The Miracle Max of MBS


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Miracle Max: Don’t rush me, sonny. You rush a miracle man, you get rotten miracles. You got money?

Inigo Montoya: Sixty-five.

Miracle Max: Sheesh! I never worked for so little. Except once, and that was a very noble cause.

Inigo: This is noble sir. His wife is… crippled. The children are on the brink of starvation.

Miracle Max: Are you a rotten liar!

Inigo: I need him to help avenge my father, murdered these twenty years.

Miracle Max: Your first story was better.

The Princess Bride (1987)

We have published fewer Zeitgeist notes in the last few weeks. The reason won’t be surprising: they’d all be about the same thing, more or less. Sometimes certain language dominates market attention.

This is one of those times.

Even then, there are occasionally articles which hit our screens and so capture the spirit of the age in multiple ways at once that it would be almost criminal of us not to include them.

This is one of those times.

Colony’s Barrack Urges Margin Call Moratorium in CMBS Market [Bloomberg]

In most Zeitgeist submissions, we excerpt enough of an article to give you a sense of what it is about and why we think its language brought it to the top of our Zeitgeist dashboard. In those cases maybe it isn’t necessary to read the full article. I hope you will make an exception for this one – read it in full. Once you do, I suspect you’ll get the same sense that I did.

This is not news.

This is not even fiat news.

This is a press release.

The article’s opening salvo permits its subject – Colony Capital Chairman Tom Barrack – to frame the issue of bailing out CMBS investors in morally loaded terms: doing so would represent “cooperation” and “support.”

“America needs the immediate cooperation and support from our banking sector,” Barrack, chairman and chief executive officer of Colony Capital Inc., said in a white paper he posted on Medium.

Source: Bloomberg, Colony’s Barrack Urges Margin Call Moratorium in CMBS Market (3/29/2020)

In the very next paragraph, the author helpfully provides contrasting ethical framing for what the banks are currently doing. Instead of cooperating and supporting, they are demanding and seizing.

The threat of widespread defaults has caused waves of selling in the market for commercial mortgage-backed securities. Banks in turn are demanding cash and seizing collateral from vehicles that borrowed to invest in CMBS and other forms of asset-backed debt, a practice that drives down prices even further. One index of mortgage REITs, or real estate investment trusts, has collapsed by more than 50%, in part because of those margin calls.

Source: Bloomberg, Colony’s Barrack Urges Margin Call Moratorium in CMBS Market (3/29/2020)

From there the article simply cribs the emotional appeal straight from Colony’s Medium article and Barrack’s Twitter feed.

At stake, he said, are trillions of dollars in securities owned by insurers, asset managers, pension funds — even banks themselves…If the investment vehicles get such relief, they can subsequently grant forbearance to the hotels, retailers, malls and other tenants and borrowers who can’t pay rent or interest while the economy is largely shut down because of the pandemic, Barrack said.

Source: Bloomberg, Colony’s Barrack Urges Margin Call Moratorium in CMBS Market (3/29/2020)

Then, because it’s 2020 and this is how we do it now, the article presents – verbatim – Barrack’s tweet arguing that the only way to help American enterprise is by bailing out leveraged investors in commercial real estate securities. Words fail.

The only way to accomplish relief for American enterprises is by receiving forbearances on the interest obligations that real estate owners and mortgage real estate investment trusts owe to the banks and their other security lenders.

Source: Twitter, Posted 8:57 PM, March 28, 2020

There are no challenges to factual assertions made by the subject. No alternative views are presented. No counterpoint is provided. No contextual facts are sourced. Do you, dear reader, think that Mr. Barrack’s role as the chairman of President Trump’s inaugural committee might be a newsworthy addition to the article’s cheerful characterization of him as a “longtime friend?” The article does nothing to shed new light on a topic. It provides a free lectern and and a megaphone for the advocacy aims of one particular market missionary looking to establish a preferred narrative.

Apparently it also serves as the promo for an interview – today on Bloomberg TV!


Look, I’m not mad at Tom for bringing his mostly dead asset class to Miracle Max and asking for a miracle. That’s his job.

I’m also not mad at the author for seeking out knowledgeable, well-known interview subjects to probe about current issues and news. That’s his job (and in full disclosure, many of his interviews are really very good).

But there is an emerging news practice of “presenting verbatim what famous people said” under the tenuous guise that what a wealthy, famous person said or tweeted is inherently newsworthy in itself, rather than newsworthy in context of some broader event of public interest. This practice played a not-insignificant role in the woefully unchallenged and uncontextualized repetition of talking points from WHO leaders, New York City health officials and others in many outlets over the past few months. It has been the on-air M.O. of financial media for far longer.

More importantly, the practice forms a critical part of the machinery of narrative construction and transmission.

Clear eyes.

Comments

  1. Recommend as a companion piece from MBS Highway, Dan and Barry Habib, “Mortgage Crisis and Fed Unintended Consequences”. Lots more corporate pleas for Fed bailouts coming.

    If only we had a wheelbarrow.

  2. Implied throughout your note, this reflects a massive failure of the “media” or what we used to call journalists to objectively cover news by reporting “all” the facts, by questioning statements from “important” people or, at least, presenting some counter viewpoints.

    We see it regularly where news outlets show their bias be “reporting” statements form the right or left with little or no questioning, but then pick apart everything the “other” side says.

    Was news ever bias free? Of course not, but on the continuum, it’s moved far away from objectivity. The article you note, is a good example, but sadly, it’s just one of many.

    And while “we” (me included) blame the “people” for being divided and partisan, the media shares a big part of this blame as the “people” no longer have a place to turn for (somewhat) objective reporting that challenges its views / its biases. Sure, if you hate one side, you watch CNN (the other, FOX), but do you truly believe that’s all objective reporting?

    No, the people get they are being fed bias news, but figure “the other side does it, so why shouldn’t we.” To wit, with no reasonable place to turn for objective news - (and this is key) where you can’t deny your point of view could be wrong - then “news” just becomes more confirmation bias and the gyre widens.

  3. The Economy: mostly dead is also partly alive!

  4. Lots more. And we’ve got LOTS more to say about this market in particular.

  5. Hey, the buildings will still be there after the equity has ceased to be, so that’s something!

  6. I wish there were more we could do, but the current model is how a dying industry resurrected itself. For better or worse, the old model didn’t pay the bills.

  7. Burn.
    them.
    Down.

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