October 13, 2008: behind closed doors in Washington, the U.S. government forces Wall Street’s biggest banks to take rescue money—no opt-outs, no stigma, no time for debate. What follows isn’t just a bailout. It’s a quiet rewrite of capitalism: stabilize the banks first, let homeowners and workers fight for air.

Dimitrius Lynch traces how the TARP bailout, near-zero interest rates, and weak homeowner relief accelerated a new housing order—one where asset prices recover faster than wages, and where homes shift from shelter to portfolio. As the National Association of Realtors pushes demand-side subsidies like the $8,000 first-time homebuyer tax credit, foreclosure prevention tools like principal reduction are resisted—protecting values over people.

Then comes the next extraction layer: Airbnb’s normalization of housing as income strategy, followed by private equity and corporate landlords turning foreclosed homes into rentals at scale. Blackstone and Invitation Homes pioneer the machine—buy in bulk, rent to the displaced, then bundle single-family rentals into securities. Meanwhile, policy capture tightens: carried interest survives, lobbying culture “owns” offices, and Citizens United floods politics with corporate money—reshaping who writes the rules of housing, finance, and democracy itself.

This episode is a documentary-style timeline of how the middle class gets eaten—not by accident, but by incentives, institutions, and a politics increasingly engineered for capital. The crash wasn’t the end. It was a blueprint for a new future and purpose for housing.

Episode Extras - Photos, videos, sources and links to additional content found during research.

Episode Credits:

Production in collaboration with Gābl Media

Written & Executive Produced by Dimitrius Lynch

Audio Engineering and Sound Design by Jeff Alvarez

It's October 13th, 2008, an unusually warm day in Washington, D.C.

2

Inside an ornate Treasury conference room, the temperature rises for another reason.

3

Fear has overtaken the country.

4

From the Federal Reserve to the Treasury, the halls of America's Financial Foundation has

become an emergency triage unit, and the patient is the global economy.

5

Capitalism, an economic system that took shape in the 16th century, is built on private

property, competition, profit, and reinvestment into productive growth.

6

Its innovation wasn't wealth itself, but what wealth blended.

7

More goods, more jobs, more capacity for society.

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But over time, capital drifted towards spectacle over substance, luxury assets,

9

political influence, and financial engineering, forms of wealth that signaled status

rather than expand productivity.

10

The system still rewarded profit, but not necessarily progress.

11

Now, on one side of a long mahogany table sit the nation's top financial minds, Treasury

Secretary Henry Hank Paulson, blanked by Federal Reserve Chair Ben Bernanke,

12

FDIC Chair Sheila Baer, New York Fed President Timothy Geithner, and Comptroller of the

Currency John Dugan.

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Their challenge, how far will they go to save capitalism from itself?

14

For Nanki, a scholar of the Great Depression is likely recalling a speech he gave in 2002

honoring Milton Friedman and Anna Schwartz.

15

He closed with a remarkable admission, quote,

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Regarding the Great Depression, you're right.

17

We did it.

18

We're very sorry.

19

But thanks to you, we won't do it again." Friedman had long argued that the Federal

20

Monetarism asserted that persistent inflation and deflation are driven by the money supply

and that central banks

21

should maintain steady monetary growth to stabilize prices.

22

Friedman and Schwartz challenged the dominant Keynesian view that the Depression was a

failure of demand requiring fiscal stimulus.

23

They believed the Fed simply failed to keep banks liquid during panic, a government

failure, not a market failure.

24

But that worldview carried a deeper implication.

25

Trust markets, distrust government, let prosperity flow from boardrooms downward.

26

Yet history showed something else.

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Before the Fed, financial panics were constant.

28

After the deregulatory wave of the 1980s, corporations optimized for profit without

obligation to raise wages or strengthen communities.

29

Growth concentrated at the top.

30

The trickle-down rarely reached workers.

31

When the bottom is hollowed out long enough, collapse eventually follows.

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By fall 2008, Bernanke,

33

usually calm, soft spoken, was exhausted.

34

The markets were in free fall.

35

A few weeks earlier, he delivered an extraordinary warning to congressional leaders.

36

Despite the efforts of the Federal Reserve, the Treasury, and other agencies, global

financial markets remain under extraordinary stress.

37

Action by the Congress is urgently required to stabilize the situation and avert what

otherwise could be very serious consequences for our financial markets and for our

38

economy.

39

In this regard, the Federal Reserve supports the Treasury's proposal to buy illiquid

assets from financial institutions.

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Purchasing impaired assets will create liquidity and promote price discovery in the

markets for these assets, while reducing investor uncertainty about the current value and

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prospects of financial institutions.

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More generally, removing these assets from institutions' balance sheets will help to

restore confidence in our financial markets and enable banks and other institutions to

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raise capital and to expand credit to support economic growth.

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Congress passed the $700 billion Trouble Asset Relief Program, or

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Tarp bailout on October 3rd, originally intended to buy toxic mortgage assets.

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But as panic worsened, Paulson and Bernanke concluded that buying assets was too slow.

47

Something more drastic was required.

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On that fateful day of October 13th, 2008, just three weeks before the presidential

election, Halston summoned the CEOs of the nine largest US banks to the Treasury.

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The meeting was deliberately secretive.

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Even the CEOs didn't know why they were being called.

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Emails flew back and forth that morning, frantically trying to figure out if executives

were actually necessary.

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Halston demanded that they all appear in person, no deputies allowed, a sign of the

gravity.

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present were the most powerful figures on Wall Street.

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Jamie Dimon, Lloyd Blankfein, John Mack, Ken Lewis, Vikram Pandit, and others.

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They sat, uneasy, waiting.

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Paulson got straight to the point.

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The government would not buy troubled assets.

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Instead, each bank represented would have to accept direct capital injections, preferred

equity stakes purchased by the treasury.

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and every CEO in the room would participate.

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It was not optional.

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Agreements were placed on the table in front of each executive.

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Paulson's private talking points later revealed through the Freedom of Information Act

included a blunt warning.

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Quote, if a capital infusion is not appealing, be aware your regulator will require it in

any circumstance.

