Slashdot Mirror
Data Centers Crucial To Lehman Sale
miller60 writes "What assets retain value in the midst of a financial panic? Data centers. When assets of bankrupt Lehman Brothers were sold to Barclays Tuesday for $1.75 billion, Lehman's data centers and headquarters accounted for $1.5 billion of the value in the deal. That echoes the JPMorgan-Bear Stearns fire sale, in which Bear's two data centers and HQ represented much of the sale price. Amidst financial turmoil, Wall Street's high-tech data centers become the crown jewels for buyers of distressed assets."
Hi! I'm a programmer for Lehman brothers and I'm looking for work. I was the designer of Assett Manager 1.0, a powerful tool that allowed our brokers to get values of our contracts....it's not a bad program, but it had a couple of bugs in it that I would like to have fixed.
This is my sig.
I guess this is one 'disaster' Lehman Bros couldn't failover?
Programs come and go. Information is timeless and valuable.
putting the 'B' in LGBTQ+
Your towel and your thumb.
Use your head, can't you, use your head,
You're on earth, there's no cure for that - S. Beckett
You know what else retains value in the midst of a financial panic? Skyscrapers.
Anytime you have physical assets, you have value. Especially if those physical assets are in continuing demand. (Which data centers are in particular, because the Technology sector is doing quite well right now.)
The only difference is that companies rarely own their own spaces anymore. They sold them off to realty companies long ago, because they didn't want to be in the real-estate business. This sort of sell/lease arrangement is almost certain to become common with data centers in the future. CoLos are already the standard of the industry, and are going to take over increasing amounts of large corporate business in the future.
Javascript + Nintendo DSi = DSiCade
Using Linux could have saved millions. ;) :P
Is it any surprise that the most valuable assets in a company that is going down the tubes would be its physical assets, real estate, etc? The summary itself says data centers AND HEADQUARTERS. What a shock that "datacenterknowledge.com" is telling us how valuable and important data centers are. I'm almost tempted to say this is spam, but I can't be bothered to go to the website to learn more about it.
Real estate: billions
Data centers: couple million
What?? I'm sorry, I gotta call your bluff here: [Citation Needed].
Banks *love* electronic retention, because it's zillions of times cheaper than paper retention. I was working on a project in the early 90s for a now-purchased-purchased-purchased bank that was nearly zealous in their conversion from warehouses full of checks and bonds and whatever to WORM-drive archiving of photos of said instruments. It didn't get much trendier (and certainly not 5-10-15 years behind) than that. Pretty much any way a bank can remove people or real estate from the equation they will... barring, of course, sexy corner-lot retail space that a competitor might use.
I deal with a lot of distressed older commercial debt, so I see a lot of the backlog. There are a handful of banks, certainly, that have it right, but there are plenty out there which can't afford the expense of updating to modern data retention, or at least taking care of what is already on paper. There's a ton of paper out there in places like Iron Mountain and such which does nothing but store paper because the bank can't afford to digitize the stuff. You're partly right, at least for the bank you did work with, but I see tons of other material as well that never makes it that far.
As the data which is stored on those servers. Don't you think the financial data for tens of thousands of customers is worth something? Also, physical facilities, HVAC, network infrastructure, etc. Also, a lot of the value of a data center, I suppose (I'm no expert in this field) might be less about the hardware itself, as the engineering that went into building up the data center as a cohesive, integrated system.
People are born with compassion and empathy circuits in our brain for a reason, and those that don't have them or can't use them are seriously handicapped.
you had me at #!
Also, a difference between 'dumb' and 'uneducated about financial matters.' Is there a class on ARMS in high school people can take? I don't think those are covered in home ec.
People can't be experts on every field. Add to that fact that finances bring up survival fears in most people, and fear shuts down the brain, and you will see that many people may be smart in many areas, but uneducated about finance.
So people have to trust the experts they hire to do right by them. When those experts say, "Hey, you can own a house now and save that money you were putting into rent. Don't read the fine print, it's boring and it doesn't matter," people trust those experts. And they were misled.
Finally, I know you probably agree with me but I have to point it out: dumb people do not DESERVE to be taken advantage of by smart people. Social Darwinism is an inherently fascist, evil, and anti-social philosophy that destroys societies and people's lives. Don't subscribe to it. Society works because of trust, and social Darwinism destroys that trust.
