[swatcoder]

> Bailout? Why? Because it's not just these "rich" landlords/investors that lose their money. They are pension funds, retirement funds, Teachers retirement funds, public service funds, your neighbors' annuity, etc.

And why did those socially vital funds invest in a boom/bust industry? Oh, because bailouts will protect them during the bust. Like free insurance. Whee.

What could go wrong with a feedback loop baked into the economy?

[bcrosby95]

The biggest trick the rich pulled on the wider public is getting them financially invested in the same things they are. In a democracy, what better way is there to guarantee that your losses will be socialized than giving the masses a financial interest in your losses being socialized?

[voisin]

> And why did those socially vital funds invest in a boom/bust industry?

Because retirees like when their funds earn more than T-bills and actually beat inflation and that entails taking risks. Otherwise everyone can work a hell of a lot longer.

[swatcoder]

But that’s the point. They didn’t take a risk pursuant to their upside expectation. They exploited an implicit insurance policy that mitigates their downside with other people’s money through bailouts.

“Beat the market” on the upside, “take from everyone” on the downside. Win win!

[fragmede]

Risk involves, well, risk. If commercial real estate is too big to fail, and provides better returns than bonds, then it seems like we've broken something.

[pipodeclown]

Why are you guys talking about a bail-out? Is there any talk of that? Not as far is I know... As far as I've seen that only happens when there is a systemic/ high contagion risk...

[Arnt]

Because real estate has a real component. Those houses exist, and will stay there, for much longer than the boom/bust cycle. Pension funds are long-term entities.

Compared to, say, shares or bonds issued by a consumer electronics company, or a cosmetics company, the real part of real estate is much bigger.

[cjrp]

> And why did those socially vital funds invest in a boom/bust industry?

Presumably because that's the only way they could generate the returns needed to fund the pensions?

[jessaustin]

Put another way, they pretended to fund pensions by purchasing securities that were cheaper than actually funding pensions.

[cjrp]

I'd be interested to see the breakdown of a pension fund; is it sustainable with "safer" investments, what sort of margin is the pension fund owner making, etc. I have no real idea.