Wednesday, July 22, 2009

The other shoe to drop...

The commercial real estate market is in trouble.....big trouble. But instead of dealing with the problem, banks are poised (under the direction of Ben Bernanke) to do a little accounting jig called an 'extend and pretend'. Basically, banks will extend loans (for a fee or increased interest rate) and pretend everything is ok. The reason for this is commercial loans are a bit different. Those receiving the loans, pay interest only for say 10 yrs. and then the full amount of the loan is due. So banks are pushing off the due date since so many cannot many in fact that the economy would crumble into a much larger disaster than the one presently in. The key is that the economy must recover substantially (and quickly) for this to work. There are no signs this will fact some estimates are pushing recovery off until 2011.
This is exactly the bad road Japan went down in 1990. What the heck? When is America going to wake up? There is no money for bailouts...with the looming Health Care bill who are they going to increase taxes on this time?

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