September 25, 2008

Taking John McCain at his word he believes in a cycle of financial deregualtion, then crisis management.  He has been ardently opposed to regulation until last week and now he would like to implement what sounds like a patchwork crisis program of regulation.  When the crisis passes I guess we go back to deregulation.  (You would expect a guy his age to have more sympathy for the successful regulatory programs of the 1930’s.)

Anyway China appears to have lost confidence in American know-how.  It apparently is suspending making loans to U.S. banks. This I think is blowback from a presidential administration that without question is the most miserable failure in American history.  The bungling of the Iraq war and mishandling of foreign affairs over the last eight years has led to a well known international lack of confidence in the U.S.  Our inability to stem the fall of the dollar has led to international difficulties.

Finally our self inflicted financial crisis after deregulating the most irresponsible institutions cannot be confidence inducing among other nations.  For years countries engaged in commerce with us in their own self interest.  At this point self interest compells them to suspend such commerce.

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.