- None can love freedom heartily, but good men; the rest love not freedom, but license. -- John Milton
First of all, these are unprecedented times in global financial markets. Once in 100 years is putting it mildly.
Second, a data center and a building are the only assets that can be valued with the shotgun marriages the Administration, Treasury, and Fed are making right **now.** By now, I mean no sleep, no one leaves until the deal is closed NOW.
BofA got a sweetheart deal with Countrywide, they are getting another sweetheart deal with whatever brokerage they acquire. The same holds true of JPMorgan Chase and Co.
The Fed has literally run out of money with the AIG nationalization and has asked the treasury to print more dollars NOW. http://www.ft.com/cms/s/0/271257f2-83f1-11dd-bf00-000077b07658.html
Once again, the losses are being socialized while the titans of financial executive management just walk away.
You would be wise to re-balance your asset pool to reflect coming inflation. And any pension holders out there should do your best to liquidate your pension today, that is, if your pension isn't underfunded already or if that is even possible.
http://www.maxineudall.com/2010/02/should-economists-be-sued-for-malpractice.html
I have to point it out: dumb people do not DESERVE to be taken advantage of by smart people. Social Darwinism is an inherently fascist, evil, and anti-social philosophy that destroys societies and people's lives. Don't subscribe to it. Society works because of trust, and social Darwinism destroys that trust.
Quoted because it deserved to be posted twice.
No sig for the moment.
No, you're mixing two separate things up. If you don't understand ARMs that doesn't make you dumb. But if you then buy one and you don't understand them, that definitely makes you dumb. What the hell?! A mortgage is a huge commitment. You're going to be paying it back for a long, long time. If somebody commits to a huge thing, turns around and says "Oops! I guess I can't deal with this after all. It was scary and my brain shut down" then I don't see why they are deserving of much sympathy.
No, they were stupid. The risks involved with large debts are enormous. This is way different than being misled by a second hand car salesman and buying a SUV with poor mileage. This is a vast sum of money. If there's one time in your life you read the boring fine print and think about it really hard, it's when taking out a gigantic loan.
Now this I do agree with. However trust can cross a line into blindness. Somebody who does whatever they're told without considering the consequences eventually crosses the line from being a poor innocent misled person into something else - a liability to society.
Intellectual property. Why just last Friday I patented "A business process and related methods to leverage instability in financial markets and raid the US treasury."
I don't expect to deploy the process myself, but licensing should be worth a good bit.
Help stamp out iliturcy.
y = (1 + x)^N
It's the function which describes the growth of a debt due to interest.
Here's the function which describes the growth in the money created at exactly the same moment, when the loan is taken out.
y = x
You notice one is exponential, the other isn't in fact growing at all.
That is the Fractional Reserve Banking based monetary system. I'll let you work out the implications.
Deleted
I am an investment banker and can say with confidence that the datacenters were an afterthought in this deal. Important? Certainly. The most important? a joke. Bob Diamond and Barclays have wanted to extend its US investment banking business for several years, and found an opportunity to grab one at a fire sale. But the true value of the deal is enormously larger than listed, as it involves taking on assets estimated (with confidence, I'm sure)at $72 billion and liabilities of $68 billion. I'd recommend reading http://www.ft.com/cms/s/0/5c9dcc26-83f1-11dd-bf00-000077b07658.html?nclick_check=1 to inform yourselves about the transaction.
As to the Bear Stearns datacenters comprising the bulk of the value - that is about as wrong as you can get. The breakup fee (the fee paid to JP Morgan if the deal did not go through) was the building. JPM could have walked from the deal and gotten the builing, so to argue that the deal was for the building/datacenter is absurd. Let's not forget that the Federal Reserve alone lent $29 billion for the transaction. Datacenters are valuable, but not worth that amount of money.
Here's the real problem. Everything the banks have lent money to people to buy are kinda valueless because they are obsolete. Technology keeps advancing such that there is no such thing as collateral any more and thus all the banks are worthless...
I was under the impression that houses were the main cause of the problem- and with the possible exception of some ludicrously techie piles built by multi-billionaires, they aren't really "tech" items and they certainly don't go obsolete within four or five years.
