales, mergers, or even bankruptcy. In particular subsidizing now obsolete business models is madness to me. Help individuals who need help (why did stimulus checks go to people who still had jobs or who were retired?) and make it as easy as possible for businesses to restructure.

>why did stimulus checks go to people who still had jobs or who were retired?

Because many people who still technically had jobs had their hours drastically cut, and because it's an economic stimulus, not strictly welfare.

> Malls are going to start becoming ghost towns, especially with no anchor stores like Penny's and the since-departed Sears.

Pretty sure that already happened. The US built waaay too much retail space[1], and still[2] has an overhang in most markets. And yea, Amazon kinda ate the Sears / JCPenny lunch, which has not helped matters.

[1]: https://qz.com/1032723/theres-much-more-empty-retail-space-i... [2]: https://amp.cnn.com/cnn/2020/01/08/business/macys-store-clos...

I like to joke that the US economy depends on how much crap people buy in December (and many, many factories in China depend on it too).

On the other hand: what would they go do about it then? It the business fails it fails. It's not like you can pretend it is not failing and have them pay rent with their non-existent money.

Germany is proving that you can do that. Businesses are not required to file for bankruptcy anymore (because of covid), they can just pretend everything is fine and their banks do not need do depreciate their debt. Bubble alert is buzzing louder every day. If that exemption law will not be prolonged after end of September interesting things will probably follow

Pausing debt collection on a temporary disruption is a best practice, not some shady number-hiding.

If the disruption happens to not be temporary, then it will be a problem (retroactively, so a huge one). But in that case, there are more pressing issues.

> Pausing debt collection on a temporary disruption is a best practice

Pausing collections is fine. Pretending those loans are still performing is an exercise in fantasy.

A large proportion of those debt collectors are gigantic soulless corporations that nobody would mind watching suffering somewhat - but that's the same as every industry. There are a lot of smaller property owners that are really hurting here and pausing debt collection might free those owners from debts but it won't put food on their table.

This is, unfortunately, a very complicated problem.

- A large proportion of those debt collectors are gigantic soulless corporations that nobody would mind watching suffering somewhat

I would argue that in Germany this is not the case. Everyone minds the gigantic soulless corporations suffering, because only they have the unions deeply intertwined with politics and the sympathy of the media (for whatever reason, ad money maybe?).

The Lufthansa bailout was clearly made to benefit the workforce and not the general population.

This crises lifts the high-level corruption here in Germany to the next level it seems.

Property owners will suffer anyway.

Government help was supposed to alleviate that pain, but I doubt they'll receive any - another point for UBI. But forcing the debtors into liquidation when they could otherwise survive won't help anybody.

Some large malls have been successfully converted to mostly residential "villages", [0], [1].

[0]: https://www.boredpanda.com/americas-oldest-shopping-mall-mic...

[1]: https://www.bloomberg.com/news/articles/2020-06-30/a-case-fo...

isn't this the plot to the movie '2008'

if that's a movie, it's impossible to google

I was just referencing the 2008 financial crisis where the US literally printed money to save businesses that should have failed.

yeah, I felt that that could have been the reference there, but the "movie" added onto the end just threw me right off

This is the only movie I could find with the literal title "2008": https://www.imdb.com/title/tt10882960/ And Wikipedia doesn't have an article on any.

Preeeeeetty sure that's a joke, likening the events of the previous big crash to a film.

Speaking of films about the previous big crash, you could try "Margin Call" if you want a very straight-faced (to say nothing of po-faced) take, or "The Big Short" if you prefer something that, while no more genuinely incisive, is at least willing to pretend as though it were.

I would have assumed malls were already on the out prior to COVID - I assume this is just accelerating the timeline? I think every mall the knew of growing up and in college is no more except for the largest (Kind of Prussia). Did your Malls usage also include stripmalls?

FWIW, Franklin/Philadelphia Mills, Neshaminy, Moorestown, Plymouth Meeting, Cherry Hill & Deptford malls are all still open & have some overlap with shoppers in KOP's area.

There's nothing wrong with not knowing a lot of malls, but come on, you have to qualify your statement a little bit, because your comment doesn't make sense to me as someone who can drive to KOP and at least a half dozen of the other malls I've been to when I was younger.

I should have qualified that KOP was the largest mall I knew of which is why I called it out. I did forget about Springfield mall which is still alive I assume. https://en.wikipedia.org/wiki/Promenade_at_Granite_Run is turning into a classic shopping center which was my closest mall growing up. In Pittsburgh https://en.wikipedia.org/wiki/Century_III_Mall is getting turn down, Ross Park Mall is declining and Robinson Town Center was half empty the last time I was there ~5 years ago. I can't speak to malls I didn't frequent.

Although "still open" isn't exactly saying much either on your end - how many stores are empty? Are they on the decline?

"Still open" was your criteria, not mine (as in when you said the other malls were "no more").

Fair enough, though I would say if these stores are on a spectrum tilting towards "barely open" or "on the decline" that it doesn't provide a useful counter-argument for the overall sentiment which is that malls are and have been dying. That being said I haven't been to any of the ones you've listed in my adult life so would have no idea their status.

I will concede that there are thriving malls in existence in the same way that stores that closed in one area of the country thrive in others. Not sure what that says towards malls as a whole but imagine it would trend to being viable in only a subset of the country.

Have a look at the chart a the bottom article. Looks it was going down about 5% per quarter during last year.

I started saying this last March, the next big crash or rather the biggest fallout from the pandemic will in commercial real estate. Just because of how the industry works, these commercial real estate companies are leveraged like crazy and it's not like you can turn around a rent/sell the property easily in this market. Banks set aside billions last quarter in expectation of this happening.

>ghost towns

...if rents don't fall. And maybe they should.

I think I've seen it stated that property developers and property-management companies are often heavily leveraged, such that they can't lower rents; in about the same way that a VC firm with a ten-year investment time horizon on their fund can't invest in your startup if all your valuation-growth will come only after 11 years.

In both cases, the lenders and shareholders of the firm, have contractually obligated the firm to have specific returns (and often have built financial instruments on top of those predictable returns, which is why they bothered to invest in the first place!) So the firm itself is destined to either return the predicted profit, or die, with no middle road.

Then they are doomed. Their current tenants can’t afford the current rent, and no new tenants are going to come along at that rent level while this crisis is still ongoing, so what are they going to do?

If the current tenants can be viable if rents are reduced, along with other cost saving measures, then maybe that’s a least worst outcome for society and the landlords.

Ultimately though, to me, the actual business leasing the property, employing people and providing service to customers is doing more for society and the real economy than a heavily leveraged management company. Those retail businesses don’t deserve to exist on any terms, but if they do have value, then I think they’re worth giving a second chance.

The property management company isn't really a company per se; it's more like a conduit for money, an instrument.

If that instrument defaults, it's not of so much concern that a property management company will die; but rather, that the companies who were on either side of it, relying on it as a conduit for money to flow through, will end up illiquid, unable to exchange through that instrument.

On one side, that's large investors, e.g. mutual funds. So the markets will go down.

On the other side, that's the businesses themselves. Having no access to financially-healthy property management companies to rent from, is a lot like having no access to loans: it limits your choices as a business.