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End quote.

65

The message

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sign or risk being marked as failing.

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Some executives resisted, particularly Richard Kovakovich of Wells Fargo.

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Well, I think it was one of the worst economic decisions in the history of the United

States.

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uh Everybody was well intentioned.

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uh But the proposition that Hank put before us was that if we took this money, the

confidence in the industry would go up.

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And I was arguing that day until I was told to be quiet.

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is the opposite what happened.

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And let's just look at the facts.

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Shortly after TARP, the stock market fell by 40 percent and the banking industry stocks

fell by 80 percent.

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So how can anyone say that TARP increased the confidence level of an industry when its

stock market valuation fell by 80 percent?

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I think, so I think it made the, I think it caused the crisis to get much greater.

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than it would have been if it would have been handled differently.

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And I think as we look back uh there, you know, we could have handled it differently.

79

And I think the fact support that handling the crisis differently uh would have made the

crisis uh less severe than it actually was.

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Paulson and Bernanke feared that if only weak banks accepted capital, markets would target

them and deepen the panic.

81

So all nine banks were required to join to avoid stigma.

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The conditions were minimal.

83

There were no requirements to increase lending or help homeowners.

84

The goal was speed and unity, not oversight.

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Each CEO scribbled his bank's assigned amount, $25 billion each for JP Morgan.

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Bank of America, Citigroup, and Wells Fargo.

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Ten billion for Goldman and Morgan Stanley.

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Smaller amounts for the rest.

89

In exchange, the government received preferred stock and warrants, partial nationalization

on highly favorable terms to the banks.

90

By 6.25 p.m., a treasury aide emailed, quote, we now have nine out of nine.

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The deal was done.

92

The next day,

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The Dow soared 936 points, the largest one-day point gain in history at the time.

94

Markets exhaled.

95

The immediate collapse was averted, but outside Wall Street, the suffering deepened.

96

As you know, in concert with the Treasury and the Federal Reserve, we took a number of

actions to bolster confidence in the banking system.

97

These included temporarily increasing deposit insurance coverage and providing guarantees

to new, senior, unsecured debt issued by banks.

98

and holding companies.

99

The purpose of all these programs is to increase bank lending and minimize the impact of

deleveraging on the American economy.

100

As a result of these efforts, the financial system is now more stable and interest rate

spreads have narrowed substantially.

101

However, credit remains tight and a serious threat to the economic outlook.

102

Regulators will be watching to make sure these emergency resources are mainly used for

their intended purpose, responsible lending to consumers and businesses.

103

In the meantime, we remain focused on the borrower side of the equation.

104

Everyone agrees that more needs to be done for homeowners.

105

We need to prevent unnecessary foreclosures and we need to modify loans at a much faster

pace.

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That was FDIC's Sheila Baer in a congressional hearing in October 2008.

107

But most Americans didn't own stock.

108

The financial system was abstract.

109

The crisis was not.

110

John Taylor of the National Community Reinvestment Coalition says,

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a record number of home foreclosures.

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People in foreclosure or heading to foreclosure, which continue to be record numbers.

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in April, we had 400,000 families with facing foreclosure, filing foreclosure.

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The housing crisis and the great recession that immediately followed it was a huge jump in

the number of foreclosures in cities and regions around the country.

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again, a whopping 81 % from 2007 to 2008.

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While the 2.3 million American homeowners faced foreclosure proceedings last year, picture

isn't as as it was.

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The only thing you can do is just keep hope and just keep believing that something will

resolve and you'll be able to stay.

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Homes lost, jobs lost, life savings erased.

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Five million families would ultimately lose their homes.

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Nine million jobs vanished.

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Treasury's $700 billion rescue stabilized banks, but only a fraction reached homeowners.

122

Lending stayed tight.

123

Many banks hoarded capital to protect themselves.

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Public anger exploded as headlines revealed banks paying bonuses

125

while families were being evicted.

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President Bush went on television to defend the bailout.

127

But the pain spread anyway.

128

By December, unemployment was soaring, credit was frozen, retirement accounts had

evaporated, and the Dow had lost half its value.

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They weren't talking about a market correction anymore.

130

They were talking about collapse.

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The Federal Reserve, the government's lender of last resort, responded with unprecedented

measures.

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Zero percent interest rates, hundreds of billions in emergency lending,

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massive asset purchases, money created out of thin air.

134

The rescue would soon exceed the total cost of every war the United States had ever

fought.

135

Homeowner relief was weaker.

136

The 2009 Home Affordable Modification Program, or HEMP, aimed to modify mortgages, but

proved slow and inconsistent.

137

Participation was voluntary, guidelines were loosely enforced, and servicers

138

routinely lost paperwork or foreclosed mid-review.

139

Fewer than 800,000 permanent modifications materialized, far short of the millions

promised.

140

Months later, Bernanke would tell 60 Minutes.

141

Of all the events and all the things we've done in last 18 months, the single one that

makes me the angriest, that gives me the most angst, is the intervention with AIG.

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Here was a company that made all kinds of unconscionable bets.

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uh Then when those bets went wrong, they had a situation where the failure of that company

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would have brought down the financial system.

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say it makes you angry.

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What do you mean by that?

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It makes me angry.

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I slammed the phone more than a few times on discussing AIG.

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It's just absolutely, I understand why the American people are angry.

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It's absolutely unfair that taxpayer dollars are going to prop up a company that made

these terrible bets uh that was operating out of the sight of regulators.

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ah but which we have no choice but to stabilize or else risk enormous impact, not just on

the financial system, but on the whole US economy.

152

By then, the damage was done and quite profound.

153

Even as economists declared the recession over, low and middle income Americans had lost a

massive share of their wealth.

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The rules of capitalism had been rewritten.

155

The market would no longer follow the people.

156

the people would be expected to follow the market.

157

And in the years ahead, the institutions rescued in 2008 would grow larger, richer, and

more powerful, while ordinary Americans would have to figure out how to recover on their

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own.

159

I'm Demetrius Lynch, and this is Built to Divide.

