Elizabeth Warren Says to Expect Commercial Real Estate Trouble

[mod mom]

NVESTMENT BANKING
Warren Says to Expect Commercial Real Estate Trouble
March 30, 2010, 4:50 AM

Elizabeth Warren, head of Congressional oversight for TARP and a major backer of the idea of a consumer protection agency, told CNBC on Monday that the U.S. economy still had a hard road ahead.

“By the end of the year, about half of all commercial real estate loans are gonna by underwater, and they are concentrated in the midsize banks,” she said. (Short-sellers, at least, may have something to look forward to.) “We now have 2,988 banks that have these dangerous concentrations of commercial real estate lending.”

She said that the banks’ exposure to shaky commercial real estate would have two upshots: 1) since they were already suffering since the subprime crisis, their stability might be affected; and 2) the midsize banks “are the banks that are supposed to be doing small business lending, and when they’re getting a sock in the teeth over over commercial real estate loans, they’re not in a position to be lending to small business,” Ms. Warren told CNBC.

“I think we have another very serious economic problem that we’re going to have to resolve in the next three years,” she said.

Asked whether things would return to normal this year, she responded: “I don’t think so.”

-snip

http://dealbook.blogs.nytimes.com/2010/03/30/warren-says-to-expect-commercial-real-estate-trouble/

[Newest Reality]

1. Oh my gosh!

Really? How can that be? It's a re-cover-ry! ;)

Such gloom and doom and prophetic mischief afoot. Look at TV! Everything looks fine there and the media keeps pumping out pro-financer's porn that assures us we are all going to be just fine! I even say to myself everyday, "What a wonderful world!"

However, if this is actually truthy, and not just more filler for our incredible delusion of security and normalcy, then we might have an unexpected crises of immense proportions. What do you do with mall rats when the malls have no more stores? Imagine zombie-like teenagers roaming randomly about! ;)

[lonestarnot]

11. They would make fun paint ball arenas!

[leftstreet]

13. The zombie movies were right. I knew it n/t

[Juche]

2. I've heard about that

And it could crush small business lending. At the same time state/federal budget cuts could lead to tons of layoffs since we are so far in debt.

And in 2010 we are supposed to see the first of a new set of mortgage collapses. The 2007-2008 was the subprime collapse, there is a new wave of collapses in 2010-2011 when option and Alt-A loans reset.

It could suck.

http://www.youtube.com/watch?v=-6Xr98wQxeg

[Supersedeas]

3. Too much TRUTH for the Corp Spend Now Free Credit Media to stomach?

[Warpy]

4. Uh, duh, it's in trouble for the same reason housing is

Developers got loans from less than honest companies writing paper they knew they could sell to be bundled up and given an automatic AAA rating from Moody's. The developer built shopping centers, strip malls, office buildings, and the like and sold it to an investor, who also got iffy paper written by an iffy company who sold it to someone else to bundle up and repackage with an AAA rating from Moody's. The companies who purchased all that iffy paper marketed as structured investment vehicles also purchased insurance on it that said they couldn't lose. The insurance was extended because Moody's said it was all good paper.

It's a total clusterfuck of people building stuff nobody really needed, people writing paper they didn't care about because they didn't have to back it, people selling that paper after an incestuous agency rubber stamped it with a "can't lose" rating, and insurance companies who expected everybody else to be doing their jobs. And the merry go round continued.

The hell of all this is that no one has gone to jail and the lax laws that enabled the whole thing to continue have not been tightened. While the threat that this will change in the near future plus the fact that enforcement of the lax laws we still have is being pursued has put a damper on the scammers, they will be back as soon as the economy starts even the mildest of recoveries.

[Winterblues]

5. Oh Boy, more Huge Bonuses in the banking business.

Tax payers will bail out these mid size banks and then let the Bonuses roll......

[Missy Vixen]

6. Columbia Center in Seattle missed a mortgage payment last week

Fasten your seatbelts, everyone. It's going to be a very bumpy ride.

[MannyGoldstein]

7. This Is Not A Problem For Most of Us

We'll pay our taxes and they'll be handed over to the bankers to cover the loss.

Warren is such a drama queen.

[Missy Vixen]

9. Actually, for anyone who owns a business in one of these buildings

it's a pretty big problem.

Imagine trying to do business out of an office building that is delinquent on their mortgage, for instance.

[autorank]

8. She's beenj on target all along k*r THANKS!!!

[laughingliberal]

10. K & R nt

[upi402]

12. Without trade reform it wont come back to normal - ever

NAFTA and GATT did their job. And I'd like to do a hell of a lot more to Clinton-Republicans than say 'I told ya so'.
And there will be no reinstating of tariffs and restoration of manufacturing without MAJOR media reform. It's over.

Now what to do?

[Greyhound]

14. Just astounding...

The person in charge of administrating the bailout fund, hardly an outside rock-thrower or radical Nobel-winning economist, tells us that
By the end of the year, about half of all commercial real estate loans are going to be underwater!
and it is ignored or downplayed. Meanwhile the counter-campaign is well under way and the heads are nodding in unison. Nothing to see here, all is well, don't you have some shopping to do?

So let's see where we are and what is foreseeable. Oil prices are being pushed up by the usual suspects at the usual time of year, President Obama proposes the "drill baby, drill" plan hopefully to help offset the speculators and expose some republicon hypocrisy, "sell in May and go away", lay-offs continue to increase though at a somewhat slower pace (I think there just isn't anyone left to fire), thousands more homes are still being foreclosed on every day and the banks are going to have to start exposing the bad loans they've kept off the books with accounting magic over the last year, and the commercial real estate scams are falling apart thanks to the rippling tidal wave of fraudulent financial markets, also due to accounting rules major corporations have to start charging anticipating increased health care costs...

But, we're in the beginning of the recovery.
:kick: & R

[earth mom]

15. Meanwhile, Obama & Congress ignore Warren.

:nuke:

[Sen. Walter Sobchak]

16. Our office is in this situation,

Our landlord is fucked, we offered to buy the building but they can't sell it for market value because the building is already leveraged for double the market value (and climbing) which was used to develop an empty strip mall/big box development something along I-10 and they have three other buildings in Orange County that are completely empty also over leveraged but producing no rental income.

Should be a blast...