Maybe the valuations of these properties will crash without property-management companies around to compete over them, and businesses will be able to afford to buy them directly. But more likely, as we saw in 2007, the commercial real-estate market will just become illiquid, with everyone who is currently holding empty commercial property (i.e. mostly banks, after a presumed default or bailout of PMCs) refusing to sell it "until things recover", so that they don't have to write down a loss. And that means there won't necessarily be any commercial properties on the market for these businesses to buy into in place of their previous rentals.

And yet again the cleanest method would be to not bail out the banks and let the assets be actioned to the highest bidder. Everything else is trading off long term efficient ressource allocation in favor of short term stability.

Funny how it's a moral hazard to bail out individuals weighed down by debt, but an economic necessity to bail out millionaires and billionaires who didn't do their risk analysis.

Or maybe they did do their risk analysis, and incorporated the likelihood of getting bailed out into that?

At this point they'd be fiscally irresponsible if they didn't assume a certain level of bailing out - and they're likely "investing" in relations with various senators and representatives to make sure their name is on the list of those eligible for the bailouts.

I agree bailouts should not benefit shareholders, but it can be pragmatic to rescue businesses, including banks, that are systemically important. That may mean the government temporarily assuming equity in, or ownership of the enterprise. The important thing is that it's the interests of the economy that are being safeguarded, not those of investors.

That would cause a massive economic disruption that could potentially lead to actually bad economic effects. Right now things aren't all sunny and happy for everyone but they can get a lot worse if infrastructural components of the economy start getting eroded - either by being chopped up for vulture capitalists or by having their lending chain & backers divided up similarly.

If Fedex & UPS were to be forced to sell off package delivery in NYC to cover losses while USPS continues to be hamstrung by the administration then things will get bad - and there are a lot of other operators that are a lot less visible but just as essential. Let slip retailers and banks are less stable - let slip banks and companies that are operating through the pandemic on shoe-strings and a whole bunch of backed credits lose the ability to keep the lights on.

> If Fedex & UPS were to be forced to sell off package delivery in NYC

Then the market will adjust. If you can't get packages delivered in NYC, you will have to get your goods through some other means. Maybe all of NYC is a bubble. Maybe that many people shouldn't live on a handful of tiny islands, importing their food from the mid west and their goods from China. Maybe everyone's in the wrong place.


But if that's true, is the correct solution to crash-and-burn from the current scenario to some version of a "better" one?

Creative destruction is how capitalism is supposed to work. Bankruptcy is a vital part of the system - and far from "crash-and-burn" it's a well-regulated process with a lot of safeguards in place. If you stop allowing companies to go bankrupt then you end up with a crony capitalism that's not much different from oligarchy.

The correct thing to do is let the market decide. If it's profitable to do something, people will do it.

This seems profoundly naive to me. "If it's profitable do something" is beyond simplistic.

Profitable compared to what? Profitable for whom? Profitable based on what assumptions? Profitable by what metric? Dollars accrued to capital? Dollars accrued to GDP? Quality of life index? Happiness index? Life expectancy numbers? Infant mortality? Profitable with what externalities forced to be part of cost-factoring?

What is "the market"? What is a "decision" in this context? What is the cost benefit analysis of allowing "the market" to "decide" versus more policy-driven unfolding of the outcome?

... and so on and so on ....

i.e. the usual litany of problems with free-market boosterism

To refuse to decide is even more simplistic. The free market offers a clear way to decide where resources are invested. If you're going to override that and prop up failing companies, what grounds are you going to use to decide, and why do you believe your process will be better? Letting the market decide at least ensures that completely useless companies go to the wall, and companies that people are willing to spend a lot on get to continue (and, notably, it does this in a nondiscriminatory way - anyone's money is as good as anyone else's). Can your process - which is, what, Trump picks and chooses which companies don't go bankrupt? - guarantee that much?

I don't propose propping up failing companies. I agree with others who have suggested that ensuring that individuals (i.e. employees/workers) are adequately protected so that the immediate aftermath of corporate failure doesn't fall on them. Remember: the usual reason why employees are not entitled to the same share of profits as investors is that "employees are not taking a risk". If we're going to start arguing that deciding to take a job at a company is just as much of a risk as investing capital, then the relationship with profit will need to change too.

But the implications go beyond the people who work for corporations that fail, into communities (possibly far and wide). I don't think there are policies that can mitigage this without damaging the entrepeneurial climate, which I'd rather not do. At the same time, the incredible ease with which one can start new businesses in the US, and the trivial availability of credit, almost guarantees that we have huge numbers of businesses that play valuable roles in their communities but have absolutely no resilience to negative economic shifts. I don't know how we fix that.

Corporations are supposed to be easy-come, easy-go; the fact that it's easy to start new businesses should mean that if there's genuine need for a business then it's easy for a replacement to start. I wouldn't be surprised if e.g. a lot of bankrupt restaurants start operating again with the same kitchen and most of the same staff, because there's no reason for whoever ends up owning the place to do anything different (unless there's a long-term shift in people's behaviour - in which case we don't want the restaurants to re-open). So I think the main thing is to make sure it really is easy for replacement businesses to open (i.e. avoid situations like new businesses requiring a difficult license, or zoning that grandfathers in existing businesses but wouldn't allow similar new businesses), and to avoid having communities dominated by a small number of big companies (which mainly means not having the kind of tax loopholes that give big businesses advantages over small ones). Ultimately the losses have to be borne somewhere, and it's better that they fall on business owners and equity investors (who knew the risks they were taking) than anywhere else, even if spreading them out among taxpayers makes it looks like no-one would notice.

The instances where it's been profitable to maintain a standing army are quite few and far between - and allowing the market to control fire extinguishing has led to some really perverse incentives.

There are things that we benefit from as a society that aren't realistic to accurately price for ethical reasons so I think this is quite too simplistic a statement.

Inflation to the rescue? If rents decline in real dollars but go up in fiat dollars, does it resolve the situation where renters can't afford rent and property owners need a certain profit?

What happens is someone with money buys out the deal for pennies on the dollar or there is a successful renegotiation with lenders or there is a successful renegotiation with the limited partners (in the US most real-estate deals are structured as limited partnerships with the general partner as an LLC).

Basically, except in the first scenario everyone agrees to suffer together. In the first scenario, the initial investors suffer and the new investors think they got a good deal. It's worth noting that LP's are usually built from people who have worked together before or from people with track records of being good to work with.

What does the good deal look like here if there no new tenants ?

>So the firm itself is destined to either return the predicted profit, or die, with no middle road.

Nah, the third option is bailouts, and they are not wrong for having high confidence in getting bailouts.

It's interesting, where I live in Ontario, the mall pre-recession was doing extremely well. They changed focus primarily to services, clothing, and food. Massive food court, 80% of the mall are clothing/fashion, and then there are services, like dr's office, optometrist, gym etc. They were killing it.

No not all developers/commercial property owners are that leveraged or locked into those kind of cash distribution obligations. The smart ones will survive fine. The irresponsible will just file bankruptcy, and a more responsible owner gets to buy their properties and run them better.

Maybe someone that understands this better than I do can comment, but isn't this something that can lead to CLO collapse and systemic financial system failure (similar to 2008, but maybe not as severe?).

Described in this: https://www.theatlantic.com/magazine/archive/2020/07/coronav...

The Dodd-Frank act capital requirements seems like they'll protect banks a bit, but to an outside layman like me it does seem like the CLO risk is similar in structure to CDOs.

What am I missing?

