Reborn Tokyo Golden Age

Of course, the first to suffer from the plummeting housing prices in Neon are the major real estate companies.

Because all businesses basically come from land, they will also face the impact of the housing market crash.

The scene that happened at the Toranomon Building is almost a true portrayal of small and medium-sized real estate companies today.

Think about it, the prices in many popular areas have been cut in half.

Such an outrageous price gap can directly cause many real estate companies to declare bankruptcy.

According to economic theory, if house prices fall by more than 10%, it can be called a house price crash.

If the drop exceeds 30%, it is capitulation in house prices.

The capitulation of house prices is also called panic selling. Now Neon is in one step and is currently at this stage.

In just a few months, Neon has gone through three cyclical stages of housing price adjustment, housing price collapse, and housing price capitulation.

Because this process is so fast, most people cannot react in time.

This includes banks, real estate institutions, businesses, and ordinary individuals.

The remaining value of the land after the collapse was less than half of the previous bank loans.

There is no doubt that real estate institutions are facing the crisis of bankruptcy, and the entire market is in turmoil.

The slightest disturbance can cause everyone to panic.

Faced with such a frightening situation, some clubs chose to surrender directly and start bankruptcy procedures.

Some clubs are working hard to save themselves, going to banks for loans and going to the market to sell their remaining land at low prices in an effort to collect funds.

However, in the face of the collapse of the property market, banks will probably not give them such an opportunity.

As long as it is insolvent, the bank has the right to call in its loans early.

But it is obvious that real estate clubs and companies at this time have no spare capacity to pay loans, so the outcome waiting for them is still likely to be bankruptcy.

Faced with the collapsing property market, this is the choice of real estate clubs, companies and other institutions.

What about ordinary people? Either repay a lifetime loan that is higher than the value of your house, or simply cut off the payment.

But no matter which path, it is not a good thing for ordinary people.

Just look at the streets of Tokyo at this time. The number of homeless people has increased significantly.

They are all people who cannot afford to pay off their mortgages or have become homeless after divorce in order to avoid debts.

But this is just the beginning. It may take some time for the impact of the collapse of land prices to be passed on to ordinary people.

But there is no doubt that whether real estate companies are in crisis or ordinary people cut off their mortgage payments, their choices have directly brought a large amount of bad debt to banks.

Because land has become worthless, banks face the dilemma of not being able to collect their loans using land as collateral.

These unrecoverable loans become bad debts and non-performing assets of the bank.

Not to mention off-the-book earnings at this time, they have all gone up in smoke.

Because of the emergence of large amounts of non-performing assets, problems are constantly emerging within the bank.

The previous financial scandals are not over yet, real estate shocks are coming one after another, and now everyone in Neon's major banks is in danger.

In 1991, according to a survey of 21 banks conducted by the Ministry of Finance, the cumulative bad debts due to a series of impacts on the banking industry reached US$110 billion.

One-third of this is related to real estate, and now is the beginning of the land impact, and house prices will continue to fall in the future...

Facing the chaotic current situation, I don’t know what the bank bosses who supported Miyazawa Kiichi thought after they rejected it at the meeting half a year ago.

Maybe they don't care, maybe they regret it, but at this time most banks have no energy left to deal with anything.

Faced with increasing bad debts, some small and medium-sized banks took the lead in teaming up to keep warm.

Saitama and Kyowa Bank are only the first wave. Although they are small local banks, their merger is of great symbolic significance.

This means that the negative impact of the bursting of the bubble has been transmitted to the banks.

Saitama and Kyowa Bank simply cannot bear the consequences of large-scale bad debts due to their size, so they started self-rescue in advance.

From the merger of the two, Shirakawa Kaede can already deduce that other banks must have encountered the same problem.

The reason why there seems to be nothing unusual now is because they can still sustain it for a while.

But it won't be long, especially when Changyin begins to sell EIE's shares. This is a landmark event.

EIE International started out as a real estate company and has a large number of real estate investments around the world.

Hotels, universities, resorts, golf courses, all of these are related to land.

Do you know how much a membership card for a golf course owned by EIE International cost during the peak period of the bubble?

300 million yen!

During the bubble period, everything could be speculated, including stocks, real estate, and golf course membership cards.

At that time, in order to highlight the difference between themselves and the common people, the rich did not go to ordinary golf courses at all.

These top courses developed by real estate developers are the goals they are chasing, and it is best if they are membership-based.

EIE International started selling membership cards eagerly before the stadium was built.

The stadium hasn't even been built yet, and they started selling membership cards. Is this normal?

Is there anything unusual? I haven’t seen off-plan properties everywhere in China, or even people selling off-plan properties directly?

As a result, there are still not a lot of people paying the bill, but EIE International is playing the same trick.

These membership cards have become a rare commodity after being heated up in the market, and they once became short-term financial products.