160

You're seeing Jared Kushner meeting with executives in the White House and then sometime

after those meetings, the companies that those executives work for, run or help to run,

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are giving very sizable mortgages to his company.

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We own them.

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And what does that mean?

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Every request from our office, every request of our clients, everything that we want,

they're going to do.

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And not only that, they're going to think of things we can't think of to do.

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uh

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In the last episode, we examined the 1990s and 2000s, the lead up to and impacts of NAFTA,

the ripple effects from the dot com bubble burst, how social identity helped sell a

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bipartisan crusade for ownership, how subprime lending surged, especially in communities

long denied credit, how the machine of securitization spread risk until it became

169

collapse.

170

and how architects, planners, and investors reshape cities.

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We followed the political theater from Jack Kemp's Hope to Clinton's National

Homeownership Strategy to Bush's Ownership Society and explored who actually owned the

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upside and who absorbed the fall.

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If you haven't listened to that episode, I encourage you to go back and listen to all the

episodes of this series in order.

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In this episode, we detail the mechanics of the collapse

175

and pick up where that story left off, the moment when the decades of financial

experimentation and political complacency collided, how the government's rescue of the

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financial elite deepened inequality, reshaped cities, and set the stage for a new kind of

housing crisis, one defined by corporate landlords, stagnant wages, and policy capture.

177

And we'll get into all of that after this break.

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Episode 7 Eat the middle class

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Since the 1970s, wages for the average American worker have barely moved.

180

Housing costs, meanwhile, have rocketed into another atmosphere.

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In 1970, the medium home costs roughly three times the average annual income.

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Today, it's more than seven.

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Under the basic 30 to 50 % affordability rule, most Americans are now priced out or pushed

into chronic financial strain.

184

In cities like San Francisco, teachers and nurses drive hours from the outskirts, unable

to live in the communities they sustain.

185

Meanwhile, tech workers earning six figures compete for condos not as places to live, but

as assets to park capital in.

186

This widening gap between stagnant wages and soaring assets is not a natural accident of

the market.

187

It is the predictable outcome of a corrupted system that rewards those who already hold

capital and suppresses those who don't.

188

The American middle class was built on home ownership, a foundation of stability, equity,

and intergenerational wealth.

189

But after the 2008 collapse, that foundation cracked.

190

The very tool that once lifted families became out of reach for millions.

191

When home prices began falling,

192

The National Association of Realtors moved swiftly, framing the downturn not as a

necessary correction after years of speculation, but as a national emergency.

193

Their solution wasn't to fix structural failures, it was to revive demand.

194

The result was the 2009 first-time homebuyer tax credit, an $8,000 incentive meant to

ignite buying in a fragile market.

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Today we come to you urgently.

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We need to act.

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now.

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is Ron Phipps, first vice president of the National Association of Realtors.

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First, we need the $8,000 first-time homebuyer tax credit extended and expanded.

200

It is responsible for 350,000 to 400,000 additional sales this year.

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Each sale generates approximately $63,000 in economic activity.

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We appreciate the $10 billion cost, but the direct benefit of this

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is to Americans and the multiplier effect cannot be ignored.

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We need this done now.

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The average closing takes 45 days.

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We are at threshold.

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If you do not act immediately, then sales will wane.

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We are writing offers literally in our office today that are contingent on closing by the

30th of November, or the sales agreement is null and void, meaning the transaction goes

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away.

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It will not happen.

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And that's what people qualify for, the $8,000.

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Second, NAR urges you to make GSE and FA mortgage loan limits, the higher limit,

permanent.

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They expire on the 31st of December.

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Actions required now.

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Finally, realtors believe that the federal government must continue to play a role in

mortgage markets.

216

The second market must meet two key goals.

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First, we need to ensure that the housing market works at all times regardless of the

economy.

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And second, we need to provide mortgages to all qualified homeowners for sustainable

homeownership.

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It's been an American tradition for communities to work together and help people in need.

220

When a barn burned, the neighbors would rebuild it.

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We are asking for you to work with us, not to build a barn, but to rather build homes,

homes for American families.

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I cannot overstate the immediacy now.

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You need to act on the extension

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today.

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Now, now, now.

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The credit came with income limits, phasing out around $75,000 for single filers and

$150,000 for joint filers, later raised to $125,000 and $225,000.

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But those very limits ensured that the benefits flowed mostly to middle and upper middle

income buyers, not to low income households.

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and certainly not to those locked out of credit access altogether.

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Studies later confirmed that many of those recipients would have purchased anyway, meaning

the subsidy inflated demand without expanding true affordability.

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As housing expert Diane Randall, former executive director of Partnership for Strong

Communities noted, rental relief, not ownership incentives,

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would have provided far more support to low-income families facing acute housing

insecurity.

232

In fact, it demonstrated a shift that homelessness is growing at a faster rate in suburban

and rural towns than in our urban centers.

233

It's a finding that's consistent with many national studies.

234

Has the current housing crisis increased the availability of rental housing for low-income

households?

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Quite simply, that is not the case.

236

The loss of regular income experienced by millions of Americans, whether through

unemployment,

237

reduction in work and benefits, or crises related to mortgage and foreclosure problems

pushes more lower income households to look for affordable rentals.

238

This pressure on the low income rental market in turn drives up rents for these homes.

239

The market for rental housing for low income households is not the same as the market for

those who have higher incomes and an increased ability to pay more.

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Although recent reports indicate that rental prices may be declining in some markets,

these reports are coming primarily from large rental buildings

241

that generally rent to higher income segments of the population.

242

There also appears to be an influx of troubled properties in the rental market as

homeowners try to rent property they can no longer afford themselves.

243

Finally, I want to just say a couple words about the loss of the existing public housing.

244

We estimate that there's been a loss of almost 200,000 units of public housing stock,

which is mostly for low rental, and that there's an immediate need to preserve rental

245

housing stock in the next decade.

246

Meanwhile, NAR

247

fiercely oppose principal reduction programs, the one intervention that could have kept

families in their homes.

248

These programs reduced the amount a borrower owes.

249

It would have cost banks a little money, but it would have prevented millions of

foreclosures, which are costly for banks too.