Banks don’t own much of CLOs compared to other market participants, banks have much more stable and safe assets across the board, the borrowers are not individuals with mortgages but companies with diverse capital structures and interests. They are similar to CDOs and there are certainly those taking too much risk in the CLO market. The Fed brought up this issue before the pandemic and no one seemed to care...

> "the borrowers are not individuals with mortgages but companies with diverse capital structures and interests"

I'd be skeptical how different this is in practice. In 2008 there was an incentive to give loans to people without caring if they could pay because you could immediately sell them to larger banks that never checked the underlying status of the borrower.

With CLOs the borrowers are already selected to be companies in trouble - is the underlying resell incentive fixed if they're still being bundled together? In some ways the selection is worse because while most people need a mortgage no matter how good their credit is, I think business loans are needed more by desperate businesses. At least if the banks don't own as much (like you said) that's probably good.

From that Atlantic article:

> "A CLO walks and talks like a CDO, but in place of loans made to home buyers are loans made to businesses—specifically, troubled businesses. CLOs bundle together so-called leveraged loans, the subprime mortgages of the corporate world."

I think the structure of the CLO tranches rely on not all small loans collapsing at once and I'd bet the banks risk models (which already are incentivized towards taking on too much risk) didn't account for a global pandemic forcing everyone to stay at home.

I know Dodd-Frank requires them to have lots of capital on hand to protect against this kind of problem, but is it enough?

Also for us regular people, what should we be doing? Sell index funds and just buy Amazon?

Again, from that Atlantic article:

> "For the moment, the financial system seems relatively stable. Banks can still pay their debts and pass their regulatory capital tests. But recall that the previous crash took more than a year to unfold. The present is analogous not to the fall of 2008, when the U.S. was in full-blown crisis, but to the summer of 2007, when some securities were going underwater but no one yet knew what the upshot would be."

I don’t work in finance and these topics always bring out over confident know-nothings on HN going on about policies they don't understand (and I don't want to be that), but there are parallels here that seem pretty disturbing.

I don't want to be in the Summer of 2007, our institutions are less stable than they were back then and the politics have gotten scarier.

It can lead to something like that, yes.

Like in 2008, the Fed will print as much money as it takes to prevent this kind of systemic collapse.

We were lucky in 2008 that there was the political will and capacity for Congress (and the incoming Obama administration) to do what they did. I think whatever people thought of the decisions at the time, the market recovery after 2008 (and all of the banks paying back those loans) is evidence that those decisions were right.

I'd be worried that the political will may not exist this time, or that the administration wouldn't be able to understand the problem well enough to even figure out what should be done.

The Fed has reacted in pretty much the same manner in 2020 as it did in 2008.

Lots of things were already ghost towns. Even before covid, I am always seeing people with no buildings, and buildings with no people. I'm in SF now, but I have seen this in cities and small towns, red states and blue states: empty malls, hobo jungles down the block from me, friends with minimum wage jobs sleeping in cars, squatters getting the bum’s rush. I imagine there are good reasons to have less than %100 percent occupancy like renovation or tenant turn over, but I’m talking about the same places standing empty for months or years without a sale.

If capitalism does what it says on the tin, I don’t get why can't we have a market cleaning price for buildings. Are we doing too much capitalism, or not enough? Is this just all very efficient but I’m not smart enough to figure out how?

In many areas you can earn significantly without have tenants, if you can wait a decade to get paid. Having tenants is chore, and might make it impossible to sell the property for a different use.

Market economy works fairly well as to get the most value from the least work. If you allow empty apartment buildings, you will have empty apartment buildings if that's likely the best risk/reward for the owner.

It's not about too much or too little market economy, it's about accepting the proliferation about the wrong kinds of markets, markets that are not in the best interest of people. We don't accept trade in ivory because that's not good for the elephants, there's no reason to accept apartment buildings left empty when it's to the detriment of people.

No economic policy will govern itself, especially not any policy claimed to do so.

Government regulations are generally to blame for empty apartment buildings. In a free market, it would make very little sense for a building owner not to rent it out.

> If capitalism does what it says on the tin, I don’t get why can't we have a market cleaning price for buildings. Are we doing too much capitalism, or not enough? Is this just all very efficient but I’m not smart enough to figure out how?

Mostly too little capitalism - buildings are very heavily regulated. Zoning, property tax, planning laws, rent control, and habitability laws are big factors. For example maybe it's illegal to rent out the building because the kitchens are too small, and renovating it would not only cost a lot up-front but also push up the property taxes, so you'd have to be confident of getting a return - and maybe you're intending to knock it down and build a replacement as soon as you get planning approval.

I recently watched this documentary "Jasper Mall" about the slow death of a shopping mall, it was quite fascinating: https://www.imdb.com/title/tt11262098/

A bubble around commercial real estate that results in competition and lower rents for other businesses... that doesn't sound terrible.

Yeah the knock on effects would be terrible, but the underlying results being lower costs for renters, seems pretty natural / appropriate.

Malls were already becoming ghost towns. All this means is that mall owners will need to be more aggressive about offering rent discounts.

Sounds like "too big to fail" all over again.

isn't that the point of capitalism, the fit live the poor die? Let the poor malls die, if their business model fails. We shouldn't force a failed business to last longer than society needs it to, otherwise that's something beyond capitalism.

the point though they're making is that if they die, then it can massively affect the banks. The knock on effect could be huge.

Oh well, those banks should have had a backup plan </s>

The backup plan is state money.

No. The backup plan is to screw the people. Slash interest rates, eliminate fractional reserve requirements, and buy corporate bonds and securities.

Banks being bailed out has been national policy in the US since the Great Depression. Previous to that there were 3 national panics and bank runs, and banks were considered juicy targets for robbers as well.

The federal insurance program made it so people could trust in banking again.

Now I do think that the policy has gone too far. Bank investments should receive any bailout, those are part and parcel of the normal functioning market.

You don't have to worry about bank runs if you're not a fractional reserve bank. People were right to not trust banks, banks were fraudsters, loaning out money that wasn't theirs, then when people caught wind of it, the system collapsed.

The real laws should have been 'banks shall not loan out money from a depositor's account' and the problem would have been resolved. Investors could have loaned out money. Insurance could have protected against bank robberies, similar to how any kind of insurance works against theft today.

I disagree - their backup plan is getting bailed out. What you listed above is just standard operating procedure for them on a day-to-day.

In a situation like this, capitalism hits its limits. Don’t get me wrong, Im a thorough going capitalist. To me it’s simply a consequence of respecting individual freedoms and individual property rights. The rest of capitalism flows from those two principles.

In this situation though, when there is a threat to society as a whole either military or natural, there’s a legitimate role for society to pull together and coordinate our actions. That’s what government is for. All societies can benefit from consensus and leadership, especially in situations like this.

If their business model really fails, then fine, that’s because there’s enough value in alternative providers that these ones are no longer needed. However in temporary crises it’s possible that the process of dissolving businesses can leave a gap in the provision of valuable or even vital services that the market cannot fill fast enough. Markets are incredibly powerful, but they aren’t omniscient or omnipotent.

This is why although I’m a believing capitalist, I think there is a role for regulation and even bailouts in extraordinary circumstances. I’ll even extend that to individuals, a crisis can hit any of us just as it can hit a business. I don’t see that necessarily as socialism, just good management when done judiciously and proportionately. Ultimately it’s about fairness and good outcomes. I’ve no time for ideologies.