Even though cars (which I'd guess are probably second in terms of loan-spending) only last a few years, it's generally not because the tech goes obsolete, it's because they wear out and/or fall apart. (I'm sure that my parents first car (built in the late 1970s) would still be going today with some engine adjustments for unleaded petrol, except that its rusting to pieces by 1986 precludes this possibility!)
Granted, I'm sure that people take out more (and less justifiable) loans to spend on tech crap than they should- along with home decorating and expensive holidays- but I doubt it's the driving force behind the current economic mess. In fact, moderately cutting-edge tech is *dirt cheap* compared to what it used to be twenty- and even in some areas ten- years ago. People can fill their new homes with techie crap which will generally still be worth a small fraction of what they paid for the house itself. Yeah, the house will last longer and can be considered an "investment" in the way that electronics technology almost never can. But the value and losses involved when that "investment" goes wrong dwarfs the cost of most peoples' boxes of flashy boys' toys.
"Slashdot - News and Chat Sites Deviant". (Click "homepage" link above for details).
I agree with your general point:
they were misled. ... dumb people do not DESERVE to be taken advantage of by smart people.
But I still should point out that:
-Any taken-advantage-of borrower requires an even-more-taken-advantage-of lender. The borrower gets to walk away, at least having a gained some time in a home they shouldn't have moved into, while the lender suffers a huge loss. (Of course what actually happened here was the immediate lender, a broker, pocketed a huge gain and dumped it on other investors.)
-The problems were by and large not with the fine print. They were problems like, "I didn't know that adjustable rate mortgages adjust" and "I can't actually afford the monthly payments".
Btw, I think a large part of the problem could have been avoided with a very light regulation: label as "dangerous" any mortgage other than a fixed rate, 20% down, 30-year, fully-amortizing, non-recourse, no-prepayment penalty. Then, require it to be authorize by a rubber-stamp government agency that approves everything it gets, but after taking three weeks to get back to you. That adds a huge psychological barrier to non-savvy buyers, effectively steering them away from unsafe mortgages, while not making much of a difference to people who know what they're doing.
Information theory is life. The rest is just the KL divergence.
Um no. Though houses, businesses and commercial real estate are worth less due to market conditions, they are certainly not valueless.
:)
If you think your house isn't worth anything I'd be happy to buy it for twice that price
If you can read this... 01110101 01110010 00100000 01100001 00100000 01100111 01100101 01100101 01101011
Quoted because it deserved to be posted three times.
Well.. maybe. Or Maybe not. But Definitely not sort of.
-Any taken-advantage-of borrower requires an even-more-taken-advantage-of lender. The borrower gets to walk away, at least having a gained some time in a home they shouldn't have moved into, while the lender suffers a huge loss. (Of course what actually happened here was the immediate lender, a broker, pocketed a huge gain and dumped it on other investors.)
I love how you gloss over this statement in parenthesis as if it's a minor point. The situation that occurred is that predatory lenders issued ARM mortgages to people that they knew would be unable to pay for them. Keep in mind, the issuing bank has a full financial report of the borrower's income, debts, and credit history. These bankers then offered deals such as "you can have a fixed rate mortgage, but you'll need a $10k down payment, but if you get an ARM, we can do it without a down payment!" I live in Tennessee, and by and far this state is not as hard hit as some others. One of the reasons is that we have protective lending laws. In this state, you cannot get a mortgage without a 10% (IIRC) down payment. That may seem unfair to those who cannot afford the down payment, but it's for their own good; if they can't afford the 10% down, odds are they cannot afford the mortgage, and a bank should be prevented from signing them into a contract they cannot afford to pay off.
Picking up the spoils of a catastrophe they were instrumental in causing. What a bunch of dicks.
They weren't instrumental in causing it. They just chose not to rescue them out of fear of the damage that lehman's debt could cause barclays. And they had good reason. There was no way to evaluate the risk level or value of lehman's toxic debt. Their actions were just good business.
Disconnect your television. Do your own research. Draw your own conclusions. They're probably lying. Don't be a sheep.
Actually, Barclays was in talks with the Treasury Department. When the Treasury Department declined to cover Lehman's liabilities, Barclays decided that Lehman's liabilities exceeded the value of its assets.
