David Kirkpatrick

September 16, 2009

Averting a blow to the economy

Maybe. It’s rarely discussed, but there is a major economic crisis coming down the pipe in 2012 or so in the form of commercial real estate paper.

Essentially in the years right before last year’s meltdown most everyone in large-scale commercial real estate was doing what I’ve heard described by a player in the field as “bad deals.” That person said everyone knew the deals were bad (as in not economically feasible unless conditions remained optimal — we all know that’s no longer the case), but did them anyway because that was the only way to continue doing business in the mid- to late-2000s.

Looks like the IRS is making proactive moves to try and take some of the brunt out of this looming economic event.

From the link:

The IRS issued new rules Tuesday designed to make it easier to refinance somecommercial real estate loans in an effort to curb the number of defaults.

The rules would allow commercial loans that are part of investment pools known as Real Estate Mortgage Investment Conduits, or REMICs, to be refinanced without triggering tax penalties for investors.

The investment pools were designed to encourage mortgage-backed securities by offering tax benefits not typically available through other investment vehicles. However, under the old rules, investors could have lost those benefits if loans in the portfolio were restructured.

The new regulations come as Wall Street braces for a wave of defaults on commercial real estate loans. More than 90 U.S. banks have already failed this year. Hundreds more banks are expected to fail in the next few years largely because of souring loans for commercial real estate.

“These changes will affect lenders, borrowers, servicers, and sponsors of securitizations of mortgages in REMICs,” the new regulation says.

September 10, 2009

The recession’s over! Everybody cheer …

… oh wait, this doesn’t sound all that great.

From the link:

The U.S. employment picture will stay bleak well into next year long after the recession ends, but the worst of the labor market crisis is over, top private economists said on Thursday.

Private economists polled for the Blue Chip Economic Indicators September survey say the unemployment rate will reach at least 10 percent in early 2010 and “recede from that level only grudgingly over the second half of the year”.

More than 80 percent of the 52 private forecasters polled say the recession that started in December 2007 has ended. They look for gross domestic product to expand at a brisk 3.0 percent annual rate in the third quarter of 2009 and rise 2.4 percent in the fourth quarter.

This compares to growth rates of 2.2 percent and 2.3 percent respectively forecast in the previous survey.

For the year as a whole, the economy is expected to shrink 2.6 percent, the same consensus for July and August. In 2010 the economy will likely expand at a 2.4 percent pace, the survey said.

November 7, 2008

Obama’s economic A-list

Obviously not all choices I’d make, but you have to admit it’s a murderer’s row of a lineup.

From the link:

President-Elect Barack Obama is signaling quick movement on the economy, with his advisers moments ago rolling out a list of economic bigs who will serve on his Transition Economic Advisory Board.

Obama and Joe Biden will meet with the group tomorrow and hold a press conference afterwards, Camp Obama announces.

The group includes a bunch of expected names. There’s Warren Buffett (who endorsed Obama) and Governor Jennifer Granholm, as well as some heavy-hitters from the Clinton universe, like Robert Rubin and Robert Reich.

Also serving: Harvard’s Lawrence Summers and former Federal Reserve chair Paul Volcker.

Obama’s press conference — which will take place tomorrow at 2:30 P.M. ET — is likely to be a media zoo, both because it will offer clues to Obama’s first moves on the economy and because it’s his first presser as President-Elect.