I’m fine with bailing out companies as long as the owners and managers forfeit all their equity.

It's not an easy thing to find out who did what - trying to figure out which managers and owners were purposefully over-inflating equity to secure larger loans (or whatever) from those who were duped by the other managers and were just trying to keep the ship afloat is a really hard problem.

And, in this fun world, you might find a terribly over-leveraged business where no one ever tried to act fraudulently but some vulture capitalist consultant helped "ensure access to liquid assets" and is now in Kiribati watching the world burn.

That’s why the above poster suggests all owners forfeit equity. The company survives but it is nationalized, at least temporarily.

In practice, I think we will see companies being sold off the friends of the sitting president, and powerful senators.

Today, at least they must at least pretend to be equal in their bailouts, which gives non affiliated companies a chance to receive money.

Yes I think that's reasonable. From an economic perspective what matters is the employment, goods and services the enterprise generates. Good management should be rewarded with equity and profits, bad management or poorly exercised ownership loses out. Nobody is owed a profit, but if they get the job right they are entitled to it.

If you are the owner or manager, it’s your job to ensure your business is appropriately funded. It doesn’t matters if you commit fraud, you also get to lose your equity for incompetence.

But will this lead to a great recession this time?

> Malls are going to start becoming ghost towns

... even more.

Oh no, not the poor poor commercial real estate developers! Anyway all the malls died like decades ago. Have you been to a mall lately? As far as I can tell the only people who go are folks engaged in drug transactions and busloads of tourists from SE Asia.

This isn't just malls. This is concerning ALL retail/commercial real estate, a lot of which has still been heavily used.

Behind this is a lot of overvalued debt, which is at risk. Large institutions essentially treat this debt like dollars and have a bunch of their holding spread across a bunch of mortgage-backed securities such as these. Effectively, debt needs to be written off, and as such, "dollars" will disappear. This could result in some serious deflation.

Sadly the RE people will be fine. They were sitting on a lot of cash, and they're now converting retail spaces into high-tech distribution centers.

The people who will be screwed are retail workers.

The implication is that this, along with the rest of the current collapsing state of the USA is going to just exacerbate poverty and local decline across large parts of the country.

Malls are also a place to walk, shop, and play for families during winter. In colder areas it's often dark sooner so outdoor activities are more limited.

Here in Australia, the big shopping centres (aka Malls), get their biggest crowds in summer. Xmas helps but also there is often a contiguous 3-7 day stretch of >40C(>104F) maximums with sweltering overnights in the cities.

Not everyone has aircon.

Not looking forward to that if COVID is still kicking our arse.

They used to be. That all stopped in the 1990's.

It’s still done over here in the Virginia Tri State (including what Amazon is trying to force us to call Liberty Landing). It’s just that all the malls are outdoors “town centers”, so people still go out for ice skating, like music, winter beer festivals, fireworks, and movies but we do it in the freezing cold.

I think the idea of a indoor mall was great, but it’s a big building that’s hard to maintain.

Maybe future societies will just have geodesic domes around town centers to get the best of both worlds.

Maybe for you. I'm not much of a mall-goer, but every once in a while, I find myself in one of few that are (or were, pre-COVID19) still thriving, and they seem very much alive in this respect.

Good. I like that.

Now if we can just seem to adjust whatever weird tax rules or situations allow real estate to sit largely empty and apparently not not put all that much pressure on prices... that would help too. I see a lot of commercial real estate sit empty for ages and I hear from the local businesses that the rates are still high and even going up.

A development not far from me has been at sub 50% capacity for YEARS and I've heard from locals that they're moving because they won't adjust the pricing or are demanding more...

Would be nice to see some variety beyond Chipotle or Noodles & Company or rando fitness center... or mostly nothing.

Seems like bad economic policy to have a system that has capacity, but leaves it unused save for only the highest of profit margin chains ... who probably don't pay the rate anyone else would.....

If you’re really interested in this topic, you should look into the Land Value Tax, also in more extreme forms called the Single Tax or Georgism. You’re poking at some really fundamental questions with this line of inquiry.

I believe in the UK landlords are on the hook for business rates on commercial property when it's empty, so the incentive to lease at more reasonable rates is there.

Landlords get a three month exemption when a lease expires. On some industrial properties the exemption is six months.

This is exactly why we have bankruptcy! These businesses are failing and need to renegotiate their liabilities. This is expected and healthy if you want any retailers to have any hope of survival going forwards.

> This is exactly why we have bankruptcy!

You're not wrong, and under normal circumstances this would be a blip on the radar. However, the hundreds if not thousands of locations each of these companies plan to shutter will have an unprecedented effect on the commercial real estate market. Within months we will have thousands of property owners suddenly unable to pay their mortgages because they no longer have tenants, meaning they will have to default on their loans. This will greatly affect banks and other lenders in the months and years following. It's a domino effect that will be felt for many, many years after we've wiped out SARS-CoV-2.

Which is also the point of financing and securities.

I invest money into the market. Sometimes the market does poorly and goes down. My job as an investor is to accept risk when others do not. It is my money that disappears in these circumstances.

The general idea is for the riskier among us to lose money. The investing class reaps benefits when the economy is good, but they lose money when the economy suffers.


When downturns happen, investors become frightened. Which is fine: it means more opportunities for me to buy back into the market. But accepting this year's losses is part of the plan.

I hope it ends up causing residential real estate prices to fall as a consequence. Maybe then millennials will be able to afford homes.

I understand some people treat their home as savings but that's bad in every way for society and for the homeowner. I have a home and the only return I expect on it is to be able to continue living there. I'm certainly not going to depend on it for my retirement, as that would be really unwise.

> I understand some people treat their home as savings but that's bad in every way for society and for the homeowner. I have a home and the only return I expect on it is to be able to continue living there. I'm certainly not going to depend on it for my retirement, as that would be really unwise.

How else can we think about an expense of hundreds of thousands of dollars? It's ludicrous to spend that much on something assuming it'll just depreciate and fall apart on you, worthless. I understand that you're not paying rent in a home, so it's serving a purpose, but they aren't exactly equivalent in terms of upkeep and taxes.

At this point, given the instability in the market I have no idea what is the wise move to put money into for retirement. Investments have tanked and I don't know at what point they'll recover, interest rates are abysmal, and apparently our homes should be worth nothing. There's really no practical, accessible way to invest.

> At this point, given the instability in the market I have no idea what is the wise move to put money into for retirement. Investments have tanked and I don't know at what point they'll recover

With all the instability of a once-in-a-century pandemic, the S&P is still up 1% today from where it was January 1. Specific large companies' stock like Amazon, Apple, and Tesla are up 50-300% since January.

The issue of saving for retirement is complex, thinking on a 10-40 year horizon as the world continues to change and evolve. But this is a bizarre time to be complaining about stocks as an investment.

Except investments generally haven't tanked. NASDAQ is at an all time high... again. In general, if you held or bought more during the March crash, you'd be up now. Every investment I made then is up double digit percentages, some way more. The market is completely divorced from reality. I haven't seen gains like this since the 90's.

>How else can we think about an expense of hundreds of thousands of dollars?

