econlife - What Happens When Landlords Don’t Receive the Rent by Elaine Schwartz

Our story starts with Emily. After the Philadelphia restaurant where she works laid her off, she had to cut her rent payment in half. Jobless, she could not afford the whole amount.

That takes us to Emily’s landlord, to his mortgages, and eventually to the Fed.

The Rent Nonpayment Path

Because an estimated 40 percent of all apartment dwellers in New York City cannot afford the rent, there could be two million unsent or diminished checks. Like Ed Edge, Emily’s landlord, the city’s building owners are small businesspeople. Ed said he had 14 tenants in four buildings that normally send him $9,300 a month. However, after the pandemic layoffs, at $4500, his first checks were close to half of what was due.

Ed owes $8,000 each month for the mortgages that finance his rental units and some renovation debt. Here, as the source of his mortgages, Wells Fargo and a company called New Rez enter the picture.

But this is just the beginning.

Mortgage Securities

Next, we need “mortgage servicers” to collect the payments from people like Ed. At the same time, groups of mortgages are combined in (what I call) “packages.” They then are bought by investors whose return is based on the mortgage payments.

Oversimplifying, let’s just say that our path took us from…

• Emily the renter,
• to Ed the landlord,
• to Wells Fargo the mortgage provider,
• to mortgage servicers that collect payments from homeowners and landlords,
• to investors buying “packages” of mortgage securities that pay interest.

Now, because of the pandemic, there might be one last step along our path.

Our Bottom Line: The Federal Reserve

Knowing that investors would not get paid because people like Ed canceled autopay to mortgage servicers, the Federal Reserve has said it will purchase mortgage securities. Through the Fed’s CMBS (commercial mortgage-backed securities) Program, they are buying bond “packages” worth billions in the open market.

During the week of March 30, the New York Fed bought commercial mortgage-backed securities worth $1.03 billion. The Fed said that their purchases would continue.

So, we have Emily who could be eligible for unemployment money through the CARES Act and the owners of commercial mortgage-backed securities getting Federal Reserve dollars. We could say that the beginning and end of our path are rather similar.

My sources and more: For the pathway that links the renter to the mortgage security, Planet Money, this NPR newscast, and City Lab had the details. Next, do read this Reuters article for how the Federal Reserve is stepping in. (Our featured image is from Bloomberg via City Lab.)

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - The Cash We Love to Stash by Elaine Schwartz

Each year, the Federal Reserve decides how much cash to print. The new bills are primarily used to replace whatever is too tattered or worn out. Meanwhile, the old ones are withdrawn from circulation.

Below you can see the Fed’s 2018 print order. Only the $20s exceed the new $100s they are creating this year:

Why We Want $100 Bills

The $100 bill just became the most popular kind of cash. For years, the dollar was in the lead. No longer:

For many reasons, a $100 bill is a handy denomination. Because of the financial crisis and low interest rates, people have more cash. It makes sense that whatever cash we stash under the mattress is in large bills.

Similarly, $100 bills are the note of choice for the “informal,” underground economy. Explained in a Harvard Business School paper, they are universally acceptable, they retain their value, and they are easily transportable. Add anonymity to that list and you get the perfect currency for illegal transactions. Similarly, the $100 bill is ideal for people in countries with unstable currencies.

It is also easy to ship $100 bills. In 2012, The Atlantic said we send pallets, each with 640,000 $100 bills, to destinations outside the U.S. Because financial intermediaries pay for those bills–called seignorage–we make money when we “export” them.

Finally, you might be thinking that we live in a digital age. However, people do want to continue using cash–more so in some places than others:

Our Bottom Line: What is Money?


Small rectangles made of cotton and linen, sea shells, or massive stone disks are considered money if they have three characteristics:

• A medium of exchange: People accept it as payment.
• A unit of value: People know what it’s worth.
• A store of value: Its purchasing power is relatively stable over time.

Like the $100 bill, these huge limestone disks on the Micronesia island of Yap have also functioned as money.

My sources and more: Quartz reminded me it was to look again at the $100 bill and at who uses cash. From there, you might want to see the Fed’s money order and more about the Yap. But returning to the $100 bill, The Atlantic and this HBS paper had the detail.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.