By Numerian
That headline got your attention, didn't it? Bloggishly irresponsible of me, I know, to alarm people about Morgan Stanley defaulting. The responsible, grown up media handle these things much more professionally. They talk about Morgan Stanley having to "Give Up" five San Francisco office buildings to their lender, because they were bought at the peak of the market and have lost about half of their value. The bank that holds the mortgage on these properties, and which lent the money to Morgan Stanley to buy them in 2007, has been in "negotiations" with Morgan Stanley for months on the "orderly transfer" of these properties to the bank.
This is just a beautiful example of how the morality that applies to the corporate world is so different than the morality expected of you as a homeowner. You "default" on your home mortgage and go into "foreclosure" just before you lose the property to the bank. Morgan Stanley is going to "relinquish" its assets to the bank. It sounds so polite and gentlemanly of Morgan Stanley to do this, like they are volunteering to make this orderly transfer. Alyson Barnes, a spokesperson for Morgan Stanley, said “This isn’t a default or foreclosure situation, we are going to give them the properties to get out of the loan obligation.” The hell it isn't a default or foreclosure. If you were to do this with your home, you would be classified by the real estate industry as entering into a "strategic default." This is exactly what Morgan Stanley is doing, and everything about the way this deal is being reported is intended to prevent you from doing the same thing.
Morgan Stanley made a series of injudicious commercial real estate purchases at the peak of the market in 2007. They probably have the biggest portfolio of such lemons of any investment bank. Their market timing was dreadful and these decisions can only be described as atrocious. In 2008, Morgan Stanley was on the verge of bankruptcy because of foolish investments such as these, as well as truckloads of mortgage backed securities that were collapsing in value. The firm was allowed to convert to a commercialbank and have access to TARP rescue money and many other liquidity facilities that kept it alive at your expense. They are having a near-record year in 2009 trading with the new capital given to them by the taxpayers, and this new lease on life has allowed them to quietly default on their real estate mortgages.
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=f3dfb1b8-3b3f-4959-b08b-f8e93b6d8669)