Cars depreciate. Rent, medical services, and groceries don't return any money when you're done using them. Houses should be thought of as consumption first and a store of value second. Sure by buying as soon as you can you are betting on appreciation in value. Houses aren't a good investment compared with even a bond mutual fund. There's a 6% transaction cost, closing costs, you have to pay mortgage interest, property tax, maintenance, insurance, utilities, and maybe even PMI. A single event like a hurricane or unfavorable neighborhood evolution can wipe you out (extreme concentration risk); a single bond issuer declaring bankruptcy is a risk that can be diversified away.

From a public policy perspective, encouraging home ownership was arguably a mistake, but that is a seperate issue.

Rental properties are normally cash-flow positive, including payments on their mortgage. This means that buying a comparable unit that depriciates to $0 over a period of 30 years is still expected to be a net positive.

> How else can we think about an expense of hundreds of thousands of dollars?

I’m saying buying a home shouldn’t cost that much. See here’s the insidious thing about housing costing so much - when you were younger you surely didn’t want to spend so much on a house. You don’t want your kids to spend so much either. And if you didn’t spend so much you would never have cared so much if it drops in value.

But now that you have spent that much, you want it to cost the same, even though that perpetuates a system that punished you, your kids and your grandkids.

Do you really want to defend this? Does it boil down to yeah it sucks that houses cost so much but now that I have mine I want to slam the door on the younger generation?

If homes were not treated primarily as investments, I don't think you'd be spending that much.

And note that this isn't about things depreciating and falling apart. It's more about various policies that affect house prices indirectly. The existing arrangement, when you distill it down, pretty much means that once somebody becomes a homeowner, they have an economic incentive to make home ownership for other people as hard as possible, because it props their investment (and if they own more than one, and rent some out, lets them raise the rent higher).

That's the irresistible force (drop in salaries) meeting the immovable object (bank valuations of real estate). It's impossible to see how this is going to be squared up. On one hand, banks cannot possibly be allowed to re-value what real estate they have on their books, else they'll have to declare bankruptcy, on the other hand, wages have dropped spectacularly, and people need some sort of roof over their heads.

> banks cannot possibly be allowed to re-value what real estate they have on their books

Tell me more about this? Why can't banks re-value things that constantly change in value?

The next fragment, "else they'll have to declare bankruptcy", is pretty much the answer. And as we learned in 2008, they're also "too big to fail", so that won't be happening.

Everyone still wants to live in cities. Firms want to settle in cities. If shops close, it wont change much.

If the shops close, do people still want to live in cities? Isn't that part of the point of living in a city - that you have all these businesses easily within reach?

It's the jobs. People didn't migrate from rural to urban in the last several hundred years because they wanted the shops, they went where the highest concentration of jobs were. Moving to a rural area won't help people find jobs.

You mean the jobs that are likely to be at least somewhat less location-dependent coming out of this? (Not arguing for 100% remote or anything like this but still a fairly major shift. I certainly know plenty of people who have already moved out of cities to quite rural locations.)

I think this is another case of knowledge worker myopia. With the exception of Amazon, you can't really work retail remote. Those workers who can work remotely now can leave at any time, that's right, and there has been a bigger shift for them, but we can't pretend that the majority of workers are remote workers. The people who had to come to the city for work, people who worked in retail or in industry, those types jobs aren't moving back rural. You can't work a factory where one isn't and you can't open up retail locations in the middle of nowhere.

Certainly, I'm specifically talking about the highly-paid knowledge workers in cities. But if they move out to any large degree that cascades. You don't need the higher-end luncheon spots and other amenities those workers use at that point. There aren't generally factories or distribution centers in cities.

It may even be a positive for some of those workers to the degree prices go down, albeit with fewer high-end restaurants and so forth and fewer co-workers.

You could see commercial real-estate be converted to residential.

How much does that cost, and is anyone going to pay that cost when residential rents are also falling? Commercial property is so different from living quarters that I wouldn't be surprised if "conversion" isn't actually possible, short of just razing it and building from scratch.

I've seen that conversion in Silicon Valley.

There is the Valco mall in Cupertino being demolished for mixed use residential, retail and office space. That mall was dying for a decade.


Then there is Santana Row in San Jose. Used to be a strip mall as I recall. Now its high end shopping and residential.


In practice unfortunately most attempts seem to get aborted as zoning requirements differ too much to be economical. For one the plumbing tends to come with per resident requirements for the units they wish to sell for health code reasons of wanting a shower, toliet, and bath.

Going more "dorm" style could work for low end if there wasn't a pandemic and even then it would carry plenty of risks that would scare people away from such an arrangement let alone the consumer desires.

Won't somebody please think of the landlords and banks

I don't understand this attitude that someone who decides to invest their money into real estate instead of the stock market should be derided as a plague on society, as if it's not much more work to be a landlord than a stock market investor. When you are a landlord, you have to worry about tenants that don't pay (and threaten you with physical violence when you try to collect), tenants that damage your property, having to fix the property (some even do their own work to save money). You might not even be able to evict a problem tenant easily without some long dragged out court case, during which time you are collecting no rent. When tenants move out, you worry about how long it will take to find another tenant, as mortgage payments and taxes and repairs don't stop when there is no tenant. You have to worry about the local market situation changing, perhaps some new construction like a factory might make your property less desirable, perhaps young people just think that the area is played out, and so you will have to try to sell your property ahead of the change while looking for a new one. You have to constantly track possible changes in other neighborhoods as potential places to buy if needed. This information is not available online, you have to beat feet and constantly talk to other people and track down rumors, trying to get the big picture over all the little neighborhoods in your city. And if you are actually forced to sell and buy somewhere else, you have to spend months or years going all over the city to find another property (good real estate are just not on the market that often). Mistakes have a huge cost, and a poor choice could wipe you out as you are locked in to a property that doesn't bring income and have no buyers. You have to worry about tax laws and real estate laws changing, maybe forcing you to sell at a loss just to avoid a bigger loss later. Landlords are not people sitting on the porch, drinking iced tea and twirling their mustache while the money gets delivered in big bags. There's a lot of work and stress that goes into it, just like most other jobs.

I don’t think it’s derision, just the attitude that people in power ought to defend themselves.

Banks have no shortage of money, lawyers, and friends in high places. They do not need you or I also apologizing their actions. If anything we should be extremely suspicious of ant bailout and scrutinize it to ensure it’s well deserved, and will result in a better society overall.

I was referring to landlords, which many of mine have been just small time business owners who scrimp and save to make a living. One lived in the garage of the house he was renting out in order to make ends meet. Technically they have the power since they own the properties, but laws are very tenant friendly, and often landlords get left with the short end of the stick if there is a dispute.

This is not a useful anecdata-driven analysis of the commercial real estate market. Yes, landlords like the ones you know do exist. They do not own substantive commercial real estate, and certainly not the stuff the Neiman Marcus or GNC have been renting.

You are right about Neiman Marcus, as they occupy huge spaces in shopping malls. However, GNC stores are very small, and many are in strip malls, which can cost only a few million to purchase, not out of the range of small business owners with some collateral. At a cursory search, I can't find any numbers on the percentage of CRE owned by institutions and corporations, do you have any data you can share?

In any case, my point was not to discuss how much CRE is owned by individuals and small businesses, but rather the dismissive attitude that sweeps individual and small business landlords into the same bucket as giant CRE corporations.

"small business owners who scrimp and save to make a living", to me, is not really aligned with "a few million to purchase". Perhaps it is for you.

