Is the bailout partially responsible for destroying my industry?
According to the nations largest commercial real estate firm, Marcus and Millichap, lenders are not liquidating distressed properties. Instead they are holding them and collecting the income until the market changes by paying management companies to run and improve the cash flow of the foreclosed businesses, shopping centers, apartments, etc.
All of a sudden banks are seriously in the commercial real estate business! They are not making new loans. Commercial loans and SBA loans are down somewhere like 95 percent this year!
Since banks made bad decisions to begin with why are they allowed to hold these assets instead of liquidate them like they should? A troubled bank should not be able to afford to hold these assets, let alone hire a management company. Are they able to afford it because of the bailout?
I am real estate salesperson for the commercial real estate industry and I’m upset because without loans, I have no business. Commercial sales in my office is down like 90 percent this year, and I work in an office with like 250 agents!
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One comment
simplicitus on December 16, 2009 at 5:05 am
I wouldn’t say say so.
Banks aren’t liquidating distressed properties because there is no benefit in their doing so. If they sell at $.10 on the dollar, they don’t get much back and they have to recognize the loss on their books. That would make them all bankrupt.
As long as the banks don’t actually sell the assets, they can pretend they are worth more than what the market is willing to pay. That makes them look solvent on paper. So the banks can’t afford to dispose of the assets at current market value. That’s why the assets have been termed ‘toxic"
As for no loans meaning no business, it isn’t just you. That’s why the Fed and the Treasury Dept have been doing everything they can to get banks lending, without all that much success.
http://www.nytimes.com/2009/12/13/business/economy/13rates.html
In fact, even with the increased government borrowing, total borrowing is down.
http://economix.blogs.nytimes.com/2009/11/17/summers-the-chinese-and-the-deficit/
http://www.federalreserve.gov/releases/z1/Current/z1.pdf