YouSaid · the spoken record

Tom Barrack

lines on the record: 37
first: 2020-04-06
most recent: 2020-04-06
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Going to pay and who's not going to pay, and when they don't pay, what happens? Can you imagine a governor or a mayor of any city is not going to honor an eviction of a tenant? So what does the landlord do? Nobody pays. Nobody's going to get thrown out. Right, it's the same the resolution that can the bankruptcy courts can't handle the amount of bankruptcies that have going to be infringed. They're going to have to have a cessation on the process. So it's easier to keep the plumbing moving and avoid the unintended social consequences of what come about if people can't function.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“Wide a variety of securities as we can. Because if we bolster that just in our little world of real estate, if you bolster it at the bottom, it all rises to the top. The investment grade, the big investment grade companies don't need help. They can still access the market. It's the other companies. So if you said, great, here's what we're doing and you have to keep your people employed at 80% of their salary. And you have to continue with benefits, and you have to continue with X. Think you start to solve the problem. It's just massively frightening to all of us who are sitting on the precipice of this financial tsunami. And we're going to see more, right? It's April 2nd today. Payments between April 2nd and April 11th are going to tell us a lot.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“To all that the aftermath of what happened in 2007 or that perception of crony capitalism or that it's only the big financial players who benefit from this and the FatCAT executives and investment banks are going to get gigantic bonuses and the big corporations that are bailed out are going to get more stock grants. Nobody wants that. So it's complex, but I think it's at the end it's going to cost us the same either way. I'm just a believer of the Fed saying, we'll open up the window and buy”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“And then the crisis science, which I'm not in a position to even weigh on these, the doctors and the scientists are doing an amazing job, but whatever the comeback drill is, we need one, right? We have to have a comeback story and a comeback story is containment and a process of those who are healthier, those who have been infected in certain areas coming back. How long does that take to come? You can't stop the GDP of America for seven months. It's impossible. So to me, the other crisis is the Fed coming in and saying we can do it all and we'll do it all. They're trying to do it in steps, and I understand the legislative dilemma is everybody wants to make sure that whatever solution is applied equally.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“Said to keep this moving, and we don't know how long that it goes, but to keep it moving for everybody. And price is not as complicated as how you do it, right? Because even with the SBA loans and looking and saying, how do you get those to people quick enough or the unemployment checks? How do you do it fast enough? But I think at the end of the day, we'll look back and say, if you would have plugged this hole for everybody, And said you're going to do it for 60 or 90 days.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“Look from the cheap seats just from I'm a user of capital and a beneficiary of the capital system. And I've looked at other countries around the world and how they've responded. And none of them are great. I think what history has shown us that if you have an indication and a statement saying that you're covered, whatever it is. So if you're a tenant and you're paying rent and you can't pay rent, don't worry. You don't have to pay it. If you're paying interest and you can't pay interest, Don't pay it if you're receiving a check for $1,000 a month and have been cut off, you'll get $800 a month, that that bill, whatever that bill is, is cheaper than what we're going to end up paying. So if you looked at the GDP of Americans, said it's $4.9 trillion a quarter, something like that.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“But since there's no plenary one stop shopping on top of all of them, you have to get all these agencies and accounting rules to agree. So you have FASV, you have the SEC, you have the FDIC, you have the OCC, you have the Fed, you have the Treasury, and you have state superintendents, all with a different, very complicated set of regulatory requirements which don't move instantly. I think that they'll get there and I think the banks are very aware that they need to figure out a way to have a pass-through of the benefit and the largesse that they're getting from the Fed all the way through to the little borrower. It takes time and it's frightening.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“And the problem is the regulatory requirements don't exist in a czar, right? There's not one person. And by the way, it's happened. So there's all sorts of interagency memos going around saying lighten up on foreclosures, go slowly on mark-to-markets, encouraging people to have this dialogue, but the regulatory framework within the banking industry is so complicated that they haven't been able to get the wiring correctly yet. And it's a fast moving train. So I think that they'll get there.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, Tracy, absolutely part of the problem. So the banks have zero borrowing cost and they have all the liquidity that they need to fed is opened up to them in every aspect. The banks in turn looking down this pipeline to everybody have not figured out how to comply with the regulatory framework. From a series of regulators. If you look at a chart of a depository bank, there's probably 10 regulating agencies. So, the protocol of going from there to forbearance, right? Which is the magic word. Everybody wants a forbearance. So a tenant who's living in an apartment wants a forbearance for 90 days, 120 days from their landlord. The landlord then in turn wants a forbearance from their lender, that intermediate packager. The intermediate packager then wants a forbearance from its prime bank.