It seems like you are assuming that the few millions used in the purchase are 1. liquid, and 2. all from the owner. Many owners take out a loan to purchase property, so they are paying monthly mortgage. Also, the millions are locked up in the property and is inaccessible, so they have to live off of the rental income from the property. A $3M property with a 5% CAP, which is not bad for the US, nets the owner $150k a year, hardly Rich Uncle Pennybags' level of income. Subtract mortgage and any taxes/insurance/repairs not covered by the tenant, and also self purchased health insurance, and you are basically living a middle class lifestyle. If things go awry, such as a few bad tenants or unfavorable changes in local rental market, and you're in a situation similar to being "house poor", where you have a high value asset, but not a lot of cash for day-to-day expenses.

150k a year is nearly 3x the median household income. I'm sorry, but I don't regard this as someone who "scrimps and saves to make a living". Yes, they are not part of the 0.01%, but that level of income puts them in the top 15% or so, and talking about such landlords as if they are representative of an average person is misleading. They are not wealthy mega corporations, that is true. But they are people in vastly more fortunate positions that the vast majority of the population, and although there's no reason to be punitive towards them, I don't find their situation incredibly demanding of sympathy.

You are correct. Such earnings are above the median. Note that typical incomes are heavily based on salaries, and will not have the expenses of a business owner (such as the ones I listed earlier), and thus the $150k income of the business owner does not equate to $150k of a wage earner. Since business expenses can vary widely, it's hard to put an estimate on what the equivalent wage is, but consider it more like a $75k salary -- definitely above average, but still clipping coupons and waiting for sales and applying for financial aid when the kids go to college.

I'm glad you agree that there is no need to be punitive towards them. This is a reoccurring issue I often find on HN which I find surprising, the derision towards lines of business that people don't have much understanding of. There are no free lunches in the world that will not get optimized out quickly, and any business you believe are simple are likely to have hidden complexities that you did not consider.

I think you missed my point, that eventually the pain will trickle down to the rest of us at the bottom. I should have continued the domino metaphor to this conclusion to avoid misunderstanding, I'm sorry.

And to be fair, I and likely many other "regular Joes" benefited initially from the 2008/9 downturn; I was able to buy my first home, humble as it is, at less than half its usual market value. I'm still enjoying that benefit today, with a monthly house payment less than most people's car payment even on a used vehicle.

I think this time around it will be much different; this is approaching a true depression, not just a downturn. We are at 30 million jobs lost due to the pandemic, on top of the existing unemployment not related to it. We are on a dark road.

There is a lot less pain tricking down if the lenders and real estate owners take the brunt of it.

I think you vastly underestimate how over-leveraged everyone is.

The real estate owners are no more resilient than a sheet of paper when it comes to the guillotine that could be coming for the economy. And, while I'm sure a lot of people aren't feeling any particular love for real-estate folks in general due to the current administration - letting them get liquidated and then trying to build up a replacement is harder and more damaging than just propping them up.

But I, personally, am seriously done with this slap-on-this-wrist for endangering the economy during clear weather BS. Engaging in unsafe business practices can cause massive loss of life - whether you're Wells Fargo inflating fake accounts and leveraging them as assets, the wolf of wall street or just committing some plain old accounting fraud we need to come down hard as a society and stop glorifying it as if these clowns are sticking it to the man.

You are right, sadly Schadenfreude (gloat?) would mean a non-trivial relief to the pain of many people

My point was someone has to bear the losses. Forcing the owners to bear those losses means the rest of us don’t, which is a while lot less pain in general.

It’s like this. Suppose a real estate speculator in your town buys a mall, leverages it with debt to afford it, and becomes rich. They buy the biggest house in town, drive a Bentley, in general live well for a decade.

Then the pandemic happens, and some of their tenants stop paying. They personally signed for the mall mortgage, and are now in default.

They need $10M to recapitalize their loan, avoid foreclosure, and ride out the rest of this. So they come to the city council and ask it to raise property taxes by an average of $100 a year per person in the town so the city can loan them the $10M.

They explain by doing this they will keep the mall open, be able to work things through with the tenants, saving jobs, the mall, the bank, the city, even goddamn America! The speculator then sits back smoking a cigar to await his bailout.

Then the (secretly libertarian$”) mayor points out if the city doesn’t step up, the bank will sell the mall to a new owner, who will work with the tenants to keep the mall open, and sell the speculators mansion, Bentley and jewelry to help recoup their losses. And the citizens of the town will all be $100/year ahead.

Then he slams his gavel down and screams, “and there is no smoking in public meetings you arrogant leach!”

There's a difference between strategic failure caused by poor management and interruption of a viable business by an external event - force majeure.

You can buy insurance policies to protect your business against the latter. (Although with Covid a lot of insurers are refusing to pay out, and some are being taken to court.)

Where there's no insurance it's reasonable for government to act as an informal insurer of last resort, because it's hugely more expensive and damaging to allow businesses that are otherwise viable to go to the wall.

You don't just lose a viable business, but you create losses that ripple through the entire system causing upstream insolvencies. So you lose the productivity of all the businesses affected and the spending power of their employees. It takes a good long time to rebuild both.

The problem is in the grey area where it's hard to tell if businesses are genuinely viable and just need temporary reinforcement, or whether they're already zombies and need to be killed off.

Patronage and politics makes this even more complicated.

But the principle is still sound: in a national disaster insolvency is not a clear signal of failure, and allowing all business to crash regardless will do much more harm than good.

One could make an argument based on what we've seen during COVID19 so far that very large sections of the US economy are not genuinely viable. They've been fabricated out of the whole cloth that we call debt, they have almost zero resilience in the face of negative economic factors, and they participate in widening income and wealth inequality by not actually being the locus of viable family-supporting jobs.

Nobody has wanted to acknowledge that so much of the US economy is a house of cards. COVID19 isn't forcing people to do so, but is making it much clearer.

It’s going to have severe consequences somewhere down the line as I don’t believe anything nearing the magnitude and density of the coming bankruptcies has ever occurred. That being said I agree it’s meant to be this way, and I will always prioritize RESPONSIBLE business trying to restructure and preserve jobs over landholders who basically do very little work while extractIng as much rent out of their tennants as they possibly can without them leaving.

Ever? 1929, maybe? Crash of 1879?

Or am I being uncharitable, and you mean recently?

There was a lot more regional and even local independence in the economy when these happened. Vastly more people still worked in agriculture, and economies produced far more of what they needed within much more limited areas. 1929 was bad, but the economy then had more of a "node" structure. Today, it is more of a "web", and tugging hard anywhere stands a good chance of pulling the whole thing apart.

The problem with external shocks is that during the "readjustment", people still have to eat. The people who worked in the shops, the people who own the buildings etc.

In the end, just keeping companies afloat through rare shocks might be the cheapest option.

Market economies create efficiency, not resiliency.

It's a bit depressing to see the greed-by-framing here. I feel like the banks are playing musical chairs rather than trying to operate sustainably. It seems like a more efficient approach — one that is not as economically destructive to GDP after the pandemic — would be:

1. Retailer notifies their lease holders that a given location is impacted by public health closures, reducing revenues for products originating from that location from (100% of $X) to (y% of $X), and warns the leaseholder that the retailer may be forced to file bankruptcy if easement is not granted, reducing rent paid to (0% of $X).

