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.