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“If you are going to pay for it anyhow. So the aftermath of 2008, when they went back and they looked at TALF, TARP over a much longer period of time, the mark to market then was as a result of the vagaries of the industry. So supply demand was absolutely out of sight. And the lack of regulatory confines on the investment banking system was part of the problem. in a mark-to-market which is adjusting as a result of the vagaries of the capitalistic system, it makes sense. Have a governor intervention that says stop, it makes no sense.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“Way to do it is to say, great, the consequence of that is we're not going to unnecessarily have another set of unintended consequences as a result of that, including deaths, by the way By having a financial system that we're saying the only thing that doesn't stop is the consequences of our own actions, the government actions, and stopping commerce. It makes no sense. So we all have to pay that price. The Fed, right, our kids are going to pay the price. And by the way, the stimulus bill, and Congress did a great job. The administration has done a great job. But it's going to be the first in several. This was three. We're going to have a four. We're going to have a five for sure. So the point is.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, and Joe, look, it's the right question. But here's the simple answer to me is in essence what's happened It's an eminent domain act. So we can talk about how terrible what we're dealing with on a virus and a disease and a crisis that is and how you respond to it. The bottom line for these people is the government said don't go to work. They didn't say if you go to work, you're going to get sick. They didn't say if you go to work, you're going to die. They said, stop. So, when you do that, that's fine. And the consequences, the social consequence for all of us, right? In which we're all saying for the greater good. We are going to protect a percentage of deaths by stopping the economy. Now, that is a debate in itself.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“The fact that from the little person who has a fast food restaurant that can't pay to the most sophisticated Korean life company who's been buying structured financial instruments, this could be a fiasco if you don't get liquidity into the system.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“It's complicated, but if you just looked at it as plumbing, the pipeline is fine. There's a clog in the system. The pipeline isn't broken. And if you clear that clog for five or six inches, five or six inches, meaning maybe that's two or three or four months, on the other end, the pipeline will continue to flow. If you don't, the whole system could crack. The U.S. real estate market is $16 trillion. And if you take all the securitizations that Main Street and the Wall Street pieces, maybe it's $12 trillion, but it's the window to a derivatives market. All these structured products rely on each other. So, I think what people are missing is.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“Part of the discussion is what can the Fed buy along the securities railroad that will help. So TALF, one of these acronyms from 2007, which is actually in existence, is the ability of the Treasury with their funds lever 10 to 1 to buy advance or lend against these securities so that it will create a market. It'll create an artificial market with some haircut. But since the Fed has a 30-year perspective, it's not like a bank who's saying, I'm going to value this to today's value. Rather than what they call a mark to model rather than a mark to market.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“So, in governmental agencies, Fannie and Freddie and the FHA, let's go to forbearances to the individual, and then we'll figure out the debt stacks on top of that. On the commercial side, it hasn't happened because it's unbelievably complicated. So the cares empowered the Secretary of Treasury, Steve Mnuchin, who's sensational, with $450 billion. He can lever 10 to 1 at the Fed window”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“Today, the reason that you hear so much dismay in the financial marketplace of saying, don't use the mark-to-market, just forbear. Forbear for 60 days, let this pass, and you won't have these unnecessary wipeouts, which are starting at the top of that intermediary, causes severe indigestion at the banks. Everybody says what great shapes the banks are in. If this continues, the banks may not be in that great shape because they're swallowing all of these unmarketable pieces of debt. And most importantly, the small and middle-sized borrower who has this is on the ropes at a time where They just need a break. So, what's been happening in this market to market is everybody's been begging for a regulatory timeout. Now, it's happened on the residential side.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“Where there's a temporary cessation of bids as there is in the marketplace, just saying there is no bid. The valuation of that bond, everybody believes. When business comes back, not necessarily to normal, but when revenues return, whatever that is, whether it's $60, $90, $120, $180 days. That bond will come back to parity. But that temporary mismark of that bond causes the bank to take those securities. And when they take those securities, Or you have to come up with cash to rebalance their loan against what they thought the value was. Well, of course, the originator can't come up with a cash either because it's a falling knife. So everybody's trying to catch a falling knife. In 2007, it took a couple of years to clear those falling knives because it was a question of credit and value.