250

Critics warned it would drag down home values, yet economists showed the opposite was

true.

251

Principal reduction might shave a little off nearby appraisals,

252

but foreclosure obliterates value.

253

Distressed sales flood the market.

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Prices collapse, neighborhoods hollow out.

255

Principal reduction softens the fall.

256

Foreclosure pulls the floor out entirely.

257

The resistance wasn't about protecting communities.

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It was about protecting the asset values of lenders and investors.

259

Multiple economists at the Fed, IMF, and leading universities later concluded that

widespread

260

principal reduction would have sped up the housing recovery and the broader economy.

261

The message couldn't have been clearer.

262

Protect home values, not homeowners.

263

And into that gap stepped a new kind of buyer, investors.

264

By late 2009, the landscape had shifted.

265

Housing stock was available.

266

Many lower middle income families were trapped in underwater mortgages and upper middle

income households and above.

267

still had financial mobility, opportunity for some, distress for others.

268

In that environment, a small idea born in a San Francisco apartment began to reshape

global housing.

269

In 2008, roommates Brian Chesky and Joe Ghabia, short on rent, put air mattresses on their

floor during a design conference and called the service Air Bed and Breakfast.

270

We end up hosting three people, a 35 year old from Boston, a 30 year old from India, a 45

year old, father of five from Utah.

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But what ended up happening was we ended up becoming friends and we made enough money pay

our rent.

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At this point we say, you know, we're ordinary guys.

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I bet you there's lot of other ordinary people like us that want to make some extra money,

meet cool people.

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I asked Joe, said, well, who's the best engineer you know?

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Joe said, well, my old roommate Nate is.

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And so the three of us got together and we had a simple idea.

277

What if you can book someone's home the way you could book a hotel anywhere in the world?

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And that's how it started.

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It worked.

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With Nathan Blacharski as a third co-founder, they built a simple website for bookings.

281

Major events like the Democratic National Convention brought them their first real wave of

demand.

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By March 2009, the company rebranded as Airbnb and began expanding from air mattresses to

entire homes.

283

With mentorship and funding from Y Combinator, the platform grew rapidly.

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not just as a tool for struggling tenants to earn supplemental income, but as a vehicle

for homeowners and soon small rental property investors to monetize spare rooms, vacation

285

properties, and even speculative purchases.

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Airbnb didn't just disrupt hotels.

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It helped normalize a new class of housing investment.

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Suddenly, it became easy and lucrative for higher earners to buy second and third homes

289

and convert them into high value short-term rentals.

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A technology meant to help people make rent had inadvertently opened a gate to asset

accumulation for those who already had financial leverage.

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Today, Airbnb operates globally, connecting millions of hosts and guests and playing a

significant role in reshaping housing markets from the neighborhood level to global

292

tourism economies.

293

Another buyer that stepped into the wreckage

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came in a new form, corporate investors.

295

What had been the heartbreak of families became a new opportunity for Wall Street.

296

They moved on from MBS to private equity firms that began buying homes by the thousands.

297

A private equity firm is an investment company that leverages others' money to buy stakes

in private businesses or takes public companies private with one goal, extract a profit.

298

Unlike publicly traded stock,

299

Private equity ownership is limited to specialized funds and partnerships that step in not

just as investors, but as operators, reshaping companies from the inside.

300

But the model comes with a cost.

301

Private equity is often criticized for aggressive tactics, loading companies with debt,

slashing jobs, and prioritizing short-term returns over long-term stability.

302

And the fallout is increasingly visible.

303

In the first quarter of 2025, 7 out of 10 corporate bankruptcies involving more than $1

billion in liabilities were tied to private equity owned companies, even though the sector

304

represents just 6.5 % of the U.S.

305

economy.

306

The trend isn't new.

307

In 2024, private equity backed firms made up 11 % of all bankruptcies and more than half

of the nation's largest bankruptcies.

308

by early 2025 companies across sectors.

309

Forever 21, Prospect Medical Holdings, Red Lobster, Joanne's, all collapsed or spiraled

into distress after private equity ownership.

310

It's a pattern.

311

Concentrated control, aggressive restructuring, enormous debt, and when the model fails,

the public absorbs the damage while the firm moves on.

312

Blackstone, today the world's largest private equity firm,

313

quickly became the most aggressive player.

314

Founded in 1985 by Peter Peterson and Stephen Schwarzman, both alumni of Lehman Brothers,

the firm began as a mergers and acquisition boutique.

315

Schwarzman supplied ambition.

316

Peterson supplied political gravitas.

317

Now remember that name, Peter Peterson, because we'll come back to him later in the

series.

318

Schwarzman's rise was meteoric.

319

After graduating from Yale, where he and future president George W.

320

Bush belonged to the secretive Skull and Bones Society and earning his MBA at Harvard, he

joined Lehman Brothers.

321

By 31, he was running global mergers and acquisitions.

322

When American Express absorbed Lehman in 1984, he walked away, joining Peterson to launch

an investment company with $400,000 of their own money in seed capital.

323

it would soon become one of the most powerful financial engines on earth.

324

If there was something that was happening that was like an amazing opportunity, ah that we

wanted to do that, ah we decided we'd only do it in two circumstances.

325

ah The first is if we could hire somebody who was a 10 out of 10, ah because then we know

we would crush it, because we wouldn't know that field.

326

And the second is if that business generated intellectual capital.

327

So it made our existing businesses much stronger.

328

If it didn't meet those two tests, we wouldn't do it.

329

And so we took that strategic plan and we mailed it to everybody.

330

And nobody gave it.

331

It was amazing.

332

uh And I thought it was a really good plan, by the way.

333

It's 34 years later.

334

was a really good plan.

335

We're still doing the same plan.

336

We've never changed.

337

We just are executing the same thing.

338

And we wait around until there's something really neat, so good, even I can't screw it up.

339

So you have to pass up little things and only do really, really big things.

340

So that was our plan.

341

it ends up now, they have different names for this uh intellectual capital product.

342

This is like data.

343

We've been doing this since 1985 because knowledge is power in finance.

344

Everybody thinks the same, more or less.