At that time, American officials from abroad who came to Neon for inspection heard about the sky-high price of 300 million yen, and they once thought it was the price of a golf course.

There are many strange phenomena in the crazy period, but now the price of EIE International's golf membership card has dropped to hundreds of thousands of yen, and no one cares about it.

The reason for this huge difference is because the golf courses at EIE International are in ruins.

Before the property market collapsed last year, EIE International was already at risk of a rupture of its capital chain.

The collapse of the stock market is the inducement, and the fundamental reason is that our own front is too long.

Now that land prices have collapsed, EIE International is in danger.

Faced with this situation, as its main bank, Changxin Bank should be actively rescued.

But at this time, Changyin itself was unable to protect itself, so how could it spare any effort to save EIE International.

To put it bluntly, Changyin gave up its rescue of EIE International and sold 20% of the stocks it held. This was a move to save the company.

In 1986, Harunori Takahashi of EIE first approached Changyin to apply for a loan of US$350 million.

Changyin headquarters clearly knew that the figures reported by EIE were too inaccurate, and even lacked project details.

But it still agreed to the other party's application and started lending.

The reason why this scene happened is because EIE mentioned purchasing a large amount of land when applying for a loan.

At that time, banks only considered one thing when giving loans to other institutions: whether the collateral was real estate!

Facing the doubts from local branches, Changyin headquarters responded very simply: It is ridiculous to worry about cash flow or rate of return. That is what Americans do.

So with the tacit approval of the headquarters, EIE loaned US$8 billion from Changyin in just four years, totaling 1.1 trillion yen.

All of this money was used by EIE to purchase real estate frantically around the world. As the value of land increased, Changyin's assets swelled to US$300 billion.

However, all efforts came to nothing as land prices plummeted.

Not only is EIE International unable to repay its loans, but Changyin’s originally inflated assets have now become a drag.

Coupled with the double whammy of the stock market, banks' cash flow has begun to show signs of drying up.

Even under such circumstances, the Ministry of Finance still prohibits banks from cutting off loans at will and forces big banks to rescue small financial institutions in distress.

This model originated from the main banking system of the post-war economic recovery, which is the so-called "convoy" model in the banking industry.

It ensures that financial institutions and real enterprises will not go bankrupt, and banks will provide support to them in the event of a crisis.

The same model also applies to small banks and large banks.

In other words, the market law of survival of the fittest does not apply to Neon's banking industry.

Judging from modern market experience, this rigid model is undoubtedly backward.

But this is neon, and the power of conservatism is often beyond the imagination of outsiders.

However, under the pressure of the Ministry of Finance, Changyin continued to support EIE for nearly a year and now has to give up.

The reason why Changyin ignored the orders of the Ministry of Finance was because it found that EIE was simply a bottomless pit.

Because the stalls are too large, many of EIE's real estate developments around the world are still in the construction stage.

If the capital chain is broken, there is a risk of work being stopped and unfinished. If you want to complete the project as soon as possible and realize cash out, you need continuous capital investment.

After taking the lead in EIE, Changyin also tried to invest a certain amount of funds.

However, Neon's current real estate market is destined to make all previous investment in vain.

So after some internal deliberation, Changyin decisively announced that it would give up its controlling stake in EIE.

The bad debts generated within EIE Changyin alone are as high as 1.5 trillion yen, and the bad debts generated in other fields are also about 2.8 trillion yen.

In other words, Changyin's bad debts at this time have reached as high as 4 trillion yen. This number has even dragged Changyin itself into a place of no return.

Of course, as Neon's first-class bank, Changyin is still covering the lid, and its bad debts have not been exposed.

But others don’t know Chang Yin’s situation, Shirakawa Kaede and Arai Yu do.

Why did he deliberately detonate the neon real estate bubble in advance? Isn't it just for this day when the sea will be full of change? Otherwise, who will do the thankless work?

Starting in 1986, Shirakawa Kaede ordered Yu Arai to secretly collect information on major banks.

Because most of them are listed banks, their investment in the real estate industry can be roughly estimated from their annual financial reports.

Based on the market conditions in the past few years and the information from major real estate agencies, these calculated figures are basically close to ten.

Changyin's actual loss was 4 trillion yen, and Shirakawa Kaede and others concluded that it was about 3.6 trillion yen.

But whether it is 3.6 trillion or 4 trillion, there is no doubt that this number is beyond what Changyin itself can bear.

Because according to the intelligence collected over the years, Changyin's own loan business is only 11 trillion in scale.

The identified bad debts amount to RMB 4 trillion, accounting for about one-third of the total business, not counting other bad debts.

If nothing unexpected happens with such a high bad debt rate, Changyin’s final outcome will not be too good.

And now Bai Chuanfeng plans to continue to speed up this process. If Changyin is not dead, how will Beidu Bank complete the upgrade?