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“So there's an individual based in Delaware, let's say for a major bank who's valuing these multi-billion dollar businesses on a daily basis and has a protocol, has a manual saying this is what you do on a daily basis. And if there's an impairment or if there's a threatened impairment or if there's a cessation in revenue anywhere, then you value this bond this way. And they go to a broker-dealer and they ask for a price. Well, the broker dealers don't have any money either because it's completely stopped, right? The system has stopped. So there's no bid. Let's just take hypothetically that you had a AA bond in which the day before there was an ebulent market. And now it's not that there's a market at a spread of 30 basis points more or 50 basis.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, that's a great question, Tracy. So, what's happening is there is no market, so market-to-market works when you have a smooth and functioning, ordinary market. At a time like this, there are just no bids for those securities. So spreads widen. A bank trading desk.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“It goes south. It's not necessarily good for anybody's business. It's not good for our business, but we have four or five billion dollars of liquidity and will survive. The people who don't have the liquidity and can survive are the small and middle sized businesses, regardless of how good the SBA loans are and how good the unemployment benefits may be. So that's really our concern.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“And the underpinning of that are owners of real estate, suppliers of capital, and all the businesses that function within them, but it all functions in two markets, the Main Street market and the Wall Street market. So colony's perspective as an owner of bricks and a sponsor of Clix is that to keep that ecosystem moving as an owner and a receiver of income and a provider of both debt and equity to small and middle sized businesses and a solution provider to the big digital logos. In selling our own book, so to speak, Point of view here is I think that the universe of people like us have a front row seat. To the interconnections on a global basis and how quickly it can go south.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“So we have 19 office around the world. We're globally balanced and we've been turning our asset focus from legacy assets over the last two or three years. We've been selling substantial amounts of our legacy assets because prices have been quite dear in our opinion. So we've sold about $12 billion of legacy assets and we've invested that in the digital framework. We have 16 silo digital companies and about 25% of our balance sheet is digital. So the framework of looking at this and my personal point of view Is the world of real estate, by the way, which Which just to give you a broad view. If you took in America, if you took real estate ownership, Real estate services and all of the affiliates around it. It's about 60% of the GDP of America. It's huge.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“So, colony capital is a New York stock exchange public received with over $50 billion in assets in a series of silos where an owner of legacy businesses and the usual food groups, hospitality, healthcare, industrial. We also are the largest shareholder and a commercial Real estate REIT, a lender called CLNC. And in the last two years, we've switched to a digital owners and providers of solutions and funding to the digital world. So radio cell towers, microcells, fiber networks, data centers, and smart logistics.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“That borrowing based basically, and we'll value those securities on a daily basis, the terminology of mark to market is that they'll take those securities or those loans, and sometimes they're whole loans, and they'll mark them to market on a daily basis and lend to that originator a percentage of that.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“They sell those bonds through broker dealers that end up all over the world with life companies, endowments, hedge funds, corporate treasuries, and mutual funds and ETFs. And then the originator, let's say the commercial mortgage rate at the time, In order to keep the liquidity moving, the availability of going to the marketplace and create more loans goes to their primary bank and takes the equity portion of what they have and the securities underneath it and they enter into what they call repurchase agreement. And the repurchase agreement basically pledges all of those securities. That the bundler has and says, We're going to lend you against that base X percent. Of what they call”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“We have a public market, so the public market are REITs on the equity side and securitizations on the debt side. And we have a private market as you own your house, you own a building, and you get a loan from a life company. And on the private side, none of those are tradable except to try with treaty. On the securitization side, everything is tradable, and you vote with your feet every hour. So if you own shares in a reit, you can trade it any day of the week. If you own securitization bonds, you can trade those every day of the week. That's the good news and the bad news. So what we've come into now is in going back to our oil and vinegar example. The commercial mortgage reits and the non bank banks originate and bundle all these loans. They package them into securitizations with levels of credit enhancement from AAA to BB-SMI grade.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“Who don't have access to large commercial loans. The gigantic office can be a subject for securitization, but also direct investment on the private side for life companies, mutual funds, pension funds, et cetera. So part of what we're dealing here, if you took four quadrants of real estate.