345

mean, you all test well.

346

You all go to good schools.

347

You all get well trained.

348

So how do you win the game?

349

You have to have knowledge other people don't have.

350

And to do that, you have to produce that knowledge.

351

And then you have to figure out how do the pieces fit.

352

uh You know, how do you see something in one area that tells you what's going to happen in

another area?

353

And if you have that and you can mine that and now they have names for this data mining,

okay?

354

It's just information and seeing patterns which lead you uh to other opportunities.

355

Blackstone's evolution mirrored the arc of modern finance.

356

After advising on the 1987 merger of Shearson Lehman and EF Hutton,

357

Earning a $3.5 million dollar fee, the firm entered private equity.

358

Leveraged buyouts, once considered niche, became its core strategy.

359

As Blackstone's power grew, so did its appetite.

360

After the 1987 stock crash, the firm raised its first private equity fund.

361

In the 1990s, it expanded into Europe and then real estate, buying chains like Days Inn

and Super 8.

362

Throughout the decade, it snapped up companies across sectors, from Six Flags to funeral

homes, refining the model it would later scale globally.

363

With massive success came stature and proximity to political influence.

364

Schwarzman became one of Wall Street's most connected power players, a dealmaker, an

advisor to presidents, globally connected, and a major donor across the political

365

spectrum.

366

At the height of his ascent,

367

He lived in a setting almost symbolic of American wealth, 740 Park Avenue, the storied

Upper East Side building long known as the most exclusive residence in New York.

368

According to New York City real estate lore, whoever inherits the biggest penthouse at 740

inherits the throne of New York society itself.

369

In 2000, Schwarzman bought it for around $30 million.

370

The building itself was a monument to concentrated power

371

Its marble lobby, bronze metal shoots, and uniformed doorman were the backdrop to

residents like John D.

372

Rockefeller Jr., David Koch of Koch Industries, and Merrill Lynch CEO John Thane, a who's

who of the elite.

373

In 2011, filmmaker Alex Gibney's Park Avenue, Money, Power, and the American Dream

revealed that 740 Park's residents donated more money to political campaigns than

374

any other building in the country.

375

These were the people shaping the policies that ultimately destabilized the economy and

then writing the rules for its reconstruction.

376

Influence wasn't just translating into profit.

377

It was becoming ownership of everything.

378

By the early 2000s, Blackstone had become one of the only firms capable of executing

multi-billion dollar deals in a bruised economy.

379

In 2002,

380

It raised a then record $6.45 billion fund.

381

It bought Houghton Mifflin for $1.28 billion.

382

It expanded its hospitality holdings, acquiring Prime Hospitality, La Quinta Enns and

Suites, and in one of the most infamous private equity deals in history, Hilton Hotels for

383

$26 billion in 2007.

384

This was the prelude to what would happen after 2008.

385

When the housing market collapsed and millions of families lost their homes, Blackstone

and firms like it didn't see tragedy.

386

They saw inventory deeply discounted, scattered and ripe for consolidation.

387

And they moved quickly in a way ordinary Americans could not.

388

The logic was best communicated by investor, chairman and CEO of Berkshire Hathaway,

Warren Buffett.

389

Equities are still cheap.

390

relative to any other asset class but they're not as a single family homes are cheap now

to uh...

391

single-family homes it but yet yet if i had a way of buying a couple hundred thousand

single-family homes and and had a way of managing the management is enormous is really

392

problem because they're one by one they're not like a part of a house and so

393

i would load up on them and i would i would take more because i had a very very low rates

but but uh...

394

if if anybody is thinking about buying homes five years ago they couldn't buy and fast

enough to the other are going to go up and now they don't buy because they think they're

395

going to get down interest rates are far lower uh...

396

it's a way in effect to short the dollar because you can you can take a thirty-year

mortgage ever turns out your interest rates too high next week you refinance lower and if

397

it turns out that since too old the other guys stuck with it for thirty years so it that

it's a very attractive asset class down if you are you

398

individual investor at home and you have your choice between buying your first home or

investing in stocks where would you tell someone is the better bet if i thought i was

399

going to live and i'm to work on a lot of while live the next five or ten years i would

buy would buy a home and i'd pass it with a thirty-year mortgage and and uh...

400

it's a terrific deal and if i literally if i was an investor that was a handy type which

i'm not and i could buy a couple of them at distress prices uh and find writers ah

401

i think that's a and and and again take a thirty-year mortgage it's it's a little a

leverage way of owning a very cheap asset now and and and i i think i think that's

402

probably the track of the investment as you can make

403

One of the most consequential acquisitions in Blackstone's dominance came from a small

Arizona firm called the Treehouse Group.

404

Founded in 2005 by Dallas Tanner and Partners, Treehouse began buying up distressed homes

in Phoenix, a city leveled by the foreclosure wave and one of the earliest laboratories

405

for turning owner-occupied houses into rental commodities.

406

Between 2010 and 2011,

407

they amassed roughly 1,000 homes.

408

In 2012, Blackstone bought Treehouse and flooded it with cash for something unprecedented.

409

Invitation Homes, a single-family rental empire that would eventually control more than

80,000 homes nationwide.

410

The speed was staggering.

411

Invitation Homes first purchase closed in April 2012.

412

Within a year, it had spent $4 billion acquiring 24,000 homes

413

instantly becoming the largest single-family landlord in the country.

414

In Atlanta alone, the company bought more than 1,400 homes in a single deal.

415

In Tampa Bay, it acquired 1,650 homes in under a year and soon listed 85 % of them at

rents above the regional average.

416

These purchases were calculated.

417

Firms like Invitation Homes targeted, quote, strike zones.

418

Neighborhoods close to jobs, schools, and transit, but recently gutted by foreclosure.

419

Their ideal renter was not the poor, but middle-class families making around $100,000 a

year.

420

People priced out of ownership, but still reliable enough to pay rising rents.

421

In 2013, invitation homes went further and helped invent an entirely new financial

product, single-family rental securities, or SFRs.

422

Wall Street could now bundle suburban homes into bonds the same way it had bundled

mortgages a decade earlier.