2. Leaseholder notifies their mortgage holder of this, and warns the mortgage holder that the leaseholder may be forced to file bankruptcy if easement is not granted, reducing mortgage paid to (0% of $X).

3. Mortgage holder notifies the property tax authorities of this, and warns those authorities that the lendor may be forced to file bankruptcy if easement is not granted, reducing property tax paid to (0% of $X).

4. Property tax authority grants a public health easement to the mortgage holder, conditional on the same easement being granted to the leaseholder.

5. Mortgage holder grants a public health easement to the lease holder, conditional on the same easement being granted to the retailer.

6. Lease holder grants a public health easement to the retailer.

If anyone refuses to grant the easement, they get nothing anyways, because anyone in the stack can just give up and file for bankruptcy as a last resort — and that's where we're at today. It feels like a shell game because they're all trying to extract the maximum amount of money before bankruptcy, while withholding it until they themselves can file bankruptcy. It's such a shame they can't work together to get everyone that's owed a dollar to agree to just suspend their demands for their dollar until this is over. They're not getting their dollar either way, but if they'd rather have their tenants breaking leases left and right, so be it.

You need a 4. Federal government issues $$$ to property tax authority to cover income gap. The property tax authority needs that revenue now to pay their bills (teachers, sanitation, fire, EMT, police, etc), an easement won't cut it. They need a backstop before they can do that since all of those are critical or legally mandated services and municipalities run very lean.

Yes. Property tax shortfalls leads to laying off teachers.

Securing that funding is going to be a hard sell when the Dept of Edu is really enthusiastic about scrapping the whole "public education" thing for charter schools since charter schools have an out to get around silly things like Brown v. BoE[1] and, more importantly to them, Engel v. Vitale[2].

1. https://en.wikipedia.org/wiki/Brown_v._Board_of_Education

2. https://en.wikipedia.org/wiki/Engel_v._Vitale

It's not just property tax. The investors who fund the mortgages would have to take a haircut. Which could destabilize banks, pensions, insurance companies, any institution relying on endowment earnings to operate, etc.

They're investors. Investments are not guaranteed. They're going to take the same haircut either way, whether or not the suspension of payments is carefully handled to avoid bankruptcy or is forced upon them by bankruptcy. I think that bankruptcy filings by the lender offers a higher risk of the haircut becoming permanent, relative to temporary declarations of easement throughout the lending chain.

that would've been the smart thing to do... or a mandate from the top down fed > banks > lenders > corp|residential landlord > tenant to allow partial payments based on need, until crisis is over.

Everyone succeeds then. Might still need some stimulus for the bottom 10% of society but maybe not as badly.

7. Abolition of private property

Your "cure" is worse than the disease.

The US has too much retail space. Per capita, it has 5x as much as Europe (23.5 sq ft in the US vs 3-4 sq ft in most European countries) and 8-10x as much as Asia (2-3 sq ft). We may be looking at a permanent decrease as a result of this pandemic. But even if it goes down by 20%, the US will still have way more than anywhere else.

I think we'll be better off when we use the excess retail space for something else whether it's apartments, warehouses, or offices. But the transition will be painful.

I’m not sure if retail space alone is a good measure. The US (and Canada) love massive stores like Costco, Home Depot, Walmart. And there are a LOT of Walmart’s.

Those stores seem to be doing just fine during the pandemic (HD has been packed when I went).

Would be more useful to see a breakdown by retail size. Say <500 sq ft, 500-2000 sq ft, 2000-10000 sq ft and >10000 sq ft.

I’d suggest the small places are the ones at high risk (just thinking about typical tenants).

I agree, NA has massive stores because they have the space, e.g. population density is much lower than in Europe or Asia

A while back, in the early 2000s (maybe the 90s), there was all that talk floating around about the ghost Walmarts left over when they'd over-saturate a market with box stores to kill off the competition then scale back to a single mega-location. When that was happening the US did nothing - they didn't try and protect small businesses ("it's the will of the market!") and nor was Walmart even gone after for littering.

This situation exists because the US has been overly complacent for quite a while and happy to ascribe these warning signs as mere minor side effects of the most patriotic American capitalism - this was pretty easy to do while everything was building leverage on leverage and everyone had plenty of bread on the table.

The US economy is rotten to the core, it's really unfortunate but I hope when this house of cards inevitably falls down it at least serves as a lesson for history.

It's basically the definition of bankruptcy that you need to renege on your obligations to someone. Landlords run that risk. They're hardly the ones losing the most -- think of the poor creditors and shareholders. The landlords are only losing the expense of finding their next tenant, plus any difference in the market rate when the original lease was signed and today.

I mean, a lot of landlords might have to declare bankruptcy as well. The entire economy is run on such high leverage and debt that bankruptcies at the bottom can have a chain reaction and destabilize the entire chain, all the way up to the banks that hold the mortgages.

The fundamental problem is that the models investors use to manage risk become useless in novel market environments that break historical correlations between investments. This is a long-tail risk that is difficult to manage.

When suddenly all of your investments are losing value at the same time, even if the models say the correlation between the assets is low, you end up in a very dangerous place.

This is essentially the same thing had happened during the mortgage crisis.

I think everyone loses regardless, but I don't think we should prop up businesses, capitalism should be a game that you play to win or play to lose.

Government needs to stop getting involved period. Help at the bottom - prop up the citizens who the government IS responsible for, let the rest duke it out. Corporations are not citizens. Government has no duty to help corporations.

But, yeah everybody will hurt by this, sure. Malls will close, businesses will close inside malls, investors will hurt, and workers who worked at those businesses lose, even some consumers who enjoy malls lose, cities lose because they become blight, many probably get abandoned and become gang hideouts or something. Homeowners lose because home values drop, but lots of other factors will be causing a lot of the cycles above to happen to. Next 10 years is a hazardous wasteland for prosperity.

Should just start bulldozing some of them and building green spaces and parks. I have a feeling open air is going to be a big trend over the next decade (less chance of viral spread).

You can look at what actually happens in abandoned malls - bored teenagers and college students calling themselves "urban explorers" check them out and engage in some graffiti in a long abandoned site or trysts at most.

Gangs would find them goddamned useless as territory because there is no income stream there. There isn't anyone to make money selling drugs to or johns for clients to pimp out. That is why the damn mall closed in the first place!

The low traffic ironically makes it a poor place to lay low as "I saw some guy enter an hour or so ago" becomes useful instead of vague and useless.

That similar noticability and lack of good pretexts makes it a poor choice for a meth lab compared to a random trailer or basement.

They wind up such an economic wasteland that they aren't even good for criminal purposes which is vaguely impressive. That is essentially the one "upside" of their separation from residences. They aren't like the Opium Den/Crackhouse/Methhouse because they lack the attractiveness to be an attractive nuisance.

Lmao gang hideouts

Not mentioned at all in the article, but what will be more interesting is when all of the landlords start appealing their property tax assessments. Obviously if the government has prevented the property from being used, it's not worth what is was previously assessed at. State and local governments are in for a world of hurt.

The federal tax writeoffs tend to make up for it, AFAIK.

Tax write offs never ‘make up for’ anything - if you write off $1000 in property taxes, it will reduce your tax burden by ($marginal_tax_rate*1000), which will by definition be less than $1000.

Tax write offs are distinct from tax credits.

“I was told that this business was guaranteed upside for zero work” - Landlords

Yes, this is what chapter 11 bankruptcy is meant to enable.

