Penalties for Strategic Defaulters ??

House Republicans have proposed a last minute provision to the FHA Reform Act that would disqualify anyone deemed to have “strategically defaulted” on their mortgage from ever receiving an FHA insured loan in the future. I wonder if these same Republicans would be willing to bar any corporation from ever receiving business, rather directly or indirectly, from a US Government contract, if they have ever strategically defaulted on a loan in the course of doing business. The hypocrisy of this proposal is just incredible, yet not at all surprising, especially for Republican law makers. It’s an absolute fact that corporations, including the Fortune 500 variety, make the rational business decision to strategically default on loans all the time. When do they do this? When it makes good business sense to do so. Corporations large and small make these decisions not because they literally don’t have the money to pay, but because it makes no sense to pay based on “the numbers”. The most famous recent example is the high-profile default by Tishman Speyer and BlackRock Inc. on the $5.4 billion acquisition of Stuyvesant Town and Peter Cooper Village in New York City. These titans of business and finance bought at the top of the market and then promptly bailed out (defaulted) when the global economy collapsed and it became very clear that their “genius investment” had no chance of paying off for the foreseeable future.

So explain something to me, how is the decision by Tishman to strategically default on a $5.4 billion real estate loan any different than a decision by an individual in the Las Vegas real estate market to strategically default on a loan made in 2006 on a Las Vegas home that makes no rational sense by today’s valuation standards? Why aren’t House Republicans drafting similar language to bar corporate strategic defaulters from benefiting from future government contracts ?? Why indeed …

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