423

The business model was brutally simple.

424

Rent the homes people had just lost back to them.

425

By 2017, institutional investors owned nearly one in 10 single-family homes in some

markets.

426

Neighborhoods once built for community became revenue streams.

427

Even as millions of Americans were evicted or underwater,

428

Blackstone reported record profits.

429

That year, Invitation Homes sold nearly $10 billion in SFR bonds.

430

By 2018, the figure climbed to $15 billion.

431

And in a historic move, Fannie Mae, long barred from financing companies that bought

distressed homes, provided a $1 billion credit line to Invitation Homes.

432

Affordable housing groups condemned the decision.

433

arguing that a government agency created to support homeowners was now backing a corporate

landlord that priced them out.

434

In February 2017, Invitation Homes went public in one of the largest REIT IPOs in US

history.

435

Months later, it merged with Starwood Waypoint, swelling its portfolio even further.

436

Blackstone eventually exited in 2019, having transformed the company into a financial

juggernaut.

437

But for Invitation Homes, the acquisitions kept coming.

438

In 2020, they partnered with Rockpoint Group to buy another $1 billion in homes across

major metros.

439

We'll explore the concept deeper in the next episode, but in 2021, Invitation Homes

launched a joint venture with home building company, Hulti Group, to build 7,500 new

440

houses specifically for the rental market.

441

Entire neighborhoods constructed not for ownership,

442

but for permanent tenancy.

443

Well, fundamentals around housing are really favorable for companies like ours.

444

Whereas we don't have enough, you know, needed housing supply in the U.S.

445

today, given the amount of demand that we're seeing real time.

446

Our business today sits about 97 and a half percent occupied.

447

We're seeing a customer that continues to stay longer and longer with our business.

448

And because of the dislocation between where home prices are, mortgage rates sit, and the

availability of housing for lease,

449

ah It's much more favorable to lease a home today than it would be to own somewhere

between twelve thirteen hundred dollars a month cheaper in our markets than it would be to

450

own in those similar markets and so That value proposition has played itself out very well

for our company uh Evidenced by the numbers I shared with you Continued really strong

451

occupancy really favorable rent growth and a customer that's staying longer and longer.

452

This is Dallas Tanner

453

CEO of Invitation Homes discussing market conditions during NARIT's REIT Week 2024

Investor Conference.

454

Lack of supply will be an issue.

455

We're trying to build as much as we can.

456

We're using our balance sheet to basically lean in and try to build with a number of

different regional and national partners, new homes, new home communities.

457

We currently have about 3,000 homes being constructed in one way, shape or form and

somewhere in that process.

458

I think another issue around the lack of supply will create challenges for flexibility.

459

So if you have a lease or you own a home today, you're in a great spot.

460

If you are looking for a home or looking for a lease today, there's less to choose from.

461

So that will also put additional pressure on demand, which could increase or keep pricing

elevated uh in housing.

462

And I think lastly is regulatory.

463

Markets and states and cities are looking at all these things differently.

464

Some of it's political, some of it tends to be in line with what the needs or the wants

for that market particularly are.

465

In markets where housing is being approved at a much quicker pace, they've been able to

deal with some of these supply issues.

466

In markets where regulation has kept private capital from creating new housing units, it's

added to sort of the shortage and the issues that you find in those markets.

467

So think those are sort of the big picture kind of

468

macros that will, I think, impact housing or say over the next year or two.

469

All of this activity reshaped the market.

470

Even in areas where corporate landlords owned only 10 to 25 percent of rental homes, their

influence was outsized.

471

They bought properties in cash, often above asking price, setting new comparable sales

values that pushed appraisals and future prices higher.

472

What looked like modest ownership levels produced enormous upward pressure.

473

The incentives were clear, minimize repair costs, maximize rents, and issue more bonds.

474

And the effects were harmful for communities.

475

A 2016 Federal Reserve Bank of Atlanta study found

476

Wall Street landlords evicted tenants at far higher rates than mom and pop owners.

477

15 % at invitation homes, 30 % at Starwood Waypoint.

478

Between individual rental property investors and Wall Street's private equity giants stood

another kind of buyer.

479

Politically connected real estate empires like Jared Kushner's.

480

Kushner, son-in-law to Donald Trump and a senior advisor in his administration,

481

took over Kushner companies after his father, Charles Kushner, was convicted in 2005 on 18

counts including tax evasion, illegal campaign contributions, and witness tampering.

482

He was later pardoned by Trump in 2020.

483

Kushner companies had long dominated the New Jersey rental market, but in the 2010s, it

tapped the EB-5 visa program to fuel a boom in luxury development.

484

The program is a method for eligible immigrant investors to become lawful permanent

residents by investing substantial capital to finance a U.S.

485

business.

486

At the same time, the company expanded its holdings in low-income rentals, drawing

scrutiny for aggressive, eviction-heavy tactics.

487

In 2017, Bloomberg reported the firm was in a distressed situation.

488

That same year, a ProPublica investigation revealed Kushner companies had filed hundreds

of eviction suits in Baltimore, often against tenants who had already moved out or never

489

owed the amounts claimed.

490

Bloomberg's report also identified the company was scrambling to secure foreign investment

to stabilize its finances.

491

Legal and ethical questions followed.

492

In December 2017,

493

federal prosecutors subpoenaed Deutsche Bank records tied to Kushner companies.

494

Later in 2019, the New York Times revealed that anti-money laundering specialists inside

the bank flagged suspicious transactions involving entities linked to Jared Kushner,

495

including transfers to Russian individuals, but senior executives rejected filing the

reports.

496

Separately, in 2018,

497

The Times also reported that a private equity firm, Apollo Global Management, lent $184

million to Kushner Companies, and banking giant Citigroup lent Kushner Companies and one

498

of its partners $325 million.

499

This is Jesse Drucker, one of the investigative reporters that broke the story with CNN's

Anderson Cooper.

500

Right, so there's two different loans that we wrote about.

501

One of them is from Apollo.

502

which is a big private equity firm and one of the founders of Apollo, an executive there,

guy named Josh Harris who over the course of the year last year had a number of meetings

503

with the White House, including meetings with Jared Kushner, including meetings about a

possible job with the administration.

