{"id":1004211573,"date":"2009-01-26T00:00:00","date_gmt":"2009-01-26T08:00:00","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/cpe-uncategorized\/president-obama-and-the-real-estate-industry-a-quid-pro-quo-proposal\/1004211573.html"},"modified":"2022-12-08T04:01:22","modified_gmt":"2022-12-08T12:01:22","slug":"president-obama-and-the-real-estate-industry-a-quid-pro-quo-proposal","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/president-obama-and-the-real-estate-industry-a-quid-pro-quo-proposal\/","title":{"rendered":"President Obama and the Real Estate Industry: A Quid Pro Quo Proposal"},"content":{"rendered":"

<\/a>President Obama and the American real estate industry have a mutual interest in turning off the twin economic engines that are driving the nation\u2019s financial downturn\u2014the fall in housing prices and the credit crunch\/impending collapse of major banks.\u00a0 <\/span><\/p>\n

\u00a0<\/span>Most experts agree that the way to halt the slide in housing prices is to minimize foreclosures by keeping people in their homes with delinquent mortgages that have been restructured.\u00a0 A huge obstacle to the restructuring of home mortgages is the inability of bankruptcy judges to alter home mortgage terms.\u00a0 Ironically, when most debtors appear before bankruptcy judges, their largest economic liability is almost always their home mortgage\u2014the one payment they cannot escape.\u00a0 <\/span><\/p>\n

The real estate industry, with the notable recent exception of Citigroup, has strongly opposed the restructuring of home mortgages, or \u201ccram downs,\u201d as they are derisively termed, needed to keep delinquent home owners in their homes and out of foreclosure.\u00a0 However, the economic news of this week should curb the industry\u2019s opposition to home mortgage restructuring:\u00a0 with blue chip firms like Microsoft and Intel laying off thousands of workers, it is now clear that present and coming corporate layoffs inevitably will cause more and more households to stop making their monthly mortgage payments and file for Chapter 11 bankruptcy, aggravating further the foreclosure crisis that keeps the housing prices falling and prevents economic recovery.\u00a0\u00a0 <\/span><\/p>\n

Of course, if the real estate industry is to give up its opposition to bankruptcy cram downs, it would rather get something than nothing.\u00a0 So, what might the real estate industry want in exchange for withdrawing its opposition to bankruptcy home mortgage restructuring?\u00a0 A possible answer is Fed Chairman Ben Bernanke\u2019s idea this week of federal government creation of a \u201cBad Bank,\u201d i.e., a new financial institution into which troubled banks would deposit their \u201ctoxic assets,\u201d i.e., the discredited \u201cmortgage-backed securities\u201d investments now clogging some\u00a0banks\u2019 balance sheets and arousing such fear of non-payment that banks will not lend even to each other, much less to other would-be borrowers, even after distribution of the first $350 billion of the TARP program.\u00a0 Unlike the original Paulson plan to purchase these toxic assets at above-market prices, the Bad Bank program would involve a bargain basement purchase by the federal government of all banks\u2019 toxic assets in conjunction with a recapitalization of the participating banks, even to the tune of ten to twenty percent of GDP, a price tag that major economists say is high but doable, provided the government acts carefully.\u00a0 Simon Johnson, former chief economist of the International Monetary Fund, describes the Bad Bank approach as \u201cthe biggest financial sanitation project ever.\u201d\u00a0 And the benefit to the real estate industry of a Bad Bank?\u00a0 A process leading within several years to the restoration of the American financial industry and the resumption of available financing for real estate deals.\u00a0 <\/span><\/p>\n

\u00a0<\/span><\/p>\n

President Obama has signaled his desire for a comprehensive, bi-partisan approach to the economic problems besetting the nation, one necessarily built upon many compromises.\u00a0 An offer by the real estate industry now to withdraw its opposition to home mortgage restructuring by bankruptcy judges\u2014a concession eagerly sought by the new president and his party\u2014linked to support for a federal program to purge the toxic assets of banks (an approach which the federal government has shied away from since the early days of TARP) would constitute just such a compromise and position our industry in a progressive light in the eyes of Congress and the new administration.\u00a0 And wouldn\u2019t we like to be seen positively by the federal government, especially when it is poised to dole out $850+ billion in stimulus spending in the months and years to come?<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

President Obama and the American real estate industry have a mutual interest in turning off the twin economic engines that are driving the nation\u2019s financial downturn\u2014the fall in housing prices and the credit crunch\/impending collapse of major banks.\u00a0 \u00a0Most experts agree that the way to halt the slide in housing prices is to minimize foreclosures…<\/p>\n","protected":false},"author":936,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[39372],"tags":[],"class_list":["post-1004211573","post","type-post","status-publish","format-standard","hentry","category-cpe-blog"],"acf":[],"yoast_head":"\nPresident Obama and the Real Estate Industry: A Quid Pro Quo Proposal - Commercial Property Executive<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/president-obama-and-the-real-estate-industry-a-quid-pro-quo-proposal\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"President Obama and the Real Estate Industry: A Quid Pro Quo Proposal\" \/>\n<meta property=\"og:description\" content=\"President Obama and the American real estate industry have a mutual interest in turning off the twin economic engines that are driving the nation\u2019s financial downturn\u2014the fall in housing prices and the credit crunch\/impending collapse of major banks.\u00a0 \u00a0Most experts agree that the way to halt the slide in housing prices is to minimize foreclosures…\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/president-obama-and-the-real-estate-industry-a-quid-pro-quo-proposal\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2009-01-26T08:00:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-12-08T12:01:22+00:00\" \/>\n<meta name=\"author\" content=\"Allison Landa\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/president-obama-and-the-real-estate-industry-a-quid-pro-quo-proposal\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/president-obama-and-the-real-estate-industry-a-quid-pro-quo-proposal\\\/\"},\"author\":{\"name\":\"Allison Landa\",\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/#\\\/schema\\\/person\\\/0eb45390ae3124c14a919b7ec7bd2249\"},\"headline\":\"President Obama and the Real Estate Industry: A Quid Pro Quo Proposal\",\"datePublished\":\"2009-01-26T08:00:00+00:00\",\"dateModified\":\"2022-12-08T12:01:22+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/president-obama-and-the-real-estate-industry-a-quid-pro-quo-proposal\\\/\"},\"wordCount\":629,\"articleSection\":[\"Blog\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/president-obama-and-the-real-estate-industry-a-quid-pro-quo-proposal\\\/\",\"url\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/president-obama-and-the-real-estate-industry-a-quid-pro-quo-proposal\\\/\",\"name\":\"President Obama and the Real Estate Industry: A Quid Pro Quo Proposal - 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