There is nothing disgusting about that. That is just business. Lets use a car analogy. Last month you were talking to someone about buying their car. It was worth $5000 but they still owed $6000 on it. They offered to let you have it if you took over the loan payments. You declined. Today the bank has repossessed the car and is offering it for $3000. There is nothing disgusting about you buying the car at that $3000. This just happened faster.
The truth is that all men having power ought to be mistrusted. James Madison
Take the infamous NINJA loan: No Income, No Job, No Assets. That is, you're given a mortgage based on nothing but good looks and your credit score. Nothing else is verified
Thanks to these NINJA Loans this month it will be 5 years since I live in my own house. I may have never gotten out of renting without them since I wasn't good with money, my credit score sucked and had no assets besides my computers and car (following George Carlin's leadership, the rest of my paychecks went to pussy and beer)
The best call I made was buying the cheapest decent house ($124k) I could afford so my mortgage ended up just $100 more than what I was paying for rent. The builder told me I could qualify for a big ol' house twice that amount but I resisted. I am glad I did, I have been able to comfortably pay all my bills even on rainy days.
HTML is obsolete. It's time for a new, simpler and richer markup language.
Most people seem to place the blame with Lehman's CEO
This post climbed Mt. Washington.
For people who are still struggling to understand what's going on with the whole financial crisis, here's a great primer I was directed to: Subprime Primer.
It's a very simplified explanation of what's happened. From what I understand, it all comes down to everyone believing that real-estate value wouldn't stop rising.
This space up for sale.
From what I understand, it all comes down to everyone believing that real-estate value wouldn't stop rising.
That's a pretty good summation for parts of the country (e.g. the Washington D.C. area, probably areas like California too). Essentially, in W.D.C, people said "Well, the gov't is here, and so jobs are guaranteed. So housing will always go up." The problem is when it goes beyond where the base market can buy.
There's also another issue though - there were a lot of banks, etc. that issued bad mortgages outright. For example - the high school graduate students that moved into my parent's neighborhood - no jobs, but they got a mortgage, and eventually ended up in foreclosure. Of course, the city of Columbus, OH had some issues too politically as they tried to "clean up" downtown by moving the "poor" out into new housing (helping to get the qualified for loans they shouldn't have had) elsewhere in the state - e.g. by my parents, and other places in the Greater Columbus, OH area. For them, the politics work out good - their constituents are happy, and those people are now "someone else's problem" (literally), so it is hard to hold them accountable (their district was improved while someone else's was deteriorated).
Another good example - my wife and I were looking at buying a house in 2006. In getting pre-qualified, we looked at Washington Mutual and several others. Because we did not have a large-enough down-payment available (we had closing costs) at that time, WaMu was going to give us a double loan so we didn't have to have PMI (mortgage insurance). The first loan would be the mortgage itself, and the second was to become the down payment. We didn't really like it; but they were going to let us do that. We ended up not buying that year, and have since moved and bought a house through BB&T, with a better loan - only one loan too.
All-in-all, it was not just one issue that caused the problem.
Truth is like the sun. You can shut it out for a time, but it ain't goin' away. - Elvis Presley (source: imdb.com)
The problem is that something is only worth what someone will pay for it... and nobody is buying. Lack of liquidity is the real driver of the problems many of these banks and investment houses are seeing.
Um no. Though houses, businesses and commercial real estate are worth less due to market conditions, they are certainly not valueless.
Part of the problem is that the assets that have dropped to nothing are not the homes themselves. They are securitizations of the loans issued to buy these homes. If you own such a securitized loan, you can't go to the 1000 homeowners that back it and say "hey, let's work something out." You can either sell it for pennies on the dollar or hold on.
"Nature doesn't care how smart you are. You can still be wrong." - Richard Feynman
I'm not a mortgage broker, nor a banker, but this is how *I* approached buying a house:
- I spend $40 on a 'first-time homeowner's class'. Worth 10 times that. I learned about PITI, interest rates, amortization schedules, and had a memorable class (1 of 8) with a Realtor who warned us that real estate brokers were not our friends, and Realtors were the best of the bunch (something to do with the name and ethical promises that they broke less often than merely licensed brokers) and we should watch THEM just as carefully. He was right, except for my first broker.