504

Now, he didn't get a job with the administration, but in November of last year, Kushner

companies got a $184 million loan from Apollo.

505

And by the standards of both Apollo and Kushner companies, that is a very sizable loan.

506

It's basically triple the size of the average loan that Apollo's real estate group gives

out.

507

And it's one of the biggest loans that Kushner companies received all of last year.

508

And it was for an office building in Chicago in which Jared Kushner remains invested.

509

So oh all that talk of Jared Kushner divesting himself or separating himself from his

family's company.

510

he he is still personally invested in that building yet so i think you know this is kind

of a common misconception right so when when jared kushner took the job with the trump

511

administration last year he stepped down from his position as chief executive officer of

the company but he only divested a very small portion of his ownership stake in the

512

company he sold some portions of the state in the company to a trust controlled by his

mother and benefiting his

513

uh...

514

siblings but for the most part he is um...

515

still very heavily invested in customer companies including invested in the building in

chicago that was refinanced with the loan apollo and also invested in a series of bill

516

buildings in brooklyn that we haven't talked about yet which received a three hundred

twenty five million dollar loan from city group last year and that's significant because

517

that loan took place shortly after a white house meeting between jared pushner and the c o

of city group so um...

518

You know, in both instances, you're seeing Jared Kushner meeting with executives in the

White House.

519

And then sometime after those meetings, the um the companies that those executives uh work

for run or help to run are giving very sizable mortgages to his company.

520

And in 2020, Kushner companies received a near record seven hundred and eighty six million

dollars in loans from government sponsored Freddie Mac.

521

with unusually favorable terms, according to ProPublica and WNYC.

522

That money helped Kushner buy thousands of apartments in Maryland and Virginia, raising

conflict of interest alarms given his position in the White House.

523

This was not an isolated story.

524

It was a symbol of what the housing market had become, a system where proximity to power,

leverage, and influence increasingly determined

525

who could own and who could be owned by the market.

526

The result wasn't just economic displacement.

527

It was psychological, a slow unraveling of faith that a home could be a stable ground

again.

528

After 2008, the Federal Reserve kept interest rates near zero for nearly a decade.

529

But cheap money didn't flow to workers.

530

It flowed to investors.

531

Average Americans couldn't compete with all cash bids.

532

algorithmic buying or private equity capital.

533

Between 2010 and 2020, corporations spent $6 trillion on stock buybacks.

534

Wages barely moved.

535

Economists called it financialization, the transformation of everyday necessities,

including housing into financial assets.

536

Shelter wasn't a home.

537

It was a return on investment.

538

and the wealthiest 1 % captured nearly all of the post-recession income gains.

539

The 2008 collapse didn't just reshape the economy, it remade the political ecosystem that

governed it.

540

In Washington, Wall Street's influence only tightened.

541

Senator Chuck Schumer, now a majority leader, built his career courting the financial

industry.

542

They actually call him Wall Street Chuck on Capitol Hill.

543

Though he once warned that repealing Glass-Steagall would turn banks into casinos, by

544

Over decades, he fought off oversight measures, protected credit rating agencies,

545

and became one of the largest recipients of financial sector donations in Congress.

546

In late 2007, Congress made its first serious attempt to close the carried interest

loophole.

547

HR 2834, introduced by Representative Sander Levin, would have taxed fund managers'

compensation as ordinary income rather than capital gains, a change that the Joint

548

Committee on Taxation estimated would raise nearly $1.5

549

$50 billion over 10 years and curb offshore tax shifting.

550

The House approved it, but when the reform reached the Senate, Wall Street pushed back

hard.

551

Donations to the Democratic Senatorial Campaign Committee surged.

552

The day before the key Senate vote, private equity executive Frederick Eisenman cut a

$28,500 check.

553

Senator Hillary Clinton declined to co-sponsor the bill.

554

Senator Chuck Schumer insisted that any reform also apply to real estate and venture

capital, a move that broadened opposition and helped stall the effort.

555

In the end, the carried interest provision was stripped out.

556

The loophole survived.

557

The day after the vote, hedge fund manager John Paulson sent another $25,000.

558

The money had spoken.

559

After the 2008 collapse, however, there was no escaping some level of reform which

complicated Schumer's relationship with Wall Street.

560

And as for donors, I mean, you have to call the shots where they see them, where you see

them, and you're not going to make everybody happy, but you have to be guided by what I

561

like to call an internal gyroscope.

562

What's the right thing to do here?

563

And there are some on the right who say don't do anything or do very little.

564

That would let the crisis happen again and the same problems we have today would repeat

themselves.

565

There are some on the left who just want to be vindictive, nasty, punitive.

566

Let's just take out a knife and cut these guys.

567

That's not going to accomplish anything.

568

But if you're smart about this, you can come up with reform that will prevent this from

happening again, will make New York and Wall Street stronger.

569

And I have to tell you, lots of the smart people on Wall Street and the forward-thinking

people on Wall Street agree with this.

570

Meanwhile, lobbyists like the notorious Jack Abramoff exploited one of Washington's

greatest weaknesses.

571

Thinly staffed congressional offices, overwhelmed by legislation they didn't have the

capacity to write.

572

Corporations didn't just influence policy.

573

They literally authored it, and Abramoff was their maestro.

574

When we would become friendly with an office and they were important to us, and the chief

of staff was a competent person,

575

ah I would say or my staff would say to him or her at some point, you know, when you're

done working on the Hill, we'd very much like you to consider coming to work for us.

576

Now, the moment I said that to them or any of our staff said that to him, that was it.

577

We owned them.

578

And what does that mean?

579

Every request from our office, every request of our clients, everything that we want,

they're going to do.

580

And not only that, they're going to think of things we can't think of to do.

581

During the Bush years,

582

He became one of the most powerful lobbyists in the Capitol, a political operative who

understood that access was currency.

583

In 2001, he was appointed to the Bush administration's transition advisory team for the

Department of the Interior, where he quickly forged a close relationship with incoming

584

deputy secretary, J.

