Ryan Grim, the Washington, D.C., bureau chief for The Intercept, along with commercial mortgage-backed securities expert John Flynn, warn that widespread inflation on the value of commercial business when applying for loans could cause a repeat of the 2008 financial crisis spurred by the implosion of the housing market.
In a Tuesday interview on Hill.TV’s “Rising,” Grim outlined his recent piece that included findings from Flynn and other researchers that some banks issuing loans have inflated the value of businesses, including Dollar General, in exchange for lower interest rates.
Flynn said Tuesday that lenders are the ones overstating the income, and that businesses applying for loans may be unaware of the inflated incomes reported for their properties.
Nevertheless, Grim pointed out that what is happening is “very similar” to what Wall Street saw in 2008 with the residential mortgage-backed securities based on loans for homes.
“There’s almost nobody around who’s harmed by it as long as… prices keep going up, as long as the economy keeps booming, as long as the music is playing, everybody wins, except, of course, people who aren’t benefiting from these lower rents,” Grim explained.
“If Dollar General is getting lower rents, that means they’re able to charge lower prices for their products, and if you’re a mom-and-pop nearby that is dealing with a bank that’s actually asking you to state your income accurately, you’re going to be at an unfair competitive disadvantage against them,” he added.
Watch part of the interview with Grim and Flynn above.
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