- Assisted my GF in 2001 in buying her first house. Read the loan documents several times, and then explained to her in English what they meant. check the interest rate (fixed), the schedule of payments (all the same except for the last one, about $5 off) and the general terms (no balloons, no adjustments, nothing wierd). She still has the house, and is damned lucky. It didn't work out between us, but that's not the point of this little ditty. I easily spent 10-15 hours understanding the load, being my first, and focusing on much stuff that isn't important like state law regarding defaults, boilerplate about terms and conditions, etc.
- Assisted my wife in both selling 2 houses and buying another. The sales were painful, since one had to be completed after we moved cross-country. But done. Again, in buying, we got a NINJA loan, and again I read everything and explained it in English - fixed rate, level payments, no tricky stuff. The first loan we got presented to us was an 80/20, ARM, IO. this was in Phoenix in 2005, the height of the market here. We had plenty of down payment, didn't want an ARM, and didn't need interest-only, since we were buying an income property to hold. Told the broker the next time she pulled that we would be looking elsewhere. No problem, no more jokes, we got it. Probably spend 4 hours reading over the loan, now knowing what was important and what could be deferred.
- A year later, we refinanced, to change the interest rate. Again, going over the documents, same drill. This time, I paid extra-close attention, being a refi, and ti did take three tries to get various stuff right, like avoiding PMI since we had 30%+ equity, and still they screwed up the escrow afterwards.
I can see where a first-time buyer could easily look at a house, hear about deals, call a broker, get hooked up with their 'mortgage guy', and shown a loan for so little money that they have to buy, it's "cheaper than renting"! Never look at the details, never see a payment amount 3x what they thought it would be in a few years, and yeah, when the statemnet comes in and their $1150 payment turns into $3700, they probably soil themselves. And can't figure out how it happened. And call the bank and ask what error they made, and find out they were scammed. Do they hope for a handout from the government? I bet many do. By this standard, we would be spending a LOT of money bailing out people who were scammed. Sadly, while I sympathize, buying a house is the biggest transaction most people ever make in their lives. And many spend more time choosing their next party dress or table saw than they do checking their next mortgage.
My front tenant went through a different travail. He had an ARM, but expected to refi in plenty of time. That was in 2006 in Phoenix. In 2007, he found out the market was in the dumper, he owed 20% more than the house could be sold for, and wasn't going to get refinananced. His payment went from $1500 to $4200. He moved into my front unit and left the keys to his house with the bank. Timing on his part, and he just got caught in the grinder. Plenty of people did that too. He doesn't expect a handout from the government. he just hopes to be ok in 5-7 years.
Cruel to say they oughta pay the price? Somehow Darwin is celebrated but his theory is selectively applauded.
Now, if you look carefully, you will find that the FBI has 19 mortgage fraud investigations open, 3 in the las
deleting the extra space after periods so i can stay relevant, yeah.
I live in Tennessee, and by and far this state is not as hard hit as some others. One of the reasons is that we have protective lending laws. In this state, you cannot get a mortgage without a 10% (IIRC) down payment.
I'm in WV and to get a loan that isn't through the Federal Housing Administration (an FHA loan) you have to have 5% down but you pay PMI. You have to put down 20% to not pay PMI. If you *do* get an FHA loan then you only need 10% down to get out of PMI but around here (north-central WV) I got info last year about this time on minimum down payments for a mortgage and as of that time no one was changing their lending practices in the area: they still were only requiring 5% down. I haven't looked into it lately despite still being in the market to buy a house just because I haven't yet got far enough into the process of buying one to find out the mortgage requirements in-depth.
this nation, under God, shall have a new birth of freedom. -- Lincoln, Gettysburg Address
You are making the posters point:
"A mortgage is a huge commitment. You're going to be paying it back for a long, long time" means it is scary, because you can't foresee the long, long future you are making a commitment to.
Also, this argument was countered by clever sales people, saying, well you are taking a 30 year mortgage, but you are staying only (on average) for 5-7 years in the house. So what do you care about the interest rate for longer than that time period (balloon loan?). So average people got lured by false argumentation to they overcame their fear.
Busy helping non technical users of OpenOffice.org - http://plan-b-for-openoffice.org/