585

Stephen Gryles, a connection that would later sit at the center of federal corruption

probes.

586

A draft report by the House Government Reform Committee revealed just how far Abramow's

reach extended.

587

We probably had very strong influence in a hundred offices at a time.

588

Come on.

589

A hundred offices.

590

In those days, I would view that as a failure because at least 335 offices that we didn't

have strong influence in.

591

There, he's referring to congressional offices that he owned.

592

Within the White House, his billing records and emails documented 485 contacts with White

House officials over just three years.

593

Ten with Karl Rove alone, President Bush's top political advisor.

594

Of those interactions, 345 were in-person meetings, 70 were phone calls, and 69 were

emails.

595

This wasn't just lobbying, it was saturation, an industrial scale

596

presence designed to shape policy before the public even knew what was being drafted.

597

Abramov's empire collapsed in 2005 when investigators uncovered a sprawling scheme

involving Native American tribes seeking to develop casino projects.

598

Abramov and his partner Michael Scanlon collected more than $85 million in fees, grossly

overbilling their clients while secretly sabotaging them.

599

lobbying against the very tribes they represented to force them into paying more.

600

The corruption spread outward.

601

Illegal gifts, campaign contributions, and favors traded for legislative action.

602

Representative Bob Nay of Ohio, aides to Majority Leader Tom DeLay, and a constellation of

congressional staffers were implicated.

603

By 2006, Abramoff pleaded guilty to mail fraud,

604

tax evasion, and conspiracy to bribe public officials.

605

He received a six-year federal sentence.

606

In total, 21 people, including White House officials Grylls and David Safavilla, were

convicted or pleaded guilty.

607

Abramov never touched housing policy, but his scandal exposed a government increasingly

outsourced to private interests, where corporations could write the rules meant to

608

restrain them.

609

That same culture of deregulation, influence, and policymaking for profit helped create

the environment where predatory lending flourished and the housing market became ripe for

610

exploitation.

611

Then came Citizens United VFEC, the 2010 Supreme Court 5-4 decision that declared

corporations could spend unlimited money on political speech.

612

The majority opinion was written by Justice Anthony Kennedy, who wrote,

613

Political speech is indispensable to democracy, which is no less true because the speech

comes from a corporation.

614

In the dissenting opinion by Justice John Paul Stevens, he argued that the majority ruling

threatens to undermine the integrity of elected institutions across the nation.

615

The path it has taken to reach its outcome will, I fear, do damage to this institution.

616

A democracy cannot function effectively

617

when its constituent members believe laws are being bought and sold.

618

In practice, Citizens United meant something simple and devastating.

619

The loudest voice in a democracy would belong to whoever could spend the most.

620

The impact was immediate.

621

During the 2008 election cycle, the last before the ruling, outside spending totaled about

$574 million.

622

By 2012,

623

it had more than doubled to nearly $1.3 billion.

624

By 2020, it hit $3.3 billion, and by 2024, approached $4.5 billion, most of it funneled

through super PACs.

625

Corporate money didn't just enter politics, it drowned it.

626

And as capital surged into Washington, housing, once understood as the bedrock of American

stability,

627

became just another asset class.

628

By the early 2010s, homeownership slipped from 67 % to 65 % and kept falling.

629

Millions of Americans, especially millennials, were locked out entirely.

630

Rents soared.

631

Institutional landlords tightened their grip.

632

Homes were bought sight unseen by investors, sometimes not even by humans, but by

algorithms.

633

The American dream, work hard, buy a home, build a life, collapsed.

634

Over mobility stalled.

635

The Great Recession had been sold as a freak accident of financial engineering.

636

But the longer we look, the clearer the truth became.

637

It was the predictable outcome of decades of policy decisions that privileged capital over

community, speculation over stability.

638

The crisis didn't end.

639

It morphed.

640

And unless we confront the financial machinery and corrupted politics that created it, the

next collapse isn't hypothetical.

641

It's scheduled.

642

And in that catastrophe, the divide will be expansive.

643

The 2008 crash should have been a reckoning, a warning about deregulation, concentrated

power, and markets left to govern themselves.

644

Instead, it became a blueprint.

645

The same institutions rescued with public money began buying the very homes families had

lost, transforming entire neighborhoods into corporate portfolios.

646

And from those acquisitions emerged a new model, built to rent.

647

Subdivisions built not for ownership, but for permanent tenancy.

648

Privatization seeped into everything.

649

Housing, infrastructure, even farmland.

650

Airbnb turned spare rooms and entire neighborhoods into investment strategies.

651

Developers rebranded corporate subdivisions as communities.

652

Investors bought the soil beneath the country's food supply.

653

And so a question that haunted the nation a century ago rose again.

654

What becomes of the public good when everything, every need, every home, every acre is for

sale?

655

But this time we didn't resist.

656

Decades of messaging had trained us to admire wealth, to shield the powerful, and to

believe, often against all evidence, that with enough grit or luck, we might someday join

657

them.

658

In the land of the free, everything has a price, and life itself will cost you something.

659

In the next episode, we'll trace the rise of the privatization movement, we'll unpack how

built-to-rent communities grew from foreclosure auctions into billion-dollar assets,

660

and how the same logic is reshaping our neighborhoods and our farmlands.

661

Not everything should run like a business.

662

And when we forget that, the cost isn't just economic, it's human.

663

Next time on Build to Divide.

664

We believe that there's a need for trillions of dollars investing in infrastructure

related to power grids, AI, the whole digitization of an economy.

665

Thanks for listening.

666

Built to Divide is presented by Lines, my architecture and creative studio.

667

This podcast is produced in collaboration with Gable Media.

668

If you enjoyed the show, please tell a friend and rate and review it on Apple podcasts and

Spotify.

669

It really helps others find it.

670

And if you're looking for similar content, Built to Divide is part of the Gable Media

network where you can find even more like this.

671

Visit gablemedia.com.

672

That's G-A-B-L media.com.

673

And before I go, if you want to see additional photos, video clips and content that went

into this episode, you can visit me at lines.studio slash podcasts.

674

Talk soon.

675

you