The Construction Industry

September 22, 2008

The housing industry was hurting last spring before the most recent economic difficulties.  Housing starts were already at a fifty year low.  Commercial construct enjoyed a better fate but it appears that the home loan crisis has served to dry up money for commercial projects.

Bloomberg reports:

The recent collapse of Lehman Brothers and Merrill Lynch will make it even more difficult for borrowers to refinance commercial real estate loans.

According to UBS AG, the world’s largest manager of private wealth assets, eight of the top 10 investment banks accounted for about half of the loans packed into commercial mortgage-backed securities in 2006 and 2007. As of today, the eight are now either merging with other companies, no longer in business, or significantly reducing their real estate holdings.

By the end of 2012, UBS analysts anticipate a competitive market and estimate that almost $151 billion in commercial mortgage loans that were underwritten by investment banks and securitized will be due.


BIAW: the Voice of Deregulation and the Housing Industry

September 17, 2008

It was reported that nationally new home starts in August were at a 17 1/2 year low. The housing industry sector of the economy is in its worst slump since the Great Depression. By absolutely every credible account this is due to a failure of regulation in the financial industry, the same cause as the Great Depression.

Just as the new breed of Republicans wants to roll back the social safety nets of the New Deal, they also want to unfetter all of industry from regulation. This is why Bush appointed deregulation champions and incompetents to head federal agencies. Having failed to learn from the past we were doomed to repeat it. Once again the failure of regulation has led to economic crisis.

The loudest and most ardent — if not the rational — voice for deregulation in Washington is the Republican attack dog BIAW, which constantly shrieks about getting the government off its back. The BIAW complains bitterly about environmentalists who are likened to Nazis. Officials of local governments, who enforce building codes fare no better in their eyes. Evidence of the benefits to society from growth planning, safety standards and environmental regulation are dismissed as the toxic propaganda of evil doers.

The strength of this ideological fervor is such that it overrides even concern for the interests of the BIAW’s constituency, the building industry in Washington. It is the absence of meaningful regulation — a condition insisted upon by the BIAW and the Republican Party — that created the disastrous economic conditions that are ruining so many construction-related businesses in Washington.

Time and again we learn that unchecked greed is not a functional foundation for an enduring society. Certainly there can be over-regulation but that is not a justification for the utter abandonment of regulatory constraints on society-threatening institutional avarice.

Our society in its blind fervor to reduce government to a military subsidization function, has failed over the last several years in two respects relevant to this topic: First, our tax money, instead of being used for generally recognized governmental purposes is being used to subsidize huge corporations, the profit going to investors and executives, and losses to the government; Second, under slogans promoting self reliance we have repeatedly in the last several years spectacularly depleted retirement funds and the savings of individuals, undermining the end sought to be achieved.