Paul Kanjorski leading a bailout of commercial real estate

On Paul Kanjorski’s website:
Today, Congressman Paul E. Kanjorski (D-PA), Chairman of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, and Congressman Ken Calvert (R-CA), along with 77 of their House colleagues, sent a bipartisan letter to Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke about the growing concerns that deteriorating conditions in the commercial real estate (CRE) market may threaten an economic recovery.

"The growing bubble in the commercial real estate industry has the potential to infect our economy and slow a recovery," said Chairman Kanjorski. "In order to safeguard the businesses operating on Main Street and protect the millions of jobs depending on commercial real estate, the Treasury and the Federal Reserve now must take needed and urgent action to stave off a potentially devastating wave of commercial real estate foreclosures and bank losses."

"I am deeply concerned about the health of our commercial real estate market and the stability of thousands of small businesses across the country," said Congressman Calvert. "We must take the appropriate steps to ensure that our commercial real estate market does not experience a liquidity crisis that would further exacerbate our struggling economic situation."

"A liquidity crisis in the commercial real estate market is hurting small business owners across the entire nation," said National Association of REALTORS President Vicki Cox Golder, owner of the commercial real estate company Cox and Co.; Associates in Tucson, Arizona. "I join with all commercial property owners who applaud the efforts of Reps. Calvert and Kanjorski to resolve this problem and put small business owners back in business."

Specifically, the letter asks regulators to take the following steps:
• Establish a clear method for measuring and evaluating the effectiveness of recent CRE loan modification guidance issued by the regulators.
• Institute metrics to more clearly differentiate performing versus non-performing loans as well as any other steps that provide lending institutions with more confidence in assessing CRE loans.
• Make clear public statements encouraging lenders to continue to make credit available for performing assets as a means of restoring confidence and long-term value in the CRE market.


The $6.7 trillion CRE sector supports 9 million American jobs. If the conditions in the CRE market deteriorate further the negative effects will be significant and widespread, rippling not only through the CRE sector but also the broader economy. More than $1.4 trillion in commercial mortgages will come due by 2013, and as much as 65% of those deals will have trouble getting refinanced according to recent analysis conducted by Deutsche Bank. While the Federal Reserve and Treasury Department have acknowledged the ongoing CRE challenges, their actions have so far failed to ease growing concerns among economists and market participants.

Paul, you need to get out more often. You have not left the house (of representatives) since 1984. Allow this grandpa to explain a few things since I have left the house in 26 years:
 
People have invested in commercial real estate long before you were born.
 
Believe it or not Paul, real estate investments have been and will always be impacted by economic cycles and it is the responsibility of the investor to manage his/her risk during challenging times. You see Paul; there are no guarantees in life.
 
Inept underwriting of mortgages was not exclusive to private residences. I suggest you secure a few underwriting worksheets from lenders and review the true “performance” of the property prior to issuing a mortgage. If you need assistance, zap me an email as I would genuinely welcome the opportunity to point out how essential investment factors such as vacancy rates, actual collected rents versus a stated rent roll, reserves for repairs and capital improvements, cash flow analysis when the initial note ballooned and projected rent rolls were “fudged” or ignored in order to get a deal done.
 
You see Paul, Wall Street was equally greedy and inept (by choice) regarding commercial loans as they were with residential mortgage products. I had the pleasure of working with commercial investor clients and when the “numbers” did not make sense, they hunted for other potential opportunities. In other words Paul, they were mature and intelligent investors and assumed responsibility for their actions and decisions.
 
Investing in CRE is no different than any other investment as it is about conducting due diligence and managing one’s risk. If one of your constituents invests in a publicly traded company and the stock price drops, do they call you requesting a letter to the NYSE?
 
Wake up Paul, our grandchildren do not need you or anyone else adding to their mounting mountain of debt due to the “Bail out Era”. Tell your investor clients with a boo-boo to pick themselves up and put on a bandage.
 
It is 2010; this might be the magical year when you finally have an opportunity to leave the house!