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“Created a regulatory environment for the banks of the FDIC, the OCC, the SEC, and the Fed that put unbelievable restrictions and transparency on the regulatory framework of what they could do and what they couldn't do. So they wanted to be much safer, residential was easier, and that you had Fannie and Freddie and the FHA, you had quasi-governmental entities that could acquire these securities and create liquidity, but that didn't exist on the commercial side. So the shadow banking industry, which is the framework to what we call non-bank banks, the loan market, remember this is mostly for small and medium-sized enterprises. So it's for the fast food franchise. It's for the car wash. It's for the little office building. It's for a retail operation.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“2008 great financial crisis, the amount of vinegar necessary for those credit enhancements became dramatically increased, as did the structural component of these securitizations. So all the safety toggles that were built in them too complicated for us to talk about now, but the rating agencies and the structures of safeguards for master services and special services. But that was the key to the liquidity in the commercial real estate lending market. So you now had intermediaries who were originating these loans because the banks no longer wanted to do a Dodd-Frank.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“Why does that happen? Why do banks not do that? After 2008, the regulatory environment for banks changed dramatically, and Dodd-Frank, which was a needed and worthwhile addition to the regulatory sector, put severe capital regulations and restrictions on the normal banking sector. And they needed greater equity levels, greater enhancements. So if we look at it as oil and vinegar and say that the oil is the securitization part and what the marketplace needed was more credit enhancement. So it needed the vinegar on top so that in the event of a crisis, the first loss period would be the vinegar. And after the”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“So, to be able to trade away evaluation in an hour or an afternoon in an unforeseen and unintended crisis is difficult. So if we just take the commercial mortgage market in general, if it's in the United States, it's about $5 trillion in loans. And those loans are held by banks, insurance companies, mutual funds, REITs, other institutions, endowments. And what happens to them is non-bank banks, and maybe we stop there for a minute, a non-bank bank is a commercial mortgage reit of BDC, another institution who originates commercial mortgages, pulls them together. And creates tranches of securitizations.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“Liquidity, you had transparency, you had broad participation, you had higher yield so that the individual mom and pop was able to participate in things that theretofore they had never had the opportunity. Therein lies the benefit, and therein lies the problem today, is that liquidity, which allows you to vote with your feet on a daily basis, doesn't really work well for real estate when it's repositioned. The market For an asset, if you just think about a clearing price and things that everybody can touch of your house, if you have a willing buyer and a willing seller, still it takes months. For commercial property even longer.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“And for real estate, and most of your listeners are too young to remember, but prior to 1990, there was really no capital markets. Real estate was an investment by individuals. There was very little shared participation in commercial real estate. Lenders were life insurance companies, pension funds primarily, and your local bank would make a loan to you on a commercial project based on your business. had been invented but not widely utilized and there really was no such thing as commercial mortgage bank securitization so on the capital market side if you thought in four quadrants you have public and private equity and you have public and private debt and what we're what we're watching today is the public side the benefit side of the public what you had”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“So that collapsed without wasting too much time on why and when had some of the same resolutions in that the Fed and the Treasury had to step in along with the arsenal of other regulatory bodies. So when we think about liquidity and banking, we today have a banking system and we have a non-bank system. We have Main Street and we have the capital markets.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“Maybe it's worthwhile just to look at the great financial crisis, which everybody uses as a metric against which to have some historic perspective as to what happened then and what we might do now. But a very different set of situations, the 2008 financial crisis really started in 2007 from an oversupply of everything and an exogenous structural defects and financial instruments that were being created and were sent around the world, these weapons of mass destruction. Which bundled mortgages, which Which gave individuals of residential consumption an addiction and the same in the commercial mortgage markets and the same in the corporate markets.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, of course it's in chaos, as most of our lives, while we have this intersection of two crises, the unforeseen and unknown coronavirus and COVID-19. And for the first time in anybody's memory or history, a cessation of revenue. So, when we look at the setting that we're in of a banking system that became well-healed and structurally much different than the banking system that was the subject of restructuring in 2008.”
2020-04-06 · Odd Lots · Tom Barrack On The Crisis In The Commercial Real Estate Market · IDENTIFIED FROM THE TRANSCRIPT · source