Global Investing

Act now or forever hold your (b)-piece, Obama

February 11, 2010
It appears the penny has finally dropped in Washington.
Bank bailout watchdog Elizabeth Warren, chair of the
Congressional Oversight Panel, has unveiled a report that
outlines the shocking state of the U.S. commercial mortgage
sector, which left unaided could spark “economic damage that
could touch the lives of nearly every American”.
The Havard Law School Professor and her panel colleagues are
talking the kind of apocalyptic language that may just shake the
White House and its star policy advisers into facing problems we
have now rather simply obsess about those we may or may not
encounter in the future.
The global banking system may well need some kind of
Volcker-esque guidelines to curb the next generation of
excessive risk-takers but Obama is putting the cart before the
horse in his efforts to haul the economy back on track.
Certainly, his and the previous administration has toiled
long and hard to stabilise the U.S. housing market, propping up
Fannie and Freddie and their dysfunctional offspring, but the
subprime mess has distracted attentions from the toxic
commercial market, where the clean-up task is no less
important.
Warren reckons there is about $1.4 trillion worth of
outstanding commercial real estate loans in the U.S that will
need to be refinanced before 2014, and about half of them are
already “underwater,” an industry term that refers to loans
larger than the property’s current value.
But bank brains are wasting too much time figuring out how
the so-called “Volcker rule” might affect their operations and
future profitability, instead of getting their arms around
underwater real estate loans that could break their institutions
in two long before the anti-risk measures even take hold.
Obama’s premature challenge to their investment autonomy,
which he says cultivated the collapse of banks like Lehmans, is
like suturing a papercut while your jugular gapes wide open.
Maybe now, as Warren’s report hammers home the threat posed
by unperforming commercial real estate debt, Obama will give
Wall Street a chance to refocus on the “now” and worry about
“tomorrow”, tomorrow.

It appears the penny has finally dropped in Washington.

Bank bailout watchdog Elizabeth Warren, chair of the Congressional Oversight Panel, has unveiled a report that outlines the perilous state of the U.S. commercial mortgage sector, which left unaided could spark “economic damage that could touch the lives of nearly every American”.

The Havard Law School Professor and her panel colleagues are talking the kind of apocalyptic language that may just shock the White House and its star policy advisers into facing problems banks have now rather simply obsess about those they may or may not encounter in the future.

The global banking system may well need some kind of Volcker-esque guidelines to curb the next generation of excessive risk-takers but critics say Obama is putting the cart before the horse in his efforts to haul the economy back on track.

Certainly, the U.S. government has toiled long and hard to stabilise the U.S. housing market, like propping up Fannie and Freddie and their dysfunctional offspring, but the subprime mess has distracted attentions from the toxic commercial market, where the clean-up task is no less important.

Warren reckons there is about $1.4 trillion worth of outstanding commercial real estate loans in the U.S that will need to be refinanced before 2014, and about half of them are already “underwater,” an industry term that refers to loans larger than the property’s current value.

But some believe bank brains are wasting too much time figuring out how the so-called “Volcker rule” might affect their operations and future profitability, instead of getting their arms around the real estate loans that could snap their institutions in two long before the anti-risk measures even take hold.

Obama’s challenge to Wall Street’s  investment autonomy, which he says cultivated the collapse of banks like Lehmans, is seen like suturing a papercut while your jugular gapes wide open.

Maybe now, as Warren’s report hammers home the threat posed by unperforming commercial real estate debt,  Obama and his policymakers will refocus on the “now” and worry about ”tomorrow”, tomorrow.

Comments
4 comments so far | RSS Comments RSS

You know 9 of the top 30 job sectors ten years ago are shrinking to the point of extinction due to foreign competition and technology advances? The US economy is in tailspin. I work for http://storyburn.com and the angry chaos around America is getting worse each day. Companies are using this recession to do far more with less people. That’s way less space needed in commercial buildings

Posted by hambo | Report as abusive
 

This is going to be the biggest jobless recovery on record. Huge export volumes will spur GDP for the coming quarters, but companies are using the recession to produce more with far less people. I work for http://storyburn.com where the angry chaos of our times comes to roost and I see an outlook for job growth that is nothing short of abysmal. I miss the times of Clinton, when everybody had jobs and we were actually, wait a minute, reducing the deficit. Novel idea, huh?

Posted by hambo | Report as abusive
 

How poetically wonderful.

This is what corporate “America” has done with its right of citizenship. This is what they have cooked for themselves by exercising their rights as “citizens” to lobby congress into allowing them to regulate themselves.

If corporate citizenship were not a factor right now, it would be very easy for government to fix the problem. Congress would simply implement a set of rules and business would have to abide. But since they are recognized as “people”, they lobby congress and stall the very efforts needed to keep them alive and healthy.

Corporate citizenship is at the heart of our financial problems. Strike it down. Remove the corporate constituency and the corporate lobby. Give the government back to the people. Are there no attorneys with knowledge and the gonads to effectively challenge that ruling? Or maybe there’s just not enough money to be made doing what’s right?

Posted by Benny_Acosta | Report as abusive
 

has it ever occured to people that the Obama administration is not there to fix anything ? just asking

Posted by gramps | Report as abusive
 

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