Like the second eruption of a volcano, retail commercial mortgages are the coming second wave of the meltdown, my friends. So say a fond farewell to your favorite malls and hotels this Christmas, as we may have only their empty husks to look at in the near future:
Malls from Michigan to Georgia are entering foreclosure, commercial victims of the same events poisoning the housing market.
Hotels in Tucson, Ariz., and Hilton Head, S.C., also are about to default on their mortgages.
That pace is expected to quicken. The number of late payments and defaults will double, if not triple, by the end of next year, according to analysts from Fitch Ratings Ltd., which evaluates companies’ credit.
“We’re probably in the first inning of the commercial mortgage problem,” said Scott Tross, a real estate lawyer with Herrick Feinstein in New Jersey. […]
… Pension funds, insurance companies, and hedge funds bought the seemingly safe securities and are now bracing for losses that could ripple through the financial system.
“It’s a toxic drug and nobody knows how bad it’s going to be,” said Paul Miller, an analyst with Friedman, Billings, Ramsey, who was among the first to sound alarm bells in the residential market.
Of course, this is all good news for bankruptcy lawyers, but not many other folks. It means laid off retail workers, more supposedly solid bank assets and collateralized debt securities turning into part of the big shitpile, and an extended real estate slump that could last for a decade or more. It also means more banks and institutional investors in need of bailout cash. At this point it sort of makes you wonder if the only solution that will be left to us in the end will be the complete (or nearly complete) nationalization of our financial sector. From banks, Wall Street investment firms, Insurance companies and pension funds the rot runs so deep, and the downward spiral appears so unstoppable that I don’t know what can be done to salvage the situation absent the Government taking over the mess which our grand free marketeers (from the DLC to the RNC to Greenspan to Paulson) have created. It’s a collapse so complete that I’m sure that right wing conspiracy theorists will be imagining secret Jewish Islamic Marxist deep cover terrorist cells embedded within the Federal Reserve System for a good part of the next century as the primary cause for the collapse of global capitalism.
When really, however, it was simply ideological hubris and the stupidity of greedy assholes on Wall Street and K Street to blame. They made their fortunes, enjoyed their high stakes poker games and high class hookers, shot partridge and quail by the bucket load at private resorts while downing pallet loads of $1000 bottles of wine and champagne and eating the most expensive meals expense accounts would allow. And , of course, now that the bill has come due they’ve left repayment for all their destruction to the rest of us. Greed isn’t good, but I guess it can be fun while it lasts.
this economic debacle is far from being played out. so far, the only industries not lining up at the trough are the energy sector…although there’re demanding additional access to ANWR and off-shore rights…the military/industrials…they’ve been riding their own BushCo™ marshall plan since 911…the tech sector, but you can bet the mortage, for what that’s worth, they’re all thinking about it. local governments… city, state and county… are going bankrupt, and the taxpayer gets to pay everybody’s tab on declining earnings while the greedsters walk away with huge fortunes.
by the time obama takes office we could well be in a full blown depression. today’s the traditional retailing Black Friday and the markets will react to what is projected to be a dismal showing at best.
l’ll just leave it with this: the clapper via
spot on.
The malls in the SF Bay area are all showing empty stores. And there are no businesses moving in. Stores are both trying to sell off their overstock and cut back on salespeople at the same time.
Things are bleak out there.
We’re seeing that here in our mall in New York’s Hudson Valley.
The current president seems upbeat on his self-seen legacy.
I can’t wait for my children’s children to study American history and see what their history books say about the Bush presidency.
And behind, the commercial real estate crisis, comes what? The credit card fiasco followed by the student loan fund imbroglio. I think we are going to be tested but can’t we tar and feather a few of those Wall street and K street creeps? You know, just for a much needed diversion.
Here’s an extraordinary graph, courtesy of a post by Rabee Tourky at John Quiggin’s blog. It is generated at the St Louis Fed’s website and shows the M1 multiplier for the last 8 years. M1 is a narrow measure of the amount of money in the economy, and is composed of currency in circulation plus balances of demand deposits (checking accounts). The M1 multiplier is M1 divided by the total of currency in circulation plus bank reserves. What it measures is the degree to which banks are creating money (by lending) relative to the monetary base. The graph below shows very clearly that there is a credit crunch at the moment – the banks have more or less stopped lending!
I haven’t gotten a credit card offer in the mail all week, if you want anecdotal confirmation. Discover did send me some “checks,” however.
Don’t you just love those “checks”? I had to buy a shredder, and that was one big reason why.
I taught a high school senior several years ago who didn’t know any better and cashed one of those checks. I told her that she would have to re-pay the money with interest and she was shocked.
I’d like there to be more room for consumer education, but at my school, we have no wiggle room beyond the basics.
For the last several years, big-box stores and mall developers – along with their builder allies – have been strong-arming local communities to expedite permits to throw up (and I use the term deliberately) strip-mall after strip-mall, and enormous big-box complexes along side the interstates. Increase the sales-tax base is usually the promise, and it’s usually agricultural or green-belt land that gets developed in the case of the big-boxes, and strip-malls fill the voids previously occupied by small stores/apartment units. Well, at long last, there simply isn’t the expanding consumer base to keep these architectural atrocities afloat any longer, so, what’s to lament? Good riddance to them, as those who worked there only made minimum wage, were exploited, and (at least where I live), were immigrants – legal or otherwise.
Tom Friedman is no longer a billionaire by marriage; the family trusts, as of a week ago, are worth about $25 million in shopping mall stock.
But the company is turning the corner, and the stock will be up a hundredfold in six months.