Real estate boom has plenty of legs; minority investment banks gain share

Wall Street Journal

No boom like the old boom

“In nearly every meaningful way,” today’s residential real estate boom “is the inverse of the previous boom,” which burst in 2006 “and set off a global recession. The current housing boom is far more stable than the last one and poses fewer systemic risks, economists say. A downside: There are more barriers to entry, and it’s more difficult for buyers who aren’t already homeowners to make that first purchase.”

“Market watchers also say that a number of longer-term trends are at play that should keep the housing market hot, or at least steady, even after Covid-19-related demand fades. Millennials, the largest living adult generation, continue to age into their prime homebuying years and plunk down savings for homes. At the same time, the market is critically undersupplied. Mortgage lenders, meanwhile, are maintaining tight standards. Rising home values also mean that even if homeowners can’t afford their mortgage payments, they can likely sell their homes for a profit rather than face foreclosure. Financial firms are still packaging mortgages as securities, but the vast majority of those mortgages today have government backing.”

Gaining share

Minority-owned investment banks are grabbing a bigger share of the corporate bond market as issuers “aim to attract new investors and demonstrate their commitment to diversity.”

“The 10 largest investment banks by deal volume that are owned by minorities, women or veterans took part in 29% of debt sales by U.S. investment-grade companies last year, an all-time high and up from 22% of debt sales a decade ago. So far in 2021, the top 10 firms with diverse owners have taken part in bond offerings accounting for 43% of proceeds in the U.S. investment-grade market,” up from 33% in the same period last year.

Baseball meets bitcoin

The Oakland Athletics became “the first team in American professional sports to price their tickets in cryptocurrency instead of dollars.” For one bitcoin, worth about $60,000, fans can purchase “a full-season package for a six-person suite at the home stadium,” which costs about $64,000. A’s president Dave Kaval “said the team had received inquiries from more than 60 people potentially interested in taking the A’s up on their offer. They came mostly from Silicon Valley, but some from as far away as the East Coast.”

New York Times

Covid anniversary

In March 2020, when the COVID-19 pandemic was sweeping across the globe, the Federal Reserve was “forced to cross boundaries, break precedents and make new uses of the U.S. government’s vast powers to save domestic markets, keep cash flowing abroad and prevent a full-blown financial crisis from compounding a public health tragedy. The rescue worked, so it is easy to forget the peril America’s investors and businesses faced a year ago. But the systemwide weaknesses that were exposed last March remain, and are now under the microscope of Washington policymakers.”

Elsewhere

Diversifying further

Goldman Sachs nominated Royal Dutch Shell CFO Jessica Uhl to its board of directors Monday, Reuters reported. “If her appointment is approved by shareholders, she will be the fifth woman director on Goldman’s board and its only member to come from the fossil fuel industry.”

“The bank has backed away from fossil fuel development in recent years. In 2019, it said it would no longer finance certain drilling and coal activities and set a target of making $750 billion in loans, underwriting, advisory services and investments in projects that fight climate change or help financially disadvantaged people. Shell, where Uhl has worked since 2004, recently vowed to eliminate net carbon emissions by 2050, as it prepares to expand its renewables and low-carbon business in the face of growing investor pressure on the oil and gas sector to battle climate change.”

Deepening probe

Dutch bank ABN Amro “might face a higher-than-expected penalty in an ongoing money laundering investigation,” Reuters said. “The bank’s annual report published last week described an investigation by Dutch prosecutors, started in September 2019, which was broader than previously stated. It said it was now also suspected of ‘culpable money laundering.’”

“The new allegation could mean that the bank was aware of money laundering activities but did not act upon it,” a Dutch newspaper said. “This could lead to a higher fine for the bank, and could raise the possibility of bank executives being held responsible individually for money laundering.”