I thought the same thing, these businesses clearly are out of cash and credit and need to break leases to save SOME stores compared to losing all.

The idea of harsh leases in large retail stores kinda always made me laugh: For a JCP or the like, the setup costs, warehousing, and hiring work is so great that the only case where they would close a store is to stop cash from hemorrhaging beyond control. On a large scale this forces the only move for survival to be bankruptcy after falling way too far. If you're PREIT or such one can't help but realize that the overall outcome is that you'll push a tenant of a vast majority of your stores into really bad financial states that then leads to a much harder bankruptcy and possibly dissolving of the company, ripping stores out of ALL of your malls instead of 30%.

And thats why PREIT has so many malls with empty giant rooms and defaulted loans.

I’ve owned a physical business before. What the article fails to mention is that small to medium sized businesses generally sign leases with joint and several (personal) liability attached.

Landlords can and do go after the person after the bankrupt LLC is raided.

A lot of people think that forming an LLC or corporation will protect your personal assets from creditors. When I ran my business, I learned banks like collateral, and given my business has no assets other than the cash in the bank, anything debt I took on would need to be secured by my personal assets. If you use your personal assets as collateral, you’d better hope your business doesn’t run out of money before you’ve paid off the debt.

I have a heavy exposure in REITs (my only non-index fund investment). I treat these as passive investments so I had to look to see what I was actually invested in. I have no commercial exposure, but even what I have has been hit hard by COVID. AVB (residential), PEAK (life science/medical office/senior housing) and PSA (Public Storage) are all down roughly 25% YTD. I have to imagine that REITS in retail/office space are going to be doing even worse as these three are sectors that are less likely to see long-lasting contractions.

Someone mentioned PREIT (NYSE: PEI) in another comment so I checked to see how they're doing. Down 80% YTD. I'm glad not to be invested in malls and shopping centers.

PSA being down is interesting. I might have thought there would be greater demand for storage units as people clear stuff out of their houses to make room for home offices/gyms/etc.

That said, all the people who've lost jobs or hours are probably not looking to pay $100s/month for an auxiliary junk room.

A rush to liquidity can take down even otherwise sound investments. J.K. Galbraith describes this (as a "Gresham's Law" if memory serves) in his book on the 1929 crash. Highly recommended.

One thing I've learned is that markets are rarely rational. But, with REITs, the real return comes in the form of dividends more than capital appreciation, so if the price has irrationally declined, my return will be greater (I have all of my REIT investments set up with dividend reinvestment). I'm not expecting to liquidate any of these positions any time soon so I can afford to wait for them to do whatever they'll do.

I want to loop this back to something discussed on HN before. During lockdown, some optimistic WFHers were saying that the transition to WFH would up-end rental markets in city centres, as employees flood out of cities since they've been allowed to work remotely and won't pay a premium for a commutable home. Well it's looking more and more like that effect is going to be almost impossible to measure in comparison to the massive recession coming. Rents are going to drop because shops are going bankrupt, those areas are going to try to find new rentals, convert to offices or housing and that'll drive down prices.

I wonder how Apple will respond if malls start collapsing.

(I’ve heard rumor that) they pay just pennies on the dollar for their store leases because they draw so much foot traffic to the malls.

I can’t imagine them keeping stores open in the middle of a nearly empty mall, but I’ve only ever seen pictures of an Apple store that wasn’t in a mall or strip mall.

My guess would be they’d move their mall based stores to better locations. They have a lot of non-mall stores to use as examples, including every one of their flagship stores.

I just can’t picture what the flagship store model would look like in e.g. Charlotte NC

Some leases are conditioned the presence of an anchor tenant. So a department store failing can trigger these clauses allowing rent reductions or early termination for smaller retailers.

Not sure Apple would be hoping for a rent reduction if they are already paying a tiny amount of rent. If all US malls (mostly) shut down in the next (say) 8 months and never open again it seems Apple will have hundreds of stores to relocate.

Here is Apple asking for 50% rent reduction in the UK:


The only Apple product I have are some gifted Airpod Pros. I can confirm they stopped working repeatedly and got me into a mall 3 times.

Worked in commercial real estate before the last crash and have a few friends working at big mall companies. Have seen some really cool plans to turn a whole mall into residential with the interior being common areas and parks etc. Some really neat concepts.

if only the government/bank could've put moratoriums top down, freezing all rent commercial and residential. We'd be in a much better place.

Now we have economic collapse, 40 million looming evictions, people will starve, and freeze, or die in a shelter w/ the pandemic.

Businesses are failing because they have to meet monthly recurring bills w/ or w/out actual sales receipts. They still need to meet payroll if they're even open.

Could've been stopped from the lenders down, instead of try to just throw money every which direction and see which sticks.

I'm for handouts for the poorest, but i think the other handouts were horribly done, and the loan program.

I'm in the group of businesses that got handouts that the business didn't need to survive, but the handouts did mean folks were kept on staff even without work. This paid off big time for us (especially if covid had resolved by September) because we have seen demand pick back up pretty quickly in our space and the staff were ready to go.

So if the downward trends had continued we'd have been in good shape and it would have been good timing. Of course, our covid control in the US has been a total disaster relatively to other much poorer countries even - we're still trying to figure out if masks are worth wearing (20 cents to maybe save a life).

Instead of handouts the layoffs would have been a fine option, folks would have received unemployment. But the overhead and disruption of firing folks, canceling their benefits, and then re-hiring them (maybe) etc is not insignificant. The handouts meant we are ready to go once everything resolves which was supposed to be a lot sooner than it is looking like it will be.

The problem is a lot of handouts didn't help anybody. Was just wasted, or bought like 2-3 months max. Now that's over with and there needs to be another, or a better idea...

Alot of these businesses struggle because they have recurring bills: Rent, Mortgage, Utilities, etc... if all recurrables were 'frozen' or allowed 'pay what you want/can afford' then arguably everyone would be on better footing.

E.g. Big bank has ten malls, Malls go to businesses and ask for rent, J.C. Penny's is like we can only pay 10%. Mall goes back to Big Bank and says our customers can only pay 10% each, so that's all we can pay. Bank's like sure w/e it's a crisis.

Utitility companies, etc. same thing.

Obviously there's other costs of business, but that would save a lot of the issues. Do the same of course for residential/renters as well, cause everybody is in the same boat. Then we'd need less stimulus $$.

In other words try to make sure everyone's minimum (got the roof over my head) is met, and this would've been a good way to do that.

> if only the government/bank could've put moratoriums top down, freezing all rent commercial and residential. We'd be in a much better place.

This is exactly what I was saying in March, but everyone was too busy clutching their pearls, concerned about what will happen when pension funds lose a few percentage points of their value.

Well, now they are going to lose a few percentage points of their value, in addition to society dealing with a tsunami of bankruptcies, on top of trillions of bailouts. And we're still early on in this epidemic.

I don't see how it becomes a runaway train, esp. w/ the congressional gridlock we have now.

There's no statesmanship, no concern for the people of America, just the top 1%, so they'll probably come out okay.

They won't starve or be on bread-lines. Everyone else though will suffer tremendously.

If all recurring payments just froze...for 1 year. If we locked down like Europe. We'd have had a better time. Now it's a shitfest just waiting. I'm certain some people who are wealthy/powerful see it for what it is, and also already have plans on how to become even